Renting Out Property — Taxes and Accounting in Latvia in 2026
2026 has brought several significant changes for property owners who rent out real estate in Latvia. "Unregistered economic activity" has been renamed "notified economic activity," and VID has updated its methodical material on taxes on income from renting out or leasing an apartment. These changes directly affect anyone who rents out an apartment, house, or commercial space — both long-term landlords and those earning through Airbnb and Booking.com.
Key takeaways
"Unregistered economic activity" was renamed "notified economic activity" in 2026 — the principle stays the same: 10% personal income tax (PIT) on rental income, with no mandatory state social insurance contributions (VSAOI).
Starting economic activity must be notified to VID within five working days of signing the lease/rental agreement (not in advance, before it begins) — otherwise income earned before the registration date is taxed under the general regime (25.5% or 33%).
Utility payments are taxed at 10% PIT only if the tenant pays them to the landlord rather than directly to the service provider.
Renting out residential premises for living purposes is not subject to VAT; if the same apartment is rented out for business use, or if it is commercial space, 21% VAT is mandatory.
The real estate tax (NĪN) rate is 0.2–0.6% (if a person is declared as residing at the property) or 1.5% (if not) — the exact rate is set by each municipality within the limits set by law.
Notified economic activity — the new 10% regime
Until 2026, landlords could opt for "unregistered economic activity" and pay 10% PIT on rental income. In 2026, this regime was renamed "notified economic activity," and its conditions were clarified.
The core principle remains unchanged: the landlord pays 10% PIT on the rent received, with no right to deduct expenses (except for real estate tax). No VSAOI contributions are required, no registration as an economic operator is needed, and the accounting burden is minimal — only income needs to be recorded.
Four significant changes in 2026
1. Mandatory notification to VID. Going forward, to apply the 10% regime, starting economic activity must be notified to VID within five working days of signing the lease/rental agreement (not before the activity begins). If the notification is not submitted in time, income earned before the registration date will be taxed under the general regime — at a rate of 25.5% or 33% (see below).
2. Utility payments — how to tax them correctly. It's important to understand the distinction here:
If the tenant pays utility bills directly to the service provider (the property manager, electricity supplier, heating company, etc.) — these payments are not taxable income for the landlord.
If the tenant pays utility bills to the landlord, who then forwards them to the service provider — these payments must be included in the landlord's taxable income, and 10% PIT must be paid on them.
Source: VID methodical material "Taxes on income from renting out or leasing an apartment"
Practical tip: To avoid paying tax on utility payments, the rental agreement should state that the tenant covers utility payments themselves, paying the service providers directly. The landlord then receives only the rent.
A security deposit is also taxable income. Under the notified economic activity (10%) regime, the security deposit received from the tenant must also be added to income — not just the net rent. This means that when a security deposit is received, 10% PIT must be paid on it, just as on the rent itself.
3. Stricter control of related parties. If a person under the notified economic activity regime enters into transactions with a company where they are an officer, employee, or related person, and the transaction value exceeds market price, the excess will be taxed as salary income.
4. Parallel activity prohibited. Notified economic activity cannot be carried out if the person is simultaneously conducting registered economic activity of the same type.
The general tax regime — when 10% isn't the best option
In addition to the 10% regime, a landlord can choose registered economic activity and pay PIT under the general regime:
Annual income | PIT rate |
|---|---|
Up to €105,300 | 25.5% |
Above €105,300 | 33% |
In addition, the 3% additional PIT rate applies to the portion of income exceeding €200,000 per year (IIN Law art. 15.¹; assessed in the annual return) — it is added on top of the regular PIT rates and is not the solidarity tax.
