Changes in taxation and finances from 2026

As of 1 January 2026: 

• a personal income tax rate of 6% shall be applied to dividends (which have been disbursed applying the alternative corporate income tax rate of 15% specified in the Corporate Income Tax Law) paid to a natural person – shareholder of a capital company. 

• if an immovable property, which is being alienated in accordance with the procedures laid down in the Law on Alienation of Immovable Property for the Public Needs, has been received as a gift from a natural person who is related to the taxpayer by marriage or kinship up to the third degree within the meaning of the Civil Law, or inherited from such person by contract, testament or by law, it shall be considered that the immovable property is in the ownership of the taxpayer from the day when the relevant immovable property is registered in the Land Register as the property of the donor or the estate leaver (this legal provision shall be applied starting from 1 January 2025). 

• in order to create greater clarity to taxpayers, the Law “On Personal Income Tax” clearly stipulates that personal income tax is not levied on remuneration (compensation) paid in accordance with the Law on Alienation of Immovable Property for the Public Needs for the prevention of losses and inconveniences incurred by the former owner or other persons in connection with the alienation of immovable property for the needs of the society. 

• from 2026 to 2029, aid payments from state and European Union funds for the revitalization of historically degraded peat extraction sites shall not be imposed with personal income tax. 

• the procedures for the application of the non-taxable minimum of a pensioner to non-residents – residents of another European Union Member State (hereinafter – EU Member State) or European Economic Area State (hereinafter – EEA State) have been clarified. 

For a non-resident who is a resident of another EU Member State or EEA State, the non-taxable minimum of a pensioner is applied if at least one of the following conditions is met: 

1. the non-resident has acquired more than 75% of his or her total income in Latvia during the taxation year; 

2. the total amount of income (to which the progressive personal income tax rate would be applied in Latvia) of the non-resident in the taxation year, which has been acquired in the state of residence and abroad, does not exceed the threshold of the non-taxable minimum or similar exemption specified in the state of residence.  

For a non-resident who is a resident of another EU Member State or EEA State, the non-taxable minimum of a pensioner shall be applied in divided amounts. The State Social Insurance Agency shall apply the non-taxable minimum of a pensioner in the amount of EUR 500 during the taxation year, but the remaining part of the non-taxable minimum of a pensioner – EUR 500 shall be applied in a summary order by submitting an annual income return (this legal provisions shall be applied to income earned starting from 1 January 2025). 

On January 1, 2026, amendments to the Corporate Income Tax Law entered into force, which provide the following: 

• in parallel with the existing income tax system, corporate income tax payers whose shareholders are only individuals the option, when distributing profit as dividends, to apply an alternative 15 % corporate income tax rate, while simultaneously applying a personal income tax at a rate of 6 % to such dividend income; 

• to expand the specified exemptions for the inclusion of increased interest payments in the corporate income tax base with respect to financing attracted from various alternative financing sources, namely, the exemption shall apply to securities issued in Latvia, the European Union or the European Economic Area, to financing attracted through crowdfunding service providers and investment brokerage firms (including credit institutions), as well as to loans received from alternative investment funds; furthermore, the exemption shall also apply to special purpose entities established in accordance with the Public and Private Partnership Law, as well as in cases where certain externally attracted financing is redirected to other group companies; 

• starting with the reporting year beginning in 2026, port authorities shall be corporate income tax payers. 

As of 1 January 2026, the gambling tax rate is increased as follows: 

• for gaming machines (for each gambling place of each gaming machine) for each current calendar year from EUR 6204 to EUR 7440; 

• for roulette, card and dice games (for each gambling table) for each current calendar year from EUR 33 696 to EUR 40 440; 

• for a game of chance via the telephone and for a betting and wager from 15% to 18% of the revenue from organisation of this game;  

• for a bingo game from 10% to 12% of the revenue from the organisation of this game; 

• for interactive gambling from 12% to 15% of the revenue from the organisation of this game.  

