Abstract
The author assesses the opportunities for inclusion of the corporate income tax into the budgets of the local governments on whose territories there are legally registered companies. For this purpose the same territorial code principle is recommended, which is applied to administer personal income tax. In order to motivate companies to register legally and engage in business activities in the regions of Latvia, tax incentives should be established. The application of tax incentives need to be delegated to the local governments, thus ensuring their interest in business development in their territories. The diversion of corporate income tax into the budgets of local governments would significantly strengthen their budget revenue base, increasing the interest of municipalities into the development and modernization of the companies, as well as creation of new jobs. Inherent risks are defined, and possible solutions how to eliminate these risks are suggested.