What to Do If You've Missed a VID Deadline — Penalties, Interest, and Next Steps
Take an illustrative example: an SIA underpays corporate income tax (CIT) by €3,200, and VID only finds it after 300 days. Late-payment interest (0.05% a day, i.e. €1.60 a day) reaches €480, the penalty for the underpayment (20%, where the understatement does not exceed 15% of the amount to be declared) is €640, and the total owed is €4,320 — more than a thousand euros above the tax debt itself. We hear this regularly — and almost always from business owners who were sure a couple of weeks' delay wouldn't cause any real trouble.
In 2026 the system has changed — not eased, not tightened, just different. The rhythm of how late-payment interest is calculated is different, filing deadlines for certain items have been clarified, and voluntary correction remains the most powerful tool for anyone who catches their own delay. This article covers everything you need to know if a deadline is already behind you, and what to do next.
Key takeaways
Penalties stack in three independent layers: a penalty for late filing, a penalty for underpayment (20–30%, up to 100% in serious cases), and late-payment interest (0.05% a day, capped at 40% of the principal).
As of January 1, 2026, late-payment interest on unified tax account payments is calculated twice a month (on the 1st and 15th) instead of daily, and not at all if paid by the last day of the due-date month — the 0.05% rate itself hasn't changed.
Voluntarily correcting an error before VID issues a notice of a tax audit removes the penalty entirely — you pay only the tax and late-payment interest; after the notice but before the audit starts, the penalty is 5%.
If you can't pay right away, you can ask for a payment extension of up to 1 year (late-payment interest at 0.0125% a day), up to 5 years for amounts assessed in an audit, or a settlement agreement that can cancel up to 85% of the late-payment interest.
The statute of limitations for additional tax assessments is generally 3 years; it's extended to 5 years for transfer pricing cases.
Three layers of penalties — how the system works
Latvia's tax penalty mechanism isn't one big payment — it's three independent layers that stack on top of each other. Understanding them lets you predict the real consequences much more precisely.
Layer 1: penalty for late filing
If a tax return is filed after the deadline, VID imposes an administrative penalty (Article 141 of the Law "On Taxes and Duties"). It doesn't depend on whether any tax was actually owed — even a zero return filed late can mean a penalty, starting from the third day of delay. A penalty unit is €5, and the penalty depends on how late the return is (the same for individuals and legal entities):
3–10 days: a warning or €25–70 (no fine if a monthly or quarterly EDS return was late only once, by up to 5 days, within 12 months)
11–20 days: €75–150
21–30 days: €155–280
more than 30 days or not filed: €285–700
Informative returns on employees and notices of amounts paid to individuals face harsher penalties (Article 142): for a legal entity, from €350 to €7,100.
Layer 2: penalty for underpayment
If a tax audit finds that tax wasn't paid in full (due to errors, incorrect entries, or deliberate action), VID assesses the additional tax and late-payment interest and imposes a penalty.
The penalty is 20% of the undeclared tax if the shortfall does not exceed 15% of the amount that should have been declared, and 30% if it exceeds 15% (Article 32 of the Law "On Taxes and Duties"). If the violation is not a repeat, deadlines were met and the taxpayer cooperates, the penalty is halved. In serious cases the penalty is 100% — for example, when an employee is employed without a contract or a return is not filed within 30 days after the deadline set by VID (Article 34).
Layer 3: late-payment interest
Late-payment interest is a daily charge for every day tax remains unpaid. The rate is 0.05% per day on the unpaid principal. Annualized, that's 18.25% — on a €10,000 debt alone, that's €5 a day, roughly €150 a month, and €1,825 a year.
Maximum cap: total late-payment interest can't exceed 40% of the principal. Once that threshold is reached, interest stops accruing.
How the layers add up — an example
A company underpaid VAT by €20,000, discovered 8 months later (assuming the shortfall exceeds 15% of the declared amount, so a 30% penalty):
Item | Amount |
|---|---|
Unpaid tax | €20,000 |
Underpayment penalty (30%) | €6,000 |
Late-payment interest (240 days) | €2,400 |
Total | €28,400 |
The original €20,000 debt grew to €28,400 — a 42% markup.
You can quickly work out your own situation with our VID penalty calculator.
Changes to late-payment interest calculation in 2026
As of January 1, 2026, amendments to the Law "On Taxes and Duties" took effect, changing how late-payment interest is calculated. The key change: going forward, late-payment interest is calculated twice a month — on the 1st and 15th of each month — instead of daily.