As of 1 January 2026: 

• The reduced VAT rate   in the amount of five per cent shall be applied to the supply of the books referred to in Section 42, Paragraph five of the VAT Law in the form of a printed matter or electronic publication, as well as to the delivery in online mode or by download, if they are  issued or published in the official language, in the Latgalian written language and in the language of the indigenous  inhabitants of Latvia – Livonians, as well as in the official languages of other Member States, Member States of the European Economic Area, the Swiss Confederation, the candidate countries for accession to the European Union or the official languages of the   Organisation for Economic Co-operation and Development. 

• The reduced VAT rate  in the amount of five per cent shall be applied to the supply of printed or electronic publications referred to in Section 42, Paragraph seven of the VAT Law, including in online mode or by downloading, published publications or publications of the press and other mass media, as well as publications on the website, as well as to the subscription fee thereof, if they are issued or published in the official language, in the Latgalian written language and in the language of the indigenous inhabitants of Latvia – Livonians,  as well as in the official languages of other Member States, Member States of the European Economic Area, the Swiss Confederation, the candidate countries for accession to the European Union or the official languages of the Organisation for Economic Co-operation and Development. 

As of 1 July 2026: 

• From 1 July 2026, within the framework of the pilot project, until 30 June 2027, the reduced VAT rate in the amount of 12% is applied to the supply of food products such as bread, milk, poultry meat and eggs, which are referred to in Annex 2 to the VAT Law.

As of 1 March 2026, increase the excise duties rates at faster pace for other alcoholic beverages and slower pace for beer.

Excise duty rates for alcoholic beverages, EUR

¹Rate for beer or beer of independent small breweries, but not less than the minimum amount of duty set for beer.

Excise duty rates for tobacco products, EUR

Excise duty rates for liquids and components for e-cigarettes and novel products, EUR

Excise duty rates for non-alcoholic beverages and coffee, EUR

Excise duty rates for oil products, EUR

¹Gasoil (diesel fuel) and gas oil (diesel fuel) to which biodiesel acquired from biomass or paraffined diesel fuel acquired from biomass has been added.

Excise duty rates for natural gas, EUR

As of 1 January 2026, amendments to the Vehicle Operation Tax and Company Car Tax Law come into force, which provide: 

• A new exemption from vehicle operation tax for trustees of one vehicle of category M1 or N1 who are under the custody of persons with group I or II disabilities; 

• to apply the exemption from vehicle operation tax to persons with disabilities and families with a disabled child, not only for a vehicle of category M1, but also for a vehicle of category N1; 

• exemption from the company car tax s for vehicle dealers for two months for passenger vehicles up to ten years old intended for sale, when registering them for the first time in Latvia. 

Amendments to the Law On Taxes and Fees and  Cabinet of Ministers 9th December 2025 Regulation No. 751 “Regulations on automatic exchange of information about reportable transactions with crypto assets” arising from the delegation existing in the law, which comes into force on 1 January 2026, provide for: 

• the exchange of information on transactions in crypto-assets: 

detailed procedures by which crypto-asset service providers will collect and provide information on taxpayers' transactions with crypto-assets to the State Revenue Service (SRS) in order to ensure international data exchange with tax administrations of other countries. The information will cover the transactions of all users of crypto-assets, including both Latvian and foreign taxpayers. 

• the exchange of information on financial accounts: 

amendments to an existing information exchange standard (Global Standard on the Automatic Exchange of Financial Accounts or CRS) to include new types of financial assets (electronic money; central bank digital currency; financial instruments linked to crypto-assets) within the scope of the CRS; supplementing the information to be included in the report (incl. about the beneficial owners, the type of account and one's own proof of tax residency). 

Amendments to the Law On Taxes and Fees from 1 January 2026  introduce changes in the transfer pricing regulation, which will: 

• abolish the requirement to submit mandatory global and domestic transfer pricing documentation after reaching certain thresholds (henceforth such documentation will be submitted only at the request of the State Revenue Service); 

• increase the threshold for the preparation of global transfer pricing documentation from EUR 15 000 000 to EUR 20 000 000; 

• raise the threshold for the inclusion of the transaction (total value) in the transfer pricing documentation from EUR 20 000 to EUR 90 000; 

• introduce a new document - the report of controlled transactions - which will be prepared and submitted to the SRS within 12 months after the end of the relevant reporting year, if the amount of controlled transactions in the reporting period exceeds EUR 250,000. 

