Tax changes in 2026

Much has already been written about this, but it is probably worth summarizing in one place – what are the most significant changes in Latvian taxes that will come into effect as of 1.1.26.

1. CBAM. From January 1, 2026, import duties must be paid on CO2 emissions generated outside the EU from the production of the following goods: cement, electricity, fertilizers, iron and metal, aluminum, hydrogen. Each of these goods has its own CN (customs) code, which is specified in the relevant regulation. Until now, these only had to be declared at the time of import. Essentially, the aim of this system is to make production outside the EU equivalent to that within the EU in terms of CO2 emissions payments. More details on this can be found in a separate blog post.

2. The non-taxable minimum will increase from EUR 510 to EUR 550, while the minimum monthly wage will increase from EUR 740 to EUR 780.

3. Benefits will increase, including:

   1. The one-time childbirth benefit will be EUR 600 (previously EUR 421.17).

   2. The childcare benefit for children up to 1.5 years of age will be EUR 298 per month (previously EUR 171).

4. Alternative procedure for dividends: 15% CIT (applying a coefficient of 0.85 to the base) + 6% PIT, if the participants/shareholders are only natural persons, so that these shareholders can reduce the PIT payable in their country of tax residence by the 6% paid in Latvia. The company itself can decide whether to switch to this system. This system (6% Latvian IIN credit in their country of tax residence) could be of interest to, for example:

   1. Shareholders of Latvian companies who are US tax residents living in Latvia but continue to pay taxes in the US due to different tax residence systems;

   2. Shareholders of Latvian companies who are tax residents of other countries and generally live abroad;

   3. Local governments in Latvia where the relevant shareholder of a Latvian company permanently resides;

   4. From the point of view of public relations, it also sounds better that the CIT rate is 15%.

5. 1.1.26. extends the exemption from the so-called thin capitalization restrictions - when the 4:1 loan-to-equity ratio does not apply. This means that in more cases companies will be able to borrow from non-bank lenders without paying CIT on interest. CIT will not apply to interest payments on financing from alternative financing sources, including:

   • crowdfunding platforms,

   • investment brokers,

   • alternative investment funds,

   • securitization companies;

   • if the lender is not a related party;

   • as well as public-private partnership (PPP) target companies.

6. IIN. From 2026 to 2029, IIN will not be levied on support payments from state and EU funds for the revitalization of historically degraded peat extraction sites. The procedure for applying the non-taxable minimum for pensioners to non-residents has been clarified, as well as the fact that compensation paid in accordance with the law on the expropriation of real estate necessary for the needs of society is not subject to IIN.

7. From 1.7.26 to 30.06.27, a 12% VAT rate has been introduced for a limited list of food products (bread, milk, fresh and chilled poultry meat, fresh eggs), but 5% for books in the languages of the EU, EEA and OECD countries.

8. In addition to the now customary excise duty increases on alcohol (1.3.26., 1.3.27., 1.3.28.), tobacco products (26.-28.g.) and non-alcoholic beverages (28.g.), the abolition of reduced excise duties on petroleum products in SEZs and free ports (28) should also be highlighted.

9. Gambling tax rates have also been increased from 1.1.26.

10. The natural resources tax has a new object – unprocessed timber sold for commercial purposes outside the EU (from January 1, 2027 – EUR 75 per 1 m³; from January 1, 2028 – EUR 115 per 1 m³). This is the first time that the NRT will also apply to exports! Meanwhile, the NRT rates for peat (€3.50 per ton), sand and sand-gravel (€0.55 per 1 m³) have been increased.

11. The draft law on so-called vignettes, or road use charges, increases charges for trucks, but exempts zero-emission vehicles. However, as a result of protests, the president sent the draft law back for further review.

12. The vehicle operating tax (TEN) does not apply to electric scooters. The company light vehicle tax (UVTN) does not apply to cars purchased for sale that are less than 10 years old.

13. Transfer pricing documentation.

    1. A new controlled transaction report has been introduced:

       • A structured summary of TC data, which must be submitted to the SRS EDS within 12 months after the end of the reporting year if the amount of controlled transactions exceeds EUR 250,000.

    2. Amended TC documentation preparation thresholds and submission obligations:

       • Local documentation must be prepared within 12 months after the end of the reporting year if the amount of controlled transactions exceeds EUR 250,000;

       • Global documentation must be prepared within 12 months after the end of the reporting year if the amount of controlled transactions exceeds EUR 20 million;

       • Local and global documentation must be submitted within 30 days upon request by the SRS.

    3. Increased transaction significance:

       • If the total value of a transaction in the relevant reporting year does not exceed EUR 90,000 (previously EUR 20,000), the taxpayer is entitled not to consider it a significant transaction and not to include information about it in the TC documentation.

    4. Clarified regulations on the updating of comparable data analysis:

       • If the situation affecting the TC methodology has not changed significantly, the taxpayer shall review and refine the prepared TC documentation once every three years, except for the financial indicators of the tested parties and previously accepted comparable data, which shall be refined once a year.

14. Crypto-asset exchanges will start reporting transactions on their platforms. I already wrote about this in 2023. ‘How will information about crypto reach the SRS in 2026?’ and 2025. ‘Crypto business taxes’. The directive (DAC8, implemented by Cabinet of Ministers Regulations No. 1245 and 751 and amendments to the Taxes and Duties Act) also works the other way around, of course – the Latvian SRS will report to the administrations of other EU member states on the transactions of their tax residents with crypto on Latvian exchanges. It has not been widely reported that reporting within the EU administration also applies to inquiries if the value of a transaction or series of transactions exceeds EUR 1.5 million or relates to tax residence issues.

15. The Tax and Customs Police is transferring from the SRS to the supervision of the Ministry of the Interior.

A more comprehensive summary has also been prepared by the Sorainen tax team.