How to Rent Out Property in Latvia Tax-Efficiently in 2026

Renting out property in Latvia can generate reliable income, but the tax consequences depend heavily on the structure chosen by the landlord. A regime that works well for one residential apartment may be unsuitable for a large property portfolio or a commercial building.

In 2026, landlords generally have four options: registering as a self-employed person, using the simplified 10% rental-income regime, becoming a microenterprise taxpayer, or holding the property through a Latvian company. VAT must also be considered, particularly when commercial property is involved.

1. Registered economic activity

A landlord may register with Latvia’s State Revenue Service, or SRS, as a performer of economic activity. Under the general regime, personal income tax is calculated on profit: rental income less eligible expenses connected with earning that income.

This can be advantageous when a property has substantial costs. Depending on the circumstances, deductible expenditure may include repairs, management fees, insurance, professional services and other documented business expenses.

Latvia applies progressive personal income tax rates. In 2026, the rate is 25.5% on annual taxable income up to EUR 105,300 and 33% on the portion exceeding that amount. An additional 3% tax applies to the part of a person’s total annual income exceeding EUR 200,000. The precise result depends on the landlord’s total income, not only the rent received. Current rates should therefore be confirmed against the SRS guidance on personal income tax.

Social insurance contributions may also apply, depending on the landlord’s status, income and other employment or business activities.

This option requires bookkeeping and an annual income declaration. In general, the declaration is submitted in the year following the tax year between 1 March and 1 June. A later filing period applies to people whose annual income exceeds the statutory threshold. Quarterly social insurance reporting may also be required.

The general regime is often suitable for landlords with high operating expenses, multiple properties or plans to develop a long-term rental business. Its principal disadvantages are greater administration and potentially higher tax and social insurance costs.

2. The simplified 10% rental-income regime

For many individual residential landlords, the special 10% regime is the simplest option. It allows an individual not to register as a full performer of economic activity. Instead, personal income tax is charged at 10% of gross rental income.

Because tax is calculated on turnover rather than profit, most expenses cannot be deducted. Real estate tax paid for the relevant property is the principal exception.

The landlord must notify the SRS within five working days after signing the rental or lease agreement and provide the required information through the Electronic Declaration System. The SRS confirms that private individuals receiving property income may report it as unregistered business activity under this procedure. See the official SRS service description.

How the tax is collected depends on the tenant. If rent is paid by a Latvian company or another person registered as a performer of economic activity, the tenant may withhold the 10% tax and transfer it to the State budget. In other cases, the landlord generally declares the income and pays the tax through the annual income declaration.

This regime offers a low headline rate, limited bookkeeping and no mandatory self-employed social insurance contributions on the rental income. However, it may become inefficient when repairs, financing, utilities or management expenses represent a large share of revenue.

The additional 3% tax on annual income above EUR 200,000 may still need to be considered.

3. Microenterprise tax

Another possibility is the microenterprise tax regime. The applicable rate is 25%, calculated on turnover rather than profit. Business expenses are not deducted when determining the tax.

The regime’s eligibility is connected to the VAT-registration threshold, generally EUR 50,000 of annual turnover. Exceeding the applicable threshold can affect the taxpayer’s right to remain in the regime. The detailed conditions should be checked using the latest SRS microenterprise tax guidance.

A microenterprise tax declaration is normally submitted quarterly by the 15th day of the month following the quarter. The tax is paid by the 23rd day of that month.

Although the regime provides predictable taxation and relatively straightforward reporting, it is not automatically the most economical option for landlords. A 25% tax on gross receipts can be expensive when the property has significant maintenance, interest or management costs. For a landlord who qualifies for the 10% rental regime, the microenterprise option will usually require careful justification.

4. Holding property through a Latvian company

A Latvian company can own the property and receive the rental income. The company may deduct expenses incurred for its business, subject to the ordinary corporate-tax and accounting rules.

Latvia’s corporate income tax system generally imposes no tax on profits retained and reinvested by a company. Corporate income tax becomes payable when profits are distributed as dividends or treated as distributed for tax purposes.

The statutory rate is 20%, but taxable distributed amounts are divided by a coefficient of 0.8. This produces a tax cost equivalent to 25% of the net dividend. Official details are available in the SRS corporate income tax overview.

A company can be attractive when rental profits will be retained to renovate properties, repay financing or acquire further investments. It may also provide a more practical structure for a growing portfolio or for several investors working together.

However, incorporation and ongoing administration create additional costs. The company needs proper accounting, annual reporting and corporate compliance. Extracting money for personal use may also have further tax consequences. For a landlord with only one modest apartment, these costs may outweigh the benefits.

Does VAT apply to rental income?

VAT treatment depends primarily on the property and the nature of its use.

The letting of residential premises is generally exempt from VAT. A landlord carrying out only VAT-exempt residential letting will not normally be required to register solely because of that activity.

Commercial-property rental is generally taxable. Latvia’s domestic VAT-registration threshold is EUR 50,000 within a calendar year, although registration can become necessary in other situations, including certain cross-border transactions. The exemption for residential letting and the applicable registration rules are set out in Latvia’s Value Added Tax Law.

The distinction between residential and commercial use is therefore important. Short-term accommodation, mixed-use property and leases that include additional services may require separate analysis.

Choosing the most suitable regime

The 10% regime is often attractive for an individual renting out a residential property with low expenses. Registered economic activity may produce a better result when deductible costs are substantial. A company can suit investors building and reinvesting in a larger portfolio, while the microenterprise regime may be relevant only in more specific circumstances.

The right choice should be based on projected rent, expenses, financing, the tenant’s status, planned profit withdrawals and the landlord’s other income. Comparing only the headline tax rates can be misleading.

Tax rules and their interpretation can change. Before signing a lease or selecting a regime, landlords should obtain advice based on their individual circumstances and confirm current filing requirements with the Latvian State Revenue Service.

This article provides general information and does not constitute individual tax or legal advice.