Retained earnings (nesadalītā peļņa)
In Latvian: Nesadalītā peļņa
Retained earnings (nesadalītā peļņa) are profits of previous years that the shareholders have not paid out as dividends or allocated to other purposes, and that stay in the company as part of equity.
The balance sheet shows them in equity under retained earnings or uncovered losses of previous years, separately from the profit for the year. A decision to distribute profit appears in the next year statements, reducing retained earnings.
In a capital company the board proposes how to use the profit, and the meeting of members decides after approving the annual report. Dividends are paid only in cash.
Latvian corporate income tax is due when profit is distributed, for example when dividends are declared. Profit left undistributed is not taxed, but tax is due on deemed distributions such as expenses unrelated to the business.
Example
SIA "Ozols" makes a 2025 profit of EUR 30,000. In April 2026 the members decide to pay EUR 10,000 in dividends and keep EUR 20,000 in the company. The EUR 20,000 becomes retained earnings, while corporate income tax is calculated on the dividends paid.
Legal basis
- Law on Annual Statements and Consolidated Annual Statements, Section 20 likumi.lv
- Commercial Law, Section 180 likumi.lv
- Enterprise Income Tax Law, Section 4 likumi.lv
This explanation is for information and does not replace tax or legal advice. The law in its current consolidated text prevails.