Tax Changes in Latvia in 2026: What Is Changing in Wages, VAT, and Profit Tax

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Every new year brings tax changes, and 2026 is no exception. Many entrepreneurs and employees have heard fragments of news about new rates and become worried. Some decided that taxes had risen sharply, while others confused the dates and feared extra costs. In reality, the picture is arranged more logically than the rumours suggest. Let us go through it calmly and step by step: what exactly is changing in wages, VAT, and profit tax, and how it affects an ordinary business and employee.

This article is written for business owners, accountants, the self-employed, and employees in Latvia. There are no tangled phrases or frightening generalisations here. There are only clear explanations, concrete figures, and verified links to official sources. After reading the text to the end, the reader will know the key changes of 2026 exactly and will be able to take them into account in their calculations.

Why does this topic matter so much right now? The reason is that a lot of confusion and outdated figures surround taxes. Some of the changes took effect on 1 January, while others will start from the middle of the year. Yet precise knowledge of the rules helps to calculate wages and prices correctly. That is why spending a few minutes reading today is wiser than dealing with mistakes later.

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Changes in Wages and the Non-Taxable Minimum

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Let us start with what concerns almost every working person. From 2026, two important indicators change that affect net wages. These are the minimum wage and the non-taxable minimum. Both changes aim to increase employees take-home income.

The first change concerns the minimum wage. From 2026, the minimum monthly wage is raised to 780 euros. Previously it was 740 euros, so the increase is noticeable. This affects not only employees on the minimum pay but also the calculation of a number of other indicators tied to the minimum wage.

The second change concerns the non-taxable minimum. From 2026, the minimum not subject to personal income tax is planned at 550 euros per month. Previously it was 510 euros, so it grew by 40 euros. The higher the non-taxable minimum, the more money stays in the employee hands. That is why this change directly increases the net income of many people.

A separate rule applies to pensioners. A pensioner may have a non-taxable minimum of 500 euros applied if a tax book has been submitted. The second part of 500 euros is applied by the State Social Insurance Agency at the moment of paying the pension. That is why pensioners should understand exactly how their non-taxable minimum is distributed.

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The official overview of changes in the tax and financial area for 2026 is published on the website of the Ministry of Finance: fm.gov.lv

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Key Wage Indicators in 2026

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• The minimum monthly wage is raised to 780 euros instead of the previous 740 euros.
• The minimum not subject to personal income tax is planned at 550 euros per month instead of the previous 510 euros.
• For pensioners, a non-taxable minimum of 500 euros applies with a submitted tax book, and another 500 euros is applied by the agency when paying the pension.

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The Reduced VAT Rate on Basic Foods

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The most noticeable change for buyers concerns VAT on food. The state decided to reduce the price burden on basic food products. For this, a pilot project with a reduced tax rate is being introduced. This concerns not only buyers but also trade and production companies.

The essence of the change is simple. From 1 July 2026, within a pilot project, a reduced VAT rate of 12% is applied to certain basic food products. These include bread, milk, poultry meat, and eggs. The standard VAT rate is 21%, so the difference for these goods is significant.

It is important to understand the boundaries of this pilot project. The reduced rate applies not indefinitely but for a certain period: from 1 July 2026 to 30 June 2027. After that, the state will assess the results of the pilot and make a decision about the next steps. That is why trade companies should set up their cash and accounting systems for this rate on the relevant goods in advance.

Here it is useful to clarify the scope of products. The reduced rate concerns all types of bread, fresh, sterilised, or pasteurised milk, except ultra-pasteurised, fresh chilled poultry meat, and fresh poultry eggs in shells. That is why, when setting up accounting, it is important to correctly assign specific goods to the preferential category. An error in classification can lead to incorrect tax calculation.

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The VAT Increase on Certain Publications

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Alongside the VAT reduction on food, there is also an opposite change. It concerns books, magazines, and other publications. This change is important for publishers, bookshops, and importers of printed products. That is why everyone who works in this field should know about it.

The essence of the change is as follows. From 1 January, VAT was raised from 5% to the standard rate of 21% for books, magazines, and other publications. This concerns publications that are not in the state language, not in the languages of European Union member states or candidate states, and not in the official languages of the Organisation for Economic Co-operation and Development countries. This means the preferential rate remains for publications in certain languages, while for the others it rises.

From this follows a practical conclusion for business. Importers and sellers of foreign literature need to review their pricing and tax accounting. The increase in the rate from 5% to 21% significantly changes the final price of such publications. That is why, when planning the assortment and prices, this change is worth taking into account in advance.

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The Alternative Profit Tax for Companies with Natural Persons

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One of the most significant changes for business concerns profit tax and dividends. From 2026, a new alternative taxation regime appears. It is intended for a certain category of companies. That is why it is important to understand who it is available to and what its point is.