In addition, if the functional profile and methodology of the taxpayer does not change, the taxpayer will be able to carry out a new comparative analysis once every three years, but update annually only the financial indicators of previously accepted comparative data. 

With amendments to the Law On Taxes and Fees, from January 1, 2026, the procedure for calculating the late payment fee will be changed, i.e. the late payment fee will be calculated only twice a month - on the 1st and 15th of each month. The amount will remain unchanged from the 1st to the 14th day of a particular month (inclusive) and from the 15th day of the particular month until the last date of that month. In turn, on the 1st and 15th of the month, the amount of the late payment fee will be recalculated. 

In addition, new instances have been introduced when the late payment will not be calculated: 

• if the payment is received before the last date of the month in which the payment is due; 

• if the declaration is submitted late, the late payment fee will not be calculated if a contribution in the amount of the declared tax has been received within the time period specified by law and this contribution has not been used to cover other obligations; 

• if the tax return has been clarified, the late payment fee will not be calculated if a contribution has been received within the time period specified by law in the amount at least in the amount in which the tax was declared with the submitted clarification of the return, and this contribution has not been used to cover other liabilities; 

• If the payment is received between the periods for calculating the late payment fee, the late payment fee shall not be calculated for the period from the last date of calculation of the late payment fee to the date of payment of the late payment. 

As of 1 January 2026, the structural unit of the State Revenue Service – the Tax and Customs Police Department – has been liquidated and a separate institution of direct administration – the Tax and Customs Police – has been established, transferring to it the functions and tasks of the tax and customs police of the State Revenue Service. 

The new regulation - the Law on Tax and Customs Police - has entered into force on January 1, 2026. The purpose of the Law is to determine the legal status and operation of the Tax and Customs Police, carrying out control, supervision and prevention measures, as well as ensuring investigation and operational activities in the field of state revenue and customs affairs. On 3 December 2025, the Saeima adopted amendments to the Tax and Customs Police Law, stipulating that from 1 January 2026 the Tax and Customs Police will be under the supervision of the Minister of the Interior. 

Positive benefits of the reform: 

• The reform provides for the separation of the functions of prevention, detection and investigation of criminal offences from the functions of the service provider, as a result of which the State Revenue Service will become a modern, digital, customer-oriented service institution, a reliable ally for honest business and society; 

• The reform will strengthen the effectiveness of the work of the tax and customs police in detecting criminal offences and its structural autonomy. 

• The reform reduces the institutional fragmentation of law enforcement authorities and contributes to simplification, transparency and a common approach to law enforcement oversight of the institutional framework of public administration. 

• The institutional subordination of the Tax and Customs Police to the Minister of the Interior corresponds to its basic functions - the investigation and combating of criminal offences in the field of State revenue and customs affairs. 

• A clearer division of responsibilities is ensured between the Ministry of Finance as a tax and customs policy maker and the Ministry of the Interior as a policy maker in the field of crime prevention and combating.  

• The institutional links of the Tax and Customs Police and closer integration with other law enforcement agencies operating in the internal affairs department and ensuring the implementation and operational functioning of criminal proceedings are strengthened.  

• Cooperation between law enforcement authorities is simplified, access to the common capacities of the crime-fighting department, including coordination of operational activities, is ensured. 

• The reform provides an opportunity to form a unified and coherent policy for the development of personnel policy and remuneration system in law enforcement agencies. 

On 3 October 2025, the Cabinet of Ministers adopted Order No. 630 "On the Addition of the Lotteries and Gambling Supervision Inspectorate to the State Revenue Service". By this order, the Ministry of Finance is instructed to ensure the preparation and progress of all necessary regulatory enactments in order to practically implement the integration of the Inspectorate into the State Revenue Service by 1 April 2026. 