Under this regime, expenses related to the economic activity may be deducted: repairs, insurance, loan interest, depreciation, and management costs. However, VSAOI must also be factored in — and here's an important nuance: for a person who manages real estate (i.e., rents out or leases it under the general regime), the VSAOI rate is 26.59% (not the general self-employed rate of 31.07%, which applies to other types of services). If monthly income reaches or exceeds the minimum wage (€780/month in 2026), VSAOI is 26.59% of at least €780 (a minimum contribution of €207.40/month) plus 10% of the amount above €780. If monthly income is below €780, VSAOI is only 10% of the actual income.
Source: VID methodical material "Taxes on income from renting out or leasing an apartment", Chapter 2.3
When is the general regime more favorable? If you have significant property-maintenance-related expenses (for example, a recent major renovation or a large mortgage loan), deducting expenses can reduce taxable income more than the 10% regime saves you. The calculation must be done individually — and you need to account for the fact that VSAOI (10% of income if it is below €780 a month; otherwise 26.59% of at least €780 plus 10% of the excess) can significantly reduce that saving. VSAOI is not required if you have reached retirement age, receive a state old-age pension, have a Group I or II disability, or your permanent residence is outside Latvia.
A practical example
Suppose Marta rents out an apartment for €900 per month — €10,800 per year in total. The tenant transfers utility payments (~€150/month) directly to the service providers, so they don't affect Marta's taxable income.
Under the notified economic activity (10%) regime:
Amount | |
|---|---|
Taxable income | €10,800 |
PIT (10%) | €1,080 |
VSAOI | not required |
Net income | €9,720 |
Under the general regime, if Marta has, for example, €2,000 per year in deductible property-maintenance-related expenses (insurance, repairs):
Amount | |
|---|---|
Taxable income (€10,800 − €2,000) | €8,800 |
PIT (25.5% of €8,800 − €880 VSAOI = €7,920; Personal Income Tax Law, Article 10(1), point 1) | €2,019.60 |
VSAOI (income after expenses ~€733/month, i.e. below €780 — only 10% of actual income: 10% × €8,800) | €880/year |
Net income (€10,800 − €2,000 − €880 − €2,019.60) | ~€5,900 |
In this example, the 10% regime is significantly more favorable for Marta — under the general regime the PIT rate (25.5%) is much higher than 10% and €2,000 of expenses does not offset that difference; VSAOI comes on top. The general regime typically becomes more favorable only when rental income is higher or deductible expenses are very significant relative to income. Note: the VSAOI base is monthly income after expenses; if expenses are uneven (for example, a large repair in a single month), each month must be assessed separately (VID methodical material, example 8).
How to register and declare income
Registering with VID
1. Log in to eds.vid.gov.lv with your e-identity.
2. Select "Documents" → "Notification of economic activity."
3. Select "Notified economic activity" and specify the type of activity — renting out real estate.
4. Specify the start date of the activity.
Important: The notification must be submitted within five working days of signing the lease/rental agreement — not before the economic activity begins. If the notification is not submitted in time, income earned before the registration date will be taxed under the general regime, so don't delay the notification.
Source: VID: Notified economic activity for property landlords
Annual income tax return
Income from notified economic activity must be declared once a year, by filing an annual income tax return. Filing period: from March 1 to June 1 (but no later than three years after the end of the tax year). Tax must be paid by June 23 (if the return is filed by June 1). If you feel that you have many transactions to declare over the year and organizing them yourself is complicated, our accounting services can take over this work entirely.
Real estate tax (NĪN) in 2026
In addition to PIT, the property owner must also pay real estate tax (NĪN). The general NĪN rates in 2026:
Property type | NĪN rate (of cadastral value) |
|---|---|
Residential property with a declared resident | 0.2%–0.6% (progressive, based on cadastral value) |
Residential property with no declared resident | 1.5% |
Commercial premises and other properties | 1.5% |
Land | 1.5% |
Important: These are the general rate ranges set by law — each municipality sets its own specific rate in its binding regulations. For example, the source cited below describes specifically how the Rīga municipality applies NĪN in 2026 — check your own municipality's regulations before calculating.
