2026 has brought several significant changes for Latvian real estate landlords. The "unregistered economic activity" regime has been renamed "declared economic activity", utility payments are no longer subject to tax, and the State Revenue Service (VID) is tightening oversight of transactions between related parties. These changes directly affect everyone renting out an apartment, house, or commercial space — whether long-term or through Airbnb and Booking.com.
Declared Economic Activity — The New 10% Regime
Until 2026, real estate landlords could choose the "unregistered economic activity" option and pay personal income tax (PIT) at a rate of 10% on rental income. In 2026, this regime has been renamed "declared economic activity" and its conditions have been clarified.
The core principle remains unchanged: the landlord pays 10% PIT on the rental income received, with no right to deduct expenses (except for real estate tax). No social insurance contributions (VSAOI) are required, there is no need to register as an economic operator, and the accounting burden is minimal — only income needs to be recorded.
Four Key Changes in 2026
1. Mandatory notification to the SRS. Going forward, to apply the 10% regime, the commencement of the economic activity must be notified to the SRS within the prescribed deadline. If notification is not submitted in time, income up to the date of registration will be taxed under the general procedure — at rates of 25.5% or 33%.
2. Utility payments are no longer taxed. This is the most significant and welcome change. From 1 January 2026, income from declared economic activity no longer includes payments to third parties related to the use of the property that do not increase its value — for example, utility payments for electricity, water, and heating. Only the contractual rental amount is subject to tax.
In practice, this means: if the lease agreement stipulates that the tenant covers utilities in addition to the rent, the landlord does not have to pay the 10% tax on these amounts.
3. Stricter related-party control. If a person engaged in declared economic activity enters into transactions with a company or other entity where they are a board member, employee, or related person, and the transaction value exceeds the market price, the excess will be taxed as employment income. This curbs the possibility of concealing salary through unjustifiably high rental payments.
4. Parallel activity is prohibited. A person may not simultaneously carry out the same type of registered economic activity while using the declared economic activity regime.
The General Tax Regime — When 10% Is Not the Best Choice
In addition to the 10% regime, a landlord may choose registered economic activity and pay PIT under the general procedure:
25.5% on annual income up to €105,300
33% on the portion of income exceeding €105,300
An additional 3% rate on income above €200,000
Under this regime, you are entitled to deduct expenses related to the economic activity: repairs, insurance, loan interest, depreciation, and maintenance costs. However, you must also factor in social contributions (VSAOI) — 31.07% of gross income (or minimum contributions of €242.35 per month in 2026).
When is the general regime more advantageous? If you have significant property-related expenses (e.g. a recent major renovation, a large mortgage), deducting expenses may reduce the taxable income by more than the 10% regime saves. The calculation must be made on a case-by-case basis.
How to Register and Declare Income
Registration with the SRS (VID)
Log in to eds.vid.gov.lv using your e-identity.
Select "Documents" → "Notification of Economic Activity".
Choose "Declared Economic Activity" and specify the type of activity — real estate rental.
Indicate the start date of the activity.
If notification is not submitted in time, income up to the registration date will be taxed under the general procedure, so do not delay notification.
Annual Income Declaration
Income from declared economic activity must be declared once a year by filing the Annual Income Tax Return. The filing period is from 1 March to 1 June (but no later than three years after the end of the tax year). The tax must be paid by 23 June (if the return is filed by 1 June).
Real Estate Tax (NĪN) in 2026
In addition to PIT, the property owner must also pay real estate tax (NĪN). The NĪN rates for 2026 are:
Property type | NĪN rate (of cadastral value) |
|---|---|
Residential property with a declared resident | 0.2% – 0.6% |
Residential property with no declared resident | 1.5% |
Commercial property and other | 1.5% |
Land | 1.5% |
The application of reduced NĪN rates (0.2% to 0.6%) on residential property is linked to the declaration of a place of residence as of 1 January of the tax year. If no person is declared as residing in the residential property as of 1 January 2026, the standard NĪN rate of 1.5% will be applied for the entire year 2026.