To implement the reform, a broad set of legislative amendments has been prepared in a number of laws that redefine the exercise of supervisory and control functions in several sectors, from the regulation of gambling and lotteries to the areas of electronic money, sanctions and data circulation. The aforementioned changes to the laws have been adopted together with the 2026 budget and will come into force on 1 April 2026. 

In turn, by April 1, 2026, amendments to the Cabinet of Ministers regulations will be submitted to the Cabinet of Ministers in order to accurately determine the new competent authority and ensure uniform application of the regulation throughout the sector. 

The aim of the reform is to create a unified, centralised and effective supervisory system, transferring the supervision of the gambling and lotteries sector to the State Revenue Service. This will ensure a clearer division of responsibilities and strengthen the country's capacity to identify and address risks related to financial flows, illegal activities and respect for fair play principles in a timely manner. 

Positive benefits of adding the Lotteries and Gambling Supervision Inspectorate to the State Revenue Service: 

• A common supervisory approach and greater consistency 

By combining the functions of tax administration and gambling supervision in a single institution, the previous fragmentation is eliminated. This allows for a uniform application of the requirements and ensures consistent supervisory practices across the sector. 

• Modern use of data and technology 

The State Revenue Service already provides a wide range of digital infrastructure, including data exchange platforms, analytics tools and electronic control systems. Their integrated use will improve real-time monitoring, risk analysis and reduce the amount of manual work. In order to ensure the functions of the Inspectorate, 21 positions are transferred to the State Revenue Service. 

• Less administrative burden for entrepreneurs 

After integration, merchants will have to submit data and documents to a single institution and unified digital systems. This will facilitate administrative procedures, shorten communication routes and make the process more predictable. 

The changes to the Credit Union Act provide that from October 1, 2025, credit unions can start lending to legal entities more widely. In order to provide lending services to their members – commercial companies (partnerships and capital companies) and cooperative societies, credit unions must comply with the additional requirements specified in the law, including the conditions for the number of members and the amount of own funds, as well as obtain permission from the Bank of Latvia. The expansion of lending to legal entities is aimed at the sustainable growth of the credit union sector by promoting the attraction of members and financial resources, especially in rural areas. 

On 1 October 2025, the Law on the Digital Resilience of the Financial Market and the Use of Artificial Intelligence entered into force. This ensures the application of the requirements of the Financial Sector Digital Resilience Regulation (DORA) and the Artificial Intelligence Act in the Latvian financial market. The law mitigates the risks arising from the increased use of digital technologies in the provision of financial services, including by strengthening protection against information and communication technology disruptions and cyberattacks. The law also ensures a consistent and high level of protection in the use of artificial intelligence in cases where financial market participants use it when providing financial services. 

At the beginning of 2025, amendments to the Credit Institution Law will come into force, which define a specialized credit institution with initial capital, which may not be less than one million euros, and determine its eligibility criteria. Currently, the Credit Institution Law stipulates that the initial capital of a credit institution may not be less than five million euros. In turn, the Directive of the European Parliament and of the Council of 26 June 2013 provides that the Member States of the European Union (EU) may grant authorisation to special categories of credit institutions with an initial capital of not less than one million euros. A specialised credit institution licence will also allow access to financial markets in the EU for non-bank financial institutions, such as credit unions or fintech companies, which are often financed solely by their shareholders' funds or by capital market instruments. By becoming a licensed specialised credit institution, a financial market participant would be provided with immediate access to the deposit markets of Latvia and other Member States, which would benefit diversification of sources of financing and development of activities in the direction of both deposits and lending. 

The 3rd reading of the draft law in the Saeima is scheduled for 11.12.2025.  

