Micro-Enterprise Tax 2026 – Rates, Registration, Restrictions | Balansis

Micro-Enterprise Tax in 2026 – A Complete Guide for Individual Merchants and Self-Employed Persons

The micro-enterprise tax (MET) regime is the simplest tax formula Latvia offers to small entrepreneurs: one rate, one payment, simple accounting. For most self-employed persons, it means that PIT and social insurance contributions no longer have to be calculated separately – everything is included in a single 25% tax rate on turnover.

However, “simple” and “advantageous” are not synonyms. And 2026 has brought new provisions that are important to know. This article covers everything that is relevant: who can use the MET, what the rates are, what the restrictions and pitfalls are, how to register – and in which cases it is better to choose the general tax regime.

TL;DR – Key takeaways

• MET rate in 2026: 25% of turnover (rate unchanged since 2024)

• Available only to natural persons – individual merchants (IK), owners of individual enterprises, owners of agricultural or fisheries holdings, and persons registered as self-employed with the VID; limited liability companies (SIA) cannot use it since 2022

• Turnover limit: €50,000 per year (the VAT registration threshold)

• Employee wages are taxed outside the MET – under the general regime

• From January 2026: the option to register for MET status for specific quarters (for those with irregular economic activity)

• The MET is advantageous when costs are low; if costs are high, the general regime is usually cheaper

What is the micro-enterprise tax and who is it for?

The micro-enterprise tax is not another tax on top of existing ones – it is a substitute. A single payment covers two things: the micro-enterprise owner’s state social insurance mandatory contributions (VSAOI) and the personal income tax (PIT) on the income from economic activity. The tax is calculated simply: turnover × 25%. Nothing else to count.

According to Section 1.1 of the Micro-Enterprise Tax Law, the law’s purpose is to reduce the administrative and tax burden on micro-enterprises, especially during the start-up phase of economic activity, as well as in sectors with low income potential.

Source: Micro-Enterprise Tax Law

In practice, this means that the MET is intended for those who are just starting out, whose turnover is small, or whose economic activity is irregular – the self-employed, consultants, craftsmen, seasonal service providers. The law does not set a mandatory minimum turnover – if there was no revenue in a particular quarter, no return needs to be filed and no tax has to be paid.

Who can use the MET in 2026?

A MET payer can only be a natural person in one of the following legal forms: individual merchant (IK), owner of an individual enterprise, owner of an agricultural or fisheries holding, or a natural person registered with the VID as a self-employed person. All these conditions have one common element – the person must not be registered as a VAT payer (with certain exceptions under Section 139.² of the VAT Law, which regulates a special registration procedure for foreign services).

There are also clear prohibitions. A micro-enterprise owner cannot simultaneously pay PIT from economic activity or the reduced patent fee. If a person operates in several forms – for example, is both the owner of an agricultural holding and an IK – MET status can be used only for one of those forms.

Limited liability companies (SIA) can no longer use this regime. SIA lost their MET payer status on 1 January 2022 – this is recorded in point 36 of the law’s transitional provisions. If any source still mentions SIA as MET payers, it is outdated. Currently, SIA pay corporate income tax (CIT) under the general procedure, and if you are interested in how SIA taxation works, we explain it in the article on CIT 0% on reinvested profit.

Key figures for 2026

It is important to understand that the turnover limit is not some internal MET ceiling – it is an automatic link with the VAT Law. As soon as turnover over a 12‑month period reaches €50,000, the enterprise must become a VAT payer, and the MET status ends with the next taxation period. This means a transition to full accounting and payment of taxes under the general regime. If the threshold in the VAT Law were to change one day, the permissible MET turnover would also change – these are interrelated provisions.

What changed in 2026?

On 1 January 2026, two additional legal provisions entered into force, as set out in point 45 of the transitional provisions.

Term registration (Section 4, Paragraph 3.¹) is a novelty that helps those whose economic activity is not constant throughout the year. If a natural person anticipates working only for a few months or seasonally, they can apply for MET status not for the entire taxation period but for one or more specific quarters. This means a photographer who works only in summer, or a consultant with project‑based work, can be a MET payer only during the time they have revenue – without having to cancel and re‑apply for the status.

Automatic loss of status (Section 4, Paragraph 8.⁶) is a procedural change. If a MET payer has no turnover for two consecutive years, the VID now issues a decision on the loss of status automatically – in the Tax Administration Information System, based on automatic data processing, within five working days after the deadline for submitting the fourth‑quarter return. The decision is valid without a signature.

