Starting in 2026, Latvia will implement significant tax policy changes affecting individuals, businesses, and specific industries. These reforms aim to adjust labor taxation, introduce new VAT rates, revise excise duties, and update corporate income tax rules. Below is an overview of the key changes planned for the coming years.
Labor taxes
- The non-taxable minimum increase to euro 550 per month.
- The minimum salary increase from euro 740 to euro 780 per month.
- The minimum salary in construction service area increased to 1050 euro.
VAT
- Application of a reduced 5% value-added tax (VAT) rate to the supply of books, press, and other mass media publications in printed or electronic format that are published in the official state language, as well as in Latgalian written language, Livonian language, or in the official languages of EU member states, European Economic Area countries, the Swiss Confederation, EU candidate countries, or OECD official languages.
- Application of a reduced 12% VAT rate to the supply of bread, fresh, sterilized or pasteurized milk, fresh chilled poultry meat, and fresh poultry eggs (in shells) under a pilot project from July 1, 2026, to June 30, 2027.
Excise tax
- A sharper increase in excise duty rates for the “other alcoholic beverages” category (per 100 liters of absolute alcohol), in addition to the already legislated increase of euro15 on March 1, 2026. Further increases across all alcoholic beverage categories, including beer, are planned from March 1, 2028, averaging 10%.
- Accelerated excise duty increases for tobacco products and similar items based on usage, with an additional 5 percentage point increase in 2026 and 2027 (excluding cigars, cigarillos, and e-liquids in 2026), and an average increase of 15% in 2028.
- Excise duty increases for non-alcoholic beverages with sugar content below 8 grams per 100 milliliters and those with 8 grams or more, as well as energy drinks, starting in 2028. From 2028, a separate excise duty rate will be defined specifically for energy drinks.
- Clarification of excise duty exemption for unpackaged non-alcoholic beverages prepared on-site in catering establishments, specifying that the exemption applies to still (non-carbonated) unpackaged beverages made and consumed on-site in catering and retail locations starting in 2028.
- Cancellation of the reduced excise duty rate for petroleum products used in free ports and special economic zones from 2028, with the standard excise duty rate to be applied instead.
CIT
Starting January 1, 2026, alongside the existing income tax system, CIT payers whose shareholders are exclusively natural persons will be able to opt for an alternative 15% CIT rate when distributing profits as dividends. A 6% personal income tax will be applied to such dividend income.
From January 1, 2028, the scope of exemptions in the CIT Law will be expanded regarding the inclusion of increased interest payments in the taxable base, specifically for financing obtained from multiple alternative (non-bank) sources.
Gambling Tax
- Roulette, card, and dice games: up to 40440 euro per table annually
- Slot machines: up to 7440 euro per game position annually
- Phone-based games of chance, totalizators, and betting: up to 18% of revenue
- Bingo: up to 12% of revenue
- Interactive gambling via telecommunications: up to 15% of revenue
NRT
- Increase in natural resource tax rates for sand and gravel.
- Introduction of new natural resource tax objects: peat and roundwood exports.
Other
- Increase in the share of dividends payable to the state to 90%, with specific proposals for determining dividend amounts for certain large state-owned enterprises.
- Taxes and duties law stipulates that for the delay in payment of taxes (excluding customs duty), fees, and other state-mandated payments to be paid into the unified tax account, the payer shall be charged late payment interest 2 a month – on the 1st and 15th date of each month. Furthermore, late payment fees are not charged if the overdue tax, duty, or other state-mandated payment is received by the last day of the month of the payment due date.
Preparing for the Changes
These changes represent a major shift in Latvia’s tax landscape, impacting individuals, businesses, and various industries. To ensure compliance and make informed decisions, it’s important to understand how these updates affect your operations.
If you have any questions or need professional assistance with tax planning and compliance, contact Leinonen – our experts are ready to help you navigate these changes.