Applying the reduced NĪN rate to residential property intended for living generally depends on a resident being declared at the property as of January 1 of the tax year. If no one is declared as residing at the residential property on January 1, 2026, the base NĪN rate of 1.5% may apply for all of 2026.
Important for landlords: if an apartment is rented out and no one is declared as residing there, the NĪN rate will usually be 1.5% — significantly higher than if someone is declared at the property.
Under the 10% regime, NĪN is the only deductible expense — it can be subtracted from taxable income when filing the annual income tax return.
Applying VAT — residential vs. commercial space
Whether VAT applies to renting out real estate depends on the type of property:
Renting residential premises — VAT-exempt ONLY for living purposes
Renting out residential premises is not subject to VAT — but only if the tenant (a natural person) actually uses the premises solely as living space. If so, the landlord does not need to charge VAT on invoices for this rent.
Important nuance: if you rent out the apartment to a legal entity, or to a natural person who will use the premises for their own economic activity (for example, as an office or as employee housing covered by an employer), this transaction IS subject to 21% VAT — even though the property itself is an apartment. What matters is the actual use of the premises, not the type of property.
Regarding the VAT registration threshold (€50,000): the value of VAT-exempt residential rental income generally must be included in the threshold calculation if you also have other VAT-taxable transactions. Exception: if your only economic activity is VAT-exempt residential rental, you may remain unregistered in VID's VAT payer registry regardless of the amount of income.
Source: VID methodical material "Taxes on income from renting out or leasing an apartment", Chapters 5.2 and 5.6
Renting out commercial space — 21% VAT
Renting out commercial premises (offices, warehouses, shops), on the other hand, is subject to 21% VAT if the landlord is a VAT payer. If the landlord is not a VAT payer, but the total value of VAT-taxable transactions exceeds €50,000 (the VAT registration threshold in 2026), they must register as a VAT payer and start applying 21% VAT to the rent. If you're not sure whether you're approaching this threshold, use our VAT calculator.
Short-term rentals (Airbnb, Booking.com)
Short-term rental services (Airbnb, Booking.com) are considered accommodation services, which are subject to a reduced 12% VAT rate (the reduced rate for hotel-type services), if the service provider is registered in the VAT payer registry.
If you rent out property using platforms registered abroad, you must also comply with the rules on earning income from foreign sources.
Renting through a SIA — when it pays off
If you own several properties or commercial spaces, renting them out through a SIA (limited liability company) can offer several advantages.
Advantages:
Deducting expenses — a SIA can deduct all property-maintenance-related expenses: repairs, insurance, management, loan interest, depreciation.
0% corporate income tax on reinvested profit — as long as rental profit stays within the SIA, no corporate income tax (UIN) is due. Tax only arises when profit is distributed — and at that point it's worth weighing in advance whether to pay it out as dividends or salary.
Recovering input VAT (for commercial premises) — if the SIA leases out commercial space and is a VAT payer, it can recover input VAT on repairs, management, and other costs.
Professional image — a SIA as landlord is more trusted by commercial tenants.
Disadvantages:
SIA maintenance costs: accountant, legal address, bank — see real pricing examples in our article on accounting costs for small businesses.
Profit distribution is subject to corporate income tax (20% under the standard regime).
Residential property owned by a SIA will usually have an NĪN rate of 1.5% (unless a natural person is declared as residing there).
Not sure whether to choose a SIA, a sole proprietorship (IK), or to stay with notified economic activity for renting out property? Compare all the options in our article SIA vs. IK vs. self-employed.
Common mistakes landlords make
Undeclared rental income. Many landlords hope VID "won't notice" small rental income. However, VID increasingly uses data matching — bank account statements, platform data (Airbnb, Booking.com), land registry data. Undeclared income can lead to fines and late-payment interest.
Incorrect handling of utility payments. Remember: if the tenant pays utility bills to you, they are taxable at 10% PIT. If you want to avoid this, the agreement should state that the tenant covers utility payments themselves, paying the service providers directly.