Employees under the MET regime – an important nuance

The MET covers only the micro‑enterprise owner’s taxes. If the enterprise has employees, taxes on them must be paid under the general procedure – just like any other employer in Latvia.

This means: employer’s social insurance contributions (VSAOI) at 23.59% on top of the gross wage, employee VSAOI deduction of 10.50% from the gross, and payroll PIT at 25.5% (or 33% above the maximum VSAOI contribution base). You can read more about the payroll tax mechanism in the article on payroll taxes for employers in 2026. The MET does not simplify this situation – employee costs are the same regardless of whether the enterprise is under the MET or the general regime.

According to Section 2.¹ of the law, an employee’s income from a micro‑enterprise is subject to personal income tax (payroll tax) in accordance with the Personal Income Tax Law, and the employee is insured as an employee in accordance with the State Social Insurance Law.

Source: Micro-Enterprise Tax Law, Section 2.¹

Simplified tax payment solution

In addition to the regular quarterly return model, MET payers have access to a special mechanism – the simplified tax payment solution. This works as follows: if all revenue from economic activity goes through a special business revenue bank account, the VID receives information from the bank and prepares the return itself. If the MET payer confirms it by the submission deadline or does not object – it is considered submitted.

To use this solution, four conditions must be met: the requirements of the Law “On Taxes and Fees” for this solution must be observed; there must be no MET debts on the day of application; all revenue must be received in the business revenue account; and accounting must be maintained using the single‑entry system.

An important detail regarding cash: if a client pays in cash, this amount must be deposited into the business revenue account within 15 days of receipt – but no later than 31 December of the taxation year (or until the termination of economic activity, if earlier). For those working mainly in a cashless environment, this solution makes it possible to be practically free from the quarterly filing routine. On the other hand, for those working with cash, this 15‑day rule must be particularly kept in mind.

Practical example

Let’s assume that Artūrs is an IT consultant working as an individual merchant with MET status. His turnover in 2026 is €24,000, while costs are only a computer and software subscriptions, totalling approximately €1,800 per year (7.5% of turnover).

Under the MET regime:

Under the general PIT regime (for comparison):

Taxable income: €24,000 − €1,800 (costs) = €22,200. Assuming even income of approximately €1,850/month, VSAOI from the minimum base €780 × 31.07% × 12 = €2,908, VSAOI above the minimum (€1,850 − €780) × 10% × 12 = €1,284, total VSAOI €4,192. PIT base: €22,200 − €6,600 (non-taxable minimum) − €4,192 = €11,408, PIT 25.5% = €2,909. Total taxes under the general regime: approximately €7,101.

In this scenario, the MET is more advantageous – by about €1,100 per year. However, this changes when costs increase. If Artūrs had rent, an employee and equipment costs – e.g. a total of €10,000 per year – the general regime would be cheaper.

The calculation is simplified and approximate. It uses the planned minimum wage of €780 (indicative value for 2026). You can make a precise comparison for your situation using our salary calculator or by consulting a Balansis accountant.

MET vs. the general IK regime – side‑by‑side comparison

This table is a quick guide – but the precise decision depends on your specific numbers. If you are not sure, we at Balansis will calculate it together with you – contact us.

When is the MET a good choice – and when is it better not to use it?

With or without the MET?

The MET is an optimal choice for service providers with low costs – consultants, IT specialists, designers, translators, photographers, coaches. For those whose invoice amount consists mostly of their personal work, not purchased goods or expensive materials, the MET regime offers the possibility to gain tax simplicity without high additional costs. For a comparison between different forms of economic activity – including IK vs SIA – read our article SIA vs IK vs self-employed.

The MET becomes disadvantageous when costs rise. From about the moment when business expenses exceed 30–40% of turnover, the general PIT regime starts to be cheaper – because tax is paid on profit, not turnover. Likewise, the MET is not suitable if you need to issue VAT invoices – it is not compatible with MET status.

Another aspect that is often underestimated: social protection. The lower the turnover, the smaller the VSAOI contributions – and the smaller the future pension and sickness benefit. If turnover is, for example, €8,000 per year, the VSAOI amount within the MET may be significantly lower than the minimum set for self-employed persons by the State Social Insurance Law. This must be taken into account.

How to register for MET status?

