Tax

The Ministry of Finance has prepared amendments to the Corporate Income Tax Law which, after public consultation, have been submitted for inter-institutional coordination. They would widen the definition of dividends (liquidation quota, consideration for share buy-backs), introduce a mechanism for corresponding transfer pricing adjustments, set the time for paying deferred CIT on deemed dividends in a reorganisation, exclude employee share plans from the calculation of reductions in equity and relax the conditions for deducting interest payments by applying a net interest calculation. The rules are also aligned with the amendments to the Social Enterprise Law that enter into force on 1 January 2027.

The Ministry of Finance has prepared amendments to the Corporate Income Tax Law to clarify the rules and prevent double taxation. The definition of dividends is widened (to include the liquidation quota and consideration for share buy-backs), a transfer pricing adjustment mechanism is introduced that allows the taxable base to be reduced where a related party's income has been adjusted, the rules on deferred payment for deemed dividends in reorganisations and the conditions for deducting interest are clarified, as are the provisions on employee share programmes and social enterprises. The public consultation has closed and the draft has been submitted for coordination.

A digest of the Supreme Court Senate's August 2026 rulings in tax cases. In case SKA-83/2026 it was held that renting out a flat or house for residential purposes is not economic activity within the meaning of real estate tax; a court reaching a different conclusion than in similar cases must justify it, and the court may order the tax administration to issue a corrected real estate tax calculation. Case SKA-733/2026 assessed the consequences of a late application for a tax relief under a municipality's binding regulations.

Tax consultant Karlīna Stāmere explains the application of VAT when a distributor hands goods over to a retailer for sale while retaining ownership (consignment). Referring to the State Revenue Service's binding ruling No. P005-17/8.6.4/17726 of 1 April 2026, it is noted that handing over goods with an accompanying document stating the possible selling price is not a VAT-taxable transaction – no tax is to be calculated at the time of handover and the retailer does not deduct input tax. The article is paywalled.

Sorainen's tax news review (I. Zladeja, A. Lasmane, K. Erele, E. Hercenbergs, J. Taukačs). The Saeima has approved changes to the simplified tax regime for small-scale economic activity: the revenue threshold is lowered from EUR 25,000 to EUR 12,000, a 10% "starter" micro-enterprise tax rate is introduced, withheld automatically by the credit institution, with an additional 15% for non-compliance. Amendments to the Personal Income Tax Law have been submitted on eligible expenses for physician-prescribed medical devices (from 31 December 2026), along with clarifications of excise/natural gas trader status. The State Revenue Service's methodology clarifies that a permanent establishment's reporting period may not exceed 12 months and that ordering by QR code in a restaurant is not distance selling. The review also covers commentary on the OECD transfer pricing guidelines, EPPO searches at two Latvian hospitals (procurements worth EUR 657,000) and tax news from Lithuania and Poland.

The Saeima's Budget and Finance (Taxation) Committee is considering for the third reading amendments to the Micro-enterprise Tax Law introducing a simplified tax payment procedure for natural persons who provide services or sell goods only to other natural persons with annual turnover of up to EUR 12,000 (coaches, gardeners, private tutors, hairdressers, etc.). A "starter" micro-enterprise tax rate of 10% of turnover is envisaged, with registration at a bank by opening an economic activity income account and no bookkeeping obligation; the conditions are no registered economic activity in the last two tax periods, no employees, and all revenue passing through the account. Breaches carry an additional 15% surcharge and a ban on using the regime for two periods. Entry into force is planned for 1 April 2027; around 1,000 users and EUR 2.5 million a year for the budgets are forecast.

An explanation of the obligation to register economic activity under Section 11 of the Law on Personal Income Tax: the indicators are regularity of transactions (three or more transactions a year, or five in three years), income from a transaction above EUR 14,229, or the economic substance of the activity. Two regimes are described – the general regime (PIT of 25.5% up to EUR 105,300 and 33% above; social insurance contributions of 31.07%, or 10% if monthly profit is below EUR 780) and the micro-enterprise tax (25% of turnover with no deduction of expenses). The 2026 thresholds are given: non-taxable minimum of EUR 6,600 a year, VAT registration threshold of EUR 50,000, minimum PIT of EUR 50; registration must be done before starting the activity, including for platform income (DAC7).

The State Revenue Service (VID) reports that from 1 July 2027 customs representation services in Latvia may be provided only by persons registered in the Register of Customs Representation Service Providers, which will be maintained by the VID and whose data will be publicly available on its website. Currently the law does not require such registration – only a vehicle driver who communicates customs control decisions to the carrier is regarded as a customs representative.

In August the Supreme Court added 24 rulings of the Senate's Department of Administrative Cases to its case-law classifiers. The most important theses for businesses: renting out a flat or house for residential purposes is not economic activity for the purpose of applying the real estate tax rate (SKA-83/2026); the Competition Council must justify a legal obligation with considerations of expediency and proportionality, and the need to rebuild a platform's processes may justify interim protection (SKA-734/2026); a licensed payment institution in an unregulated procurement has discretion to assess bidders' reputation, subject to the prohibition of arbitrariness and the principle of equality (SKA-87/2026); a creditor's subjective public rights in proceedings to strike a company off the commercial register are limited to the procedural rights provided for in the Commercial Law (an application to appoint a liquidator) (SKA-744/2026); an authority may not formally reject a request to use another communication channel instead of the official e-address (SKA-685/2026).

Cabinet of Ministers Regulation No. 499 of 25 August, published on 31 August and in force from 1 September, amends the procedure for obtaining exemption from natural resources tax on environmentally harmful goods. Waste management operators and their cooperation partners must be registered in the relevant producer registers (electrical equipment, batteries), the reporting deadline is moved from 31 March to 31 August (for the period from 1 January to 30 June), and authority action is provided for where the 40% collection target is not met; a more detailed reporting section on battery recycling applies from 2027–2028.

State Revenue Service data show Latvia's total tax arrears fell to €815.593 million as of 1 August 2026, down 1% from July. State budget debts stood at €339.521 million, municipal debts at €298.4 million, and social insurance debts at €177.672 million; €224.797 million of the total is suspended debt from insolvent companies, while €85.203 million has extended payment terms.

The Cabinet approved Finance Ministry amendments to the Personal Income Tax Law. Key changes raise the tax-exempt ceiling for volunteer and clergy expense reimbursements from 1,000 to 3,000 euros a year, exempt loyalty-programme cashback from tax, and widen tax-free gifts between relatives. The re-election period for the reduced patent tax is also shortened from five to two years.

The Latvian Traders' Association (LAT) is urging the Finance Ministry to treat losses linked to international sanctions as force majeure, allowing suppliers to write them off as business expenses without triggering corporate income tax. If suppliers must write off roughly EUR 1.8 million in unpaid goods as bad debt, current rules could impose an additional tax of about 25% on the uncovered amount. LAT president Henriks Danusevics says that without changes, suppliers lose not only the debt itself but also pay tax on it.

Latvia's statistics office published its first monthly list of Latvian-registered companies trading with Russia or Belarus, under June amendments to the law supporting Ukrainian civilians that override tax-secrecy rules. The tax authority must now feed this data to the statistics office for disclosure. Updates are planned monthly.