That means: if a tax payment is made between those dates, late-payment interest isn't recalculated every single day. For companies with a high volume of transactions, this simplifies cash flow management and reduces the administrative burden.
What hasn't changed: the 0.05% daily rate itself is unchanged. It still applies for every day of delay — only the calculation is now fixed twice a month rather than daily.
Delay scenarios: what to do in each situation
Scenario 1: return not filed, but no tax is owed
For example, a zero VAT return filed 5 days late. What to do:
File the return in EDS immediately.
Wait for VID's decision: for a 5-day delay this is a warning or €25–70, and if it is your only delay of up to 5 days within 12 months, no fine is imposed (Article 141).
If the delay had an objective cause (for example, a technical glitch), you can submit an explanation in EDS and request a reduced penalty.
Scenario 2: return not filed, and tax not paid
For example, a CIT return on distributed profit hasn't been filed for 2 months. What to do:
File the return immediately. The longer you delay, the more late-payment interest accrues — 0.05% a day.
Pay the principal debt right away or as soon as possible. This stops late-payment interest from accruing further.
Calculate the late-payment interest and pay it along with the principal. You can estimate it yourself (principal × 0.05% × number of days), but for unified tax account payments the actual calculation is done on the 1st and 15th and applies the end-of-month grace rule — so check the amount in the "Payments" section of EDS.
Wait for the penalty calculation — VID will send it separately.
Scenario 3: return filed on time, but tax not paid
For example, an employer report was filed by the 17th, but payment wasn't made by the 23rd. What to do:
For payments through the unified tax account (most taxes), no late-payment interest is charged if the payment is received by the last day of the month in which the deadline falls (Article 29, part 2², from 2026).
If that is missed, late-payment interest is calculated on the 1st and 15th — pay as soon as possible.
Scenario 4: an error in the return resulted in underpayment
For example, a VAT return mistakenly showed a lower tax due than it should have. What to do:
File a corrected return in EDS immediately and pay the difference.
Penalty: if you file the corrected return and pay the difference before VID has issued a notice of a tax audit or control, no penalty is imposed — you pay only the tax and late-payment interest (Article 33² part 1).
Important: if you file the correction after receiving the audit notice but before the audit starts, a 5% penalty on the reduced tax amount applies (Article 33² part 2), and after the notice you can no longer file a return you had not submitted. Once the audit has started, this option ends.
How to file a late return
If a return wasn't filed on time, here's what to do:
Log into eds.vid.gov.lv with your e-identification.
Find the relevant return form and fill it out as usual.
The system automatically records the filing date — the delay will be visible.
After filing, VID will calculate the penalty within a few days and notify you in EDS.
Never wait for VID to send a reminder. The longer the delay, the bigger the penalty. On top of that, if VID itself discovers an unfiled return, it may trigger a broader inspection.
Payment plan — if you can't pay it all at once
If you realize you can't pay the full amount (principal + late-payment interest + penalty) right away, there's a solution — a tax payment deadline extension, or payment plan.
How to apply
Prepare a written application to VID (through EDS or on paper).
Attach documents proving financial hardship: a profit/loss statement, a cash flow forecast, a balance sheet.
Propose a specific payment schedule. The law (Article 24) allows payments to be spread over up to 1 year (apply no later than 5 business days after the payment deadline), and up to 5 years for amounts assessed in a tax audit (apply 3 days before the deadline). If the amount in one tax exceeds €14,300, VID may require security.
Important conditions
The company must be viable. VID won't approve a plan if the company can't generate enough cash flow to cover its ongoing tax obligations.
Current obligations must be in order. To apply for a plan, all current returns must be filed and current payments made. Requesting a plan while continuing to miss current deadlines is effectively a refusal in practice.
Late-payment interest keeps accruing during the payment plan too, on the remaining principal — at the reduced 0.0125% a day for an extension of up to 1 year, and 0.025% a day for a voluntary repayment schedule (up to 3 years, after a recovery decision). The shorter the plan, the less you'll pay overall.
A calculation example
A €12,000 debt split into 12 equal monthly payments of €1,000: late-payment interest at 0.0125% a day comes to roughly €300, whereas without an extension (0.05% a day) it would be roughly €1,190. The calculation is illustrative — the actual amount depends on payment dates.
So a timely extension request cuts late-payment interest substantially, but the longer the plan, the more interest accrues in total. When planning a schedule, look for a balance between an affordable monthly payment and the total cost.