For a new starter of economic activity, the process is simple. When registering with the VID as a self-employed person, or with the Register of Enterprises (as an IK, owner of an individual enterprise), you can simultaneously submit an application for obtaining MET status. The VID takes a decision within five working days and publishes the information on its website. MET status takes effect from the day the VID receives the application.

For existing entrepreneurs who want to switch from the general PIT or CIT regime to the MET, the application must be submitted by 15 December of the pre-taxation year. The transition takes effect on 1 January of the next taxation period.

If you plan to operate irregularly – for example, only in summer or only during a few project months – term registration is available in 2026. You can apply for MET status for one or more quarters, not for the whole year. This is suitable for seasonal entrepreneurs who have both active and inactive periods during the year.

The registration conditions are the same in any case: the expected turnover must not exceed the VAT registration threshold (€50,000), and you must not be registered as a VAT payer under the general procedure.

Loss of MET status

MET status can be lost in two types of cases – automatically or voluntarily.

Automatically, the status ends if the micro-enterprise becomes or must become a VAT payer – in this case, MET status ends with the next taxation period. The status also ends automatically if there has been no turnover for two consecutive taxation periods (if the MET was registered from the second quarter of a taxation period – three consecutive periods). From 2026, this decision is taken by the VID automatically, using the data processing system.

There is also a special case that is important to remember: if a MET payer ceases economic activity during the taxation year and re‑registers it in the same year, becoming a PIT or CIT payer – they cannot return to MET status neither in the same year nor in the following year. This is Section 2, Paragraph 6 of the law, and it can have unexpected consequences for those who improvise with their enterprise structure.

Voluntary exit from MET status is possible, but not before the end of the taxation period – the VID must be informed in due time.

Frequently asked questions

Is the MET available to SIA?

No – and has not been for four years. SIA lost their MET status on 1 January 2022 and now pay CIT under the general procedure. If the question arises whether to establish an IK or an SIA, read our detailed SIA vs IK comparison.

Does the MET also cover employee taxes?

No. The MET covers only the micro-enterprise owner’s VSAOI and PIT. All employer taxes must be paid for employees under the general procedure – VSAOI at 23.59% of the gross, employee VSAOI at 10.50%, and payroll PIT.

Can a MET payer register as a VAT payer?

General VAT registration is not compatible with MET status – it means the loss of MET status with the next taxation period. There is an exception – the special registration procedure set out in Section 139.² of the VAT Law, which applies to certain cases of receiving foreign services. If turnover grows and VAT becomes necessary, the transition must be planned in time – more about VAT registration in Latvia.

What are the filing deadlines?

The quarterly return must be submitted by the 15th day of the month following the quarter. The MET must be paid by the 23rd day of the same month. The return is filed only for those quarters in which there was turnover.

Can I register for the MET for only part of the year?

Yes – from 1 January 2026. If you plan to operate irregularly, you can apply for MET status for one or more specific quarters within the taxation period.

What happens if there is no turnover for two years?

MET status is automatically lost with the next taxation period. From 2026, this decision is taken automatically by the VID, with the system processing the return data.

Which is more advantageous – MET or dividends from an SIA?

We have explained this comparison separately – read the article on dividends or salary in an SIA.

Conclusion

The micro-enterprise tax regime in 2026 is what it has been – 25% of turnover, no complex accounting, with full social insurance. It is a convenient tool for those whose business costs are low and whose turnover does not exceed €50,000.

The novelty in 2026 is term registration, which makes the MET more accessible to seasonal and irregular entrepreneurs. Meanwhile, the automatic status loss procedure means that the VID itself monitors turnover history – and excludes those who have had no activity for a long time, without a separate decision document.

It is important to remember: the MET does not reduce employee costs, is not compatible with VAT registration, and may result in lower social protection than the general self-employed regime. Before choosing or changing a tax regime, it is worth calculating a specific numerical comparison for your situation – or consulting an accountant.

Regulatory sources and references

• Micro-Enterprise Tax Law (version effective from 01.01.2026)

• Personal Income Tax Law

• State Social Insurance Law

• Value Added Tax Law

If you are not sure which tax regime is most suitable for your situation, contact Balansis – we will help you calculate and compare specifically.

Article prepared in May 2026, based on the version of the Micro-Enterprise Tax Law that entered into force on 1 January 2026. Tax legislation changes – before making decisions, it is advisable to check the current text of the law or consult a certified accountant.