The law obliges news providers to include information on the date of account closure in the register of accounts and to indicate whether the account has been closed with a balance. At the same time, it is envisaged to change the status of the information to "account closed" without additional note on the existence of the balance in those cases where the circumstances no longer exist or the basis for the status of the information included in the register "account closed with balance" is lost. Thus, the accuracy of the data in the account register and, accordingly, the current situation regarding the client's accounts is ensured. In addition, the right of the Financial Intelligence Service to obtain information contained in the Register of Accounts for the implementation of the functions specified in the Law on International and National Sanctions of the Republic of Latvia is extended. The State Revenue Service shall ensure the application of the requirements not later than on 1 July 2026, while the providers of information shall ensure the application of the new requirements to the information on a closed account with a balance, which has been included in the register and has not been deleted, until 30 September 2026. 

Latvia has started to gradually introduce structured electronic invoices (e-invoices. The first step of e-invoicing is issuance of e-invoices in transactions between companies and budget institutions in 2025. In this context, a budget institution is considered a budget institution, derived public entities partially financed from the state budget, and an institution non-financed from the budget, in accordance with the understanding of the Law on Budget and Financial Management. 

From January 2026: 

1. No longer any exceptions in place for companies registered in Latvia regarding issuance of invoices to budget institutions that are recipients of goods or services in the form of e-invoices. Similarly, budget institutions must use e-invoices when issuing invoices to companies or other budget institutions. 

2. E-invoice data – both in transactions between state and local government institutions and between companies and state or local government institutions – must be submitted to the State Revenue Service. 

The amendments to the Law on Audit Services, adopted on September 26, 2024, and entering into force on October 17, 2024, have introduced two transitional provisions regarding: 

1. Sustainability report assurance services 

If a sworn auditor or an applicant wishes to provide sustainability report assurance services but has not completed the certification process by 1 January 2026 or has obtained the certificate after that date, they must meet additional requirements: 

• has to obtine at least eight  months of practical experience in the field of sustainability; 

• has to pass a qualification exam in sustainability. 

Without fulfilling these requirements, sustainability report assurance cannot be provided. 

2. Licensed payment institutions and electronic money institutions 

These institutions have been considered public interest entities (PIEs) since the entry into force of the Law on Audit Services ; however, they have a transitional period – the requirements applicable to PIEs (such as establishing an audit committee, auditor appointment deadlines, auditor rotation requirements, and compliance with restrictions on non-audit services) must be applied starting from the 2026 reporting year. 
Furthermore, these requirements must comply not only with the Law on Audit Services  but also with Regulation (EU) No 537/2014 of the European Parliament and of the Council of 16 April 2014 on specific requirements regarding statutory audit of public-interest entities and repealing Commission Decision 2005/909/EC 

• In 2026, all municipalities have an increase in adjusted revenue, the total increase is EUR 144.1 million. euros or on average 6% compared to the planned for 2025. 

• It is intended that only the projected personal income tax revenues are credited to local governments. Municipalities will receive 1/4 of the monthly projected personal income tax revenue once a week. 

• It is intended that the overflow of the personal income tax forecast is directed to the extinguishment of the obligations of loans taken by the municipality. 

• Additional funding of EUR 3 million has been allocated. the EU's external borders for five municipalities. 

• The implementation of European Union funds and Recovery Fund projects is maintained as the main priority for borrowing in the medium term.  

• The main priorities in the area of other loans have been identified: security, education and demography – loans for the creation and adaptation of shelters to civil protection needs, loans for the implementation of investment projects of educational institutions for the implementation of a sustainable primary and secondary education function, as well as for the arrangement of the school network, including the purchase of buses for the transport of pupils as part of the school reform, as well as loans for the expansion of preschools to reduce the queues of children and to improve the infrastructure of existing preschools.  

• New conditions for borrowing of local governments have been developed, which provide for the possibilities for each local government, within the framework of a certain borrowing limit, to implement the investment projects approved in the development programmes of local governments. The limits are set taking into account specific criteria of the municipality or the size of the municipality by the number of inhabitants.  

• Riga State City Municipality has been provided with the opportunity to receive a loan for an investment project of strategic significance "Reconstruction of Vanšu Bridge".  

• New criteria for the financial capacity and sustainability of the municipality for the assessment of new borrowings and guarantee liabilities have been established, as well as the conditions for obtaining a budget and financial management loan.