Incorrect application of VAT. VAT does not need to be applied to residential rent if the tenant uses it only as living space — even if the landlord is a VAT payer for another activity. However, if that same apartment is rented out for someone's economic activity (an office, employee housing), 21% VAT must be applied regardless of the type of property. For commercial premises, 21% VAT is always mandatory if the landlord is a VAT payer.
Not using NĪN relief. If a resident is declared at the property (for example, the landlord themselves), the NĪN rate is usually lower than 1.5%. Check whether a residence is declared at your property, and check the specific rate in your municipality's binding regulations.
Frequently asked questions
Do I have to choose the 10% tax regime for rental income?
No. In addition to notified economic activity with 10% PIT, you can also choose the general tax regime (PIT of 25.5% or 33%, depending on the amount of income), which allows you to deduct property-maintenance-related expenses — repairs, insurance, loan interest. This is usually more favorable when maintenance expenses are significant and/or you already have other mandatory VSAOI coverage.
Do I have to pay 10% tax on utility payments?
It depends on how the payment is made:
If the tenant pays utility bills directly to the service provider — no tax is due.
If the tenant pays utility bills to the landlord — they count as the landlord's taxable income, and 10% PIT is due on them.
To avoid paying tax on utility payments, the rental agreement should clearly state that the tenant covers utility payments themselves, paying the service providers directly.
Does VAT apply to renting out an apartment?
It depends on the use: if the tenant (a natural person) uses the premises only as living space, VAT does not apply regardless of the amount of income. If you rent out that same apartment to a legal entity or for someone's economic activity, 21% VAT must be applied. For commercial premises (offices, warehouses), 21% VAT is always mandatory if the landlord is a VAT payer or if transaction volume exceeds €50,000 per year.
What NĪN rate applies if no one is declared as residing in the rented apartment?
Usually 1.5% of the cadastral value — the same rate as for commercial property. If a person is declared as residing at the apartment as of January 1 of the tax year, the rate is lower (0.2–0.6%, depending on your municipality's binding regulations).
Do I need to notify VID before starting to rent out property?
Within five working days of signing the lease/rental agreement — not mandatorily before the activity begins. If the notification of starting economic activity is not submitted in time, income earned before the registration date is taxed under the general regime — 25.5% or 33%, not 10%.
Summary — quick takeaways
What to remember | Details |
|---|---|
Notified economic activity | 10% PIT, no VSAOI, must notify VID within five working days of signing the agreement |
Utility payments | If the tenant pays the landlord — taxable at 10%; if paid directly to the service provider — not taxable |
General regime | 25.5% / 33% PIT (+3% additional PIT rate above €200,000), 26.59%/10% VSAOI (for real estate management), option to deduct expenses |
VAT | Residential rent for living purposes — exempt; the same apartment for business use, or commercial premises — 21%; short-term rentals (Airbnb) — 12% |
NĪN | 0.2–0.6% (if a resident is declared) or 1.5% (if not) — the exact rate is set by the municipality |
VAT registration threshold | €50,000 |
Legal sources and references
VID methodical material "Taxes on income from renting out or leasing an apartment" — the main source on utility payments and taxable income
VID: Notified economic activity for property landlords — conditions and notification procedure
Law "On Personal Income Tax" — PIT rates and the rules on notified economic activity
LV portāls: Developments in applying real estate tax in Rīga in 2026 — an example of one municipality's (Rīga's) approach to applying NĪN; rates may differ in other municipalities
Need help declaring your rental income?
At Balansis, we help landlords choose the most favorable tax regime, properly draft rental agreements, and file returns with VID on time. Get in touch with us to learn more.
Last updated: September 2026.
This information is based on the Law "On Personal Income Tax" with 2026 amendments, official VID materials, and the relevant municipality's NĪN regulations. This article is general information, not legal or professional advice for a specific situation — check your municipality's binding regulations for the exact NĪN rate.
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