Settlement agreement — how to cut penalties by up to 85%
If VID's inspection finds violations and calculates additional payments due, there's an option to sign a settlement agreement and significantly reduce both late-payment interest and penalties.
Reduction amounts by stage:
In a tax control (nodokļu kontrole) case:
Before the control invoice is issued: 85% of late-payment interest cancelled
After the invoice, but before appeal: 75% of late-payment interest cancelled
During court proceedings, first instance: 55% of late-payment interest cancelled (10 percentage points less in each further court instance)
In an audit case:
Before VID's decision: 60% of late-payment interest and 60% of the penalty cancelled
After the decision, but before appeal: 50% of late-payment interest cancelled, penalty reduced by 50–85% or cancelled entirely
During court proceedings: a reduction of 30–65% (10 percentage points less in each further court instance)
How to apply
To enter a settlement agreement, you need to submit an application to VID. Legal entities must make all payments within one year of signing the agreement, paying a proportional share each month. For individuals (not engaged in business activity), the term is two years.
Warning: if even one payment is missed, the agreement becomes void, and late-payment interest is calculated for the entire delay period under the general rules.
When you need a lawyer or tax consultant
There are situations where handling things on your own isn't advisable:
VID has opened a tax audit. A professional consultant knows which items are worth disputing, and avoids a common mistake — providing more information than was actually requested.
The penalty exceeds €10,000. At larger amounts, the cost of a mistake is too high to risk.
There's a suspicion of a deliberate violation. In such cases, without legal protection, the consequences can become criminal.
You disagree with VID's calculation. There are cases where VID applied the wrong tax period or a flawed late-payment interest methodology — these can be successfully disputed.
Statute of limitations
VID can assess additional taxes for a period of up to 3 years from the relevant tax payment deadline — this is the general limitation period, and it applies even to deliberate violations. The exception is transfer pricing cases — given their complexity and international dimension, the limitation period there is extended to 5 years. After the limitation period expires, the right to an additional assessment ends. This limitation works both ways — overpaid taxes can also be reclaimed within 3 years.
Frequently asked questions
Can I request a penalty waiver if the delay was due to technical reasons?
Yes, you can submit an explanation to VID describing the circumstances (for example, an EDS technical glitch, illness). VID evaluates each case individually, but a positive outcome isn't guaranteed. The better documented the reason, the better your chances.
How long does VID take to review a payment plan application?
Usually within 30 days. The response can be an approval, proposed changes to the schedule, or a rejection. A rejection can be appealed administratively.
Do I need to calculate the late-payment interest myself?
Formally, no — VID calculates it automatically. But it's worth working it out yourself to understand your total liability. In the "Payments" section of EDS, you can see the current late-payment interest balance, updated twice a month.
Can I request a deadline extension before the deadline arrives?
Yes. If you can already see that you won't be able to pay the tax by the set deadline, submit an application for a deadline extension of up to 1 year. In that case, late-payment interest is applied at a reduced rate — 0.0125% a day.
What happens if I don't pay the tax debt at all and ignore VID's notices?
VID can initiate forced collection — freezing the company's bank accounts, turning to a sworn bailiff to recover the debt from the company's assets, and a delinquent debt also affects the company's visibility in VID's Taxpayer Rating System, which in turn can complicate dealings with banks and business partners. In the case of a significant, long-standing debt, VID can also initiate insolvency proceedings against the company. So even if you can't pay the full amount right away, it's always better to contact VID and agree on a solution than to stay silent.
Can VID's calculation be disputed?
Yes. If you disagree with a VID decision or calculation, it can be disputed administratively — typically by submitting an application to a higher VID official within a set deadline (usually within a month of receiving the decision), and, if needed, appealing further to the Administrative District Court. Disputing the decision doesn't suspend the obligation to pay unless a separate decision on suspending enforcement has been made — so alongside a dispute, it's also worth considering a payment plan or settlement agreement.
A missed VID deadline isn't the end of the world, but it has a cost — and it grows every day. The main rule: the faster you react, the smaller the consequences. If you need help sorting out returns, applying for a payment plan, or communicating with VID, get in touch with our team — we're ready to help.
See also: the SIA annual report and the EDS guide.
Legal sources and references
Law "On Taxes and Duties" — the rules on penalties, late-payment interest, payment plans, and the statute of limitations
KPMG — Changes to the Law "On Taxes and Duties" — the 2026 change to how late-payment interest is calculated
VID — Splitting current and overdue tax payments into installments
Last updated: September 2026. Information based on current amendments to the Law "On Taxes and Duties" and VID practice.
Comments