The disposal of securities (shares, equity interests, investment fund certificates, debt instruments, etc.) by an individual generates capital gains income subject to Personal Income Tax ( PIT).
What securities qualify as capital assets? Generally, as follows:
- shares, equity interests, cooperative shares, investments in partnerships and other financial instruments referred to in the Financial Instruments Market Law
- investment fund certificates and other transferable securities evidencing participation in investment funds or equivalent collective investment undertakings
- debt instruments (promissory notes, certificates of deposit, short-term debt instruments issued by companies) and other money market instruments traded in money markets
The list is usually added by other assets (real estate, a business, intellectual property, investment gold, crypto-assets), but in relation to securities, the categories above are the most important.
Capital gain calculation
Capital gain = disposal (sale) price − acquisition value − value of investments made during the holding period
The acquisition value also includes:
- Expenses related to the acquisition of securities, including state fees, commissions and other similar expenses;
- Interest payments on a loan used to acquire securities, where documentary evidence allows the link between the loan and the acquisition to be identified;
- Expenses incurred for the acquisition and holding of securities.
Securities acquired through inheritance or gift: the acquisition value is the value included in the estate or specified in the gift agreement (not exceeding the disposal price).
Tax rate
For transactions initiated before 31 December 2024 and not completed by that date, and for which information on transactions commenced but not completed within a tax year has been submitted to the State Revenue Service, a 20% PIT rate applies. The transitional period is in effect until 2027. Transactions initiated from 1 January 2025 are subject to a 25.5% PIT rate.
An additional 3% PIT rate should also be taken into account if annual taxable income (including capital gains income) together with non-taxable dividends/liquidation proceeds exceeds EUR 200,000.
Contribution of participation to share capital
Where an individual contributes assets owned by them (including securities) to the share capital of a company in exchange for shares or equity interests, the capital gain is taxed under the tax deferral principle. Tax becomes payable when the shares or equity interests received in exchange are subsequently disposed of.
Reporting and payment
Capital gains tax return must be submitted to the State Revenue Service:
| Situation | Situation |
|---|---|
| Total income from capital assets in a quarter exceeds EUR 1,000 | By the 15th day of the first month following the quarter |
| Total income does not exceed EUR 1,000 in any quarter | March to June of the following year |
Calculated PIT must be paid into the unified tax account by the 23rd day of the relevant month.
Points requiring attention:
- Failure to include acquisition costs – if expenses (commissions, fees, loan interest, acquisition/holding costs of securities) are not taken into account, taxable income increases.
- Difference from capital income that is not a capital gain. Dividends and interest are subject to a different regime; an increase in share capital does not in itself constitute a capital gain unless the shares are disposed of.
- Rate change. All transactions from 2025 are generally subject to 25.5%, except where transitional provisions allow 20%.
- Reporting threshold. Even small amounts of income must be declared; only the filing deadline differs.
Conclusion
The disposal of securities by individuals generally gives rise to taxable capital gains that are subject to Personal Income Tax in Latvia. Given the reporting obligations and specific rules for different types of transactions, including share-for-share contributions and securities acquired through inheritance or gift, careful assessment of each transaction is recommended. Timely reporting and proper calculation of capital gains can help avoid unnecessary tax risks, penalties, and additional inquiries from the State Revenue Service. If you have any questions, please do not hesitate to contact Leinonen Latvia Tax & Legal team.
