Tax changes in 2026: What entrepreneurs need to know?
Starting in 2026, a series of tax changes will come into effect in the Latvian business environment, aimed at reducing the burden of labour taxes, encouraging investment, and improving tax administration. We have compiled the key points that every company manager and accountant should pay attention to.
1. Revolutionary changes to dividend payments (CIT and PIT)
From January 1, 2026, companies with members who are only individuals will have a voluntary alternative for dividend taxation:
Current model: 20% CIT (coefficient 0.8) at the company level, 0% PIT for the recipient.
New alternative: 15% CIT at the company level (coefficient 0.85) and 6% PIT withholding at the time of payment. This regulation will apply from 2027, sharing profits earned starting from 2026.
Why is this important? This model is particularly beneficial for foreign investors and individuals paying taxes in other countries, as it allows for easier application of tax credits in their country of residence.
2. Changes to labour costs and net salaries
To increase the purchasing power of residents, two key parameters are changing:
Tax-free minimum: Increases from 510 euros to 550 euros per month.
Minimum wage: Increased from 740 euros to 780 euros per month. Employers should expect a small increase in labour costs for minimum wage earners, while those earning average wages will see an increase in the "net" amount received.
3. VAT pilot project and language criteria
Food: From July 1, 2026, a reduced 12% VAT rate will be introduced for bread, milk, poultry meat, and eggs for one year.
Books and press: A 5% VAT rate will henceforth apply only to publications in the Latvian language or in the languages used by official EU/OECD states.
4. Administrative simplifications and e-invoices
E-invoices: From January 2026, these will become mandatory in transactions between businesses and state/local government institutions (B2G), as well as between the institutions themselves. Data on these invoices will need to be submitted to the SRS.
SRS threshold: Debt collection activities for tax debts will only commence once the debt exceeds 39 euros (previously 15 euros).
5. Increases in Excise and Natural Resources Tax (NRT)
Expect cost increases in the following areas:
Energy resources: The excise tax on natural gas increases (by ~56% for fuel) and on oil products.
NRT: Rate increases for natural resource extraction (sand, gravel, peat).
Harmful goods: A steeper increase in excise tax on alcohol (from March) and tobacco. A new NRT rate for electronic cigarettes (2 EUR/unit).
How to prepare? We recommend reviewing your company's 2026 budget plans now, taking into account the increase in minimum wage and the rising costs of energy resources. If your company has individual members, consult with us about the most advantageous dividend payment model!
Want to know more about the new dividend tax calculation? Contact us!
Information prepared based on the 2026 budget package and amendments to tax laws.
Starting in 2026, a series of tax changes will come into effect in the Latvian business environment, aimed at reducing the burden of labour taxes, encouraging investment, and improving tax administration. We have compiled the key points that every company manager and accountant should pay attention to.
1. Revolutionary changes to dividend payments (CIT and PIT)
From January 1, 2026, companies with members who are only individuals will have a voluntary alternative for dividend taxation:
Current model: 20% CIT (coefficient 0.8) at the company level, 0% PIT for the recipient.
New alternative: 15% CIT at the company level (coefficient 0.85) and 6% PIT withholding at the time of payment. This regulation will apply from 2027, sharing profits earned starting from 2026.
Why is this important? This model is particularly beneficial for foreign investors and individuals paying taxes in other countries, as it allows for easier application of tax credits in their country of residence.
2. Changes to labour costs and net salaries
To increase the purchasing power of residents, two key parameters are changing:
Tax-free minimum: Increases from 510 euros to 550 euros per month.
Minimum wage: Increased from 740 euros to 780 euros per month. Employers should expect a small increase in labour costs for minimum wage earners, while those earning average wages will see an increase in the "net" amount received.
3. VAT pilot project and language criteria
Food: From July 1, 2026, a reduced 12% VAT rate will be introduced for bread, milk, poultry meat, and eggs for one year.
Books and press: A 5% VAT rate will henceforth apply only to publications in the Latvian language or in the languages used by official EU/OECD states.
4. Administrative simplifications and e-invoices
E-invoices: From January 2026, these will become mandatory in transactions between businesses and state/local government institutions (B2G), as well as between the institutions themselves. Data on these invoices will need to be submitted to the SRS.
SRS threshold: Debt collection activities for tax debts will only commence once the debt exceeds 39 euros (previously 15 euros).
5. Increases in Excise and Natural Resources Tax (NRT)
Expect cost increases in the following areas:
Energy resources: The excise tax on natural gas increases (by ~56% for fuel) and on oil products.
NRT: Rate increases for natural resource extraction (sand, gravel, peat).
Harmful goods: A steeper increase in excise tax on alcohol (from March) and tobacco. A new NRT rate for electronic cigarettes (2 EUR/unit).
How to prepare? We recommend reviewing your company's 2026 budget plans now, taking into account the increase in minimum wage and the rising costs of energy resources. If your company has individual members, consult with us about the most advantageous dividend payment model!
Want to know more about the new dividend tax calculation? Contact us!
Information prepared based on the 2026 budget package and amendments to tax laws.