Let us examine the essence of the new regime. On 3 December 2025, the Saeima approved amendments to the laws on corporate income tax and personal income tax. According to them, from 2026 corporate income tax payers whose owners are only natural persons get a choice. Instead of the standard 20% profit tax on profit distributed as dividends, they can choose to pay a 15% profit tax at the company level. At the same time, a 6% personal income tax is withheld from the dividend income of natural persons.

This regime has clear application conditions. It is available only to companies registered in Latvia whose members are only natural persons. The regime is voluntary, and it can be applied only with the consent of all members. For those who do not choose the alternative regime, the existing procedure remains: 20% profit tax at the company level and exemption of natural persons dividends from personal income tax.

Why did the state introduce this regime? The main goal is to balance the tax burden between foreign and Latvian investors who are natural persons. For foreign investors, the 6% personal income tax paid in Latvia can be credited as tax paid in the country of residence, if its laws allow this. That is why the regime makes Latvia more attractive for private investment and at the same time brings additional income to municipal budgets.

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Information about the laws accompanying the budget is published on the legal portal: lvportals.lv

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Who the Alternative Regime Suits

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1. The company must be a capital company registered in Latvia.
2. The direct members of the company can be only natural persons.
3. Application of the regime is possible only with the consent of all members.
4. The regime is voluntary, and the State Revenue Service must be informed of its application.

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Other Changes Worth Knowing About

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Besides the key changes, there are other novelties of 2026. They concern excise duties and the gambling tax. These changes are important for companies in the relevant industries. That is why they are worth mentioning separately.

The state plans changes to the rates of excise duty and gambling tax. This affects companies working with alcohol, tobacco, non-alcoholic drinks, and gambling. For such companies, the increase in rates directly affects the cost price and prices. That is why it is important for them to follow the specific rates and the deadlines for their entry into force.

From this follows general advice for business. The tax system changes every year, and individual rates are adjusted regularly. That is why it is reasonable to check your calculations against the current norms each year. And when working in regulated industries, it is worth following the changes especially carefully. Precise knowledge of the current rates protects against mistakes and underpayments.

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How Wage Changes Affect the Calculation

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Figures become clearer when you see them in action. Let us examine in a simplified way how the new indicators affect the wage calculation. This will help an accountant and an employee understand the meaning of the changes. The specific amounts are individual for everyone, but the logic is common to all.

Let us take an employee with a low wage. Previously, a non-taxable minimum of 510 euros was deducted from their income, and now it is 550 euros. This means that personal income tax is calculated on a smaller part of the income. As a result, the employee receives a little more take-home pay at the same gross wage. That is why the increase in the non-taxable minimum is felt precisely in the net income.

Now let us add the increase in the minimum wage. For an employee on the minimum pay, the gross amount grew from 740 to 780 euros. Together with the increased non-taxable minimum, this gives a double effect on the net income. That is why it is important for an accountant to update both indicators at the same time. Otherwise, the calculation will be incorrect, and the employee will not receive what is due.

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How the VAT Reduction Affects Prices and Accounting

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The VAT reduction on food concerns not only buyers. For trade companies, it means reconfiguring processes. That is why it is useful to understand how exactly the preferential rate is reflected in accounting. This helps to avoid mistakes in calculating the tax.

The main idea is simple. When the VAT rate on a product decreases from 21% to 12%, the amount of tax on the receipt changes too. The shop must correctly assign the preferential goods to the right category in the cash system. If this is not done, the tax will be calculated at the old rate, and an error will arise. That is why setting up product groups is a key technical step.

There is also the question of pricing. The reduction in the rate gives the shop the opportunity to reduce the final price for the buyer. However, how exactly the benefit is distributed depends on the decision of the company itself. The state expects that the relief will reduce prices for people. That is why, during the pilot project period, attention to the prices of these products will be heightened.

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What Business Should Do Right Now

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Theory becomes useful when it turns into a concrete plan. Let us look at a simple sequence of actions for a company. This plan helps to meet the new tax year prepared. It suits both a small business and a large company.

The first step is to update the wage calculation with the new indicators. You need to apply the minimum wage of 780 euros and the non-taxable minimum of 550 euros. The second step is to set up accounting and cash systems for the reduced VAT rate of 12% on the relevant products from 1 July. The third step is to assess whether the alternative profit tax regime is beneficial specifically for your company. This sequence removes a large part of the questions.

For companies with foreign members or a complex structure, there is separate advice. A decision about the alternative regime is better made after calculating the consequences for all members. Since the regime is voluntary and requires the consent of all, it is important to calculate everything in advance. And in case of doubt, it is reasonable to turn to accounting and tax specialists. A competent calculation helps to choose the most beneficial option.

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Frequently Asked Questions

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What will the minimum wage be in 2026?

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From 2026, the minimum monthly wage is raised to 780 euros. Previously it was 740 euros. This change affects not only employees on the minimum