CIT Rate Quick Reference: 20% Standard vs 15% Alternative
March 9, 2026
Latvia has two corporate income tax regimes operating simultaneously in 2026. The rates look simple. The implications are not.
Standard Regime (Default)
| Element | Rate | |---|---| | CIT on reinvested profits | 0% | | CIT on distributed profits | 20/80 (effective 25% of gross-up) | | PIT on dividends | 0% |
The 20/80 means: divide the net distribution by 0.8, apply 20%. On a EUR 10,000 dividend, the CIT is EUR 2,500 (10,000 / 0.8 = 12,500 × 20%).
Alternative Regime (Opt-In from 2026)
| Element | Rate | |---|---| | CIT on annual profit | 15% (distributed or not) | | PIT on dividends | 6% |
No gross-up formula. Profit of EUR 100,000 means EUR 15,000 CIT regardless of distribution. Dividends of EUR 50,000 carry an additional EUR 3,000 PIT.
Key Differences at a Glance
| Feature | Standard | Alternative | |---|---|---| | Tax on retained profits | 0% | 15% | | Tax trigger | Distribution only | Annual profit | | Gross-up calculation | Yes (20/80) | No | | Shareholder PIT on dividends | 0% | 6% | | Best for | Reinvesting companies | High-distribution companies | | Break-even distribution | N/A | ~78% of profit | | Election | Default | Annual opt-in |
When Standard Wins
Distributing less than 78% of profit. The 0% on retained earnings is a genuine zero — no tax accrues on money kept in the business.
When Alternative Wins
Distributing more than 78% of profit. At full distribution on EUR 100,000 profit: standard costs EUR 25,000, alternative costs EUR 20,100. Saving: EUR 4,900.
For detailed analysis with worked examples, see our full alternative CIT regime article.
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