Important for landlords: if the apartment is rented out and no one is declared as residing there, the NĪN rate will be 1.5% — significantly higher than if someone is declared as a resident.
NĪN is the only deductible expense under the 10% regime — it can be subtracted from taxable income when filing the annual income tax return.
VAT Application — Residential vs. Commercial Property
The application of VAT to real estate rental depends on the type of property:
Residential Rental — VAT Exempt
The letting of residential premises is not subject to VAT. This means that regardless of the total transaction volume, a residential landlord is not required to register as a VAT payer, and VAT must not be shown on invoices. Even if rental income from a residential property exceeds €50,000 per year, VAT registration is not mandatory due to residential rental alone.
Commercial Property Rental — VAT at 21%
By contrast, the rental of commercial premises (offices, warehouses, shops) is subject to VAT at 21% if the landlord is a VAT-registered person. If the landlord is not a VAT payer but the total value of taxable transactions exceeds €50,000, they must register as a VAT payer and start applying 21% VAT to the rent.
Short-Term Rental (Airbnb, Booking.com)
Short-term rental services (Airbnb, Booking.com) are a specific case. They are considered accommodation services, which are subject to the reduced VAT rate of 12% (the reduced rate for hotel services), provided the service provider is a VAT-registered person.
If you rent out your property on a short-term basis using such platforms, instead of a lease contract you must attach a copy of the cooperation agreement with the platform and the landlord's registration confirmation document when declaring income to the SRS.
If you use platforms registered abroad, additional rules on income earned from foreign sources must also be observed.
Renting Through an SIA — When It Pays Off
If you own multiple properties or commercial premises, conducting the rental activity through an SIA may offer several advantages:
1. Deduction of expenses. An SIA can deduct all expenses related to property maintenance: repairs, insurance, management fees, loan interest, and depreciation.
2. 0% CIT on reinvested profits. As long as the rental profits remain within the SIA, no corporate income tax (CIT) is payable. Tax only arises when profits are distributed.
3. Recovery of input VAT (for commercial property). If the SIA rents out commercial property and is a VAT-registered person, it can recover input VAT on repairs, management services, and other costs.
4. Professional image. An SIA as a landlord is more credible to commercial tenants.
Disadvantages:
SIA maintenance costs: accountant (€200–400 per month), legal address, bank.
Profit distributions are subject to CIT (20% under the standard regime).
For residential property owned by an SIA, the NĪN rate will be 1.5% (unless a natural person is declared as a resident there).
The Most Common Mistakes Landlords Make
Undeclared rental income. Many landlords hope the SRS "won't notice" small rental income. However, the SRS is increasingly using data matching — bank account statements, platform data (Airbnb, Booking.com), land registry data. Undeclared income can lead to penalty interest and fines.
Utility payments included in taxable income. Although utility payments are no longer taxed from 2026, the landlord must be able to separate them from the rent. The contract must clearly state that utilities are covered separately.
Incorrect VAT application. Residential rental must not have VAT applied, even if the landlord is a VAT-registered person in another activity. However, for commercial property rental, VAT at 21% is mandatory if the landlord is a VAT-registered person.
Failure to use NĪN reliefs. If a person is declared as residing in the property (e.g. the landlord themselves), the NĪN rate is 0.2–0.6%, not 1.5%. Check whether a place of residence is declared in your property.
Renting out real estate in Latvia in 2026 remains relatively straightforward to administer, especially with the 10% regime. The changes — utility payments being exempt from tax, a stricter notification procedure — are on the whole positive and fairer towards landlords. However, if you own multiple properties or commercial premises, an SIA structure may offer significant tax advantages. Our team helps both with income declarations and with selecting the optimal structure.
Last updated: May 2026. Information is based on the Law "On Personal Income Tax" with 2026 amendments, official SRS (VID) materials, and Riga municipal NĪN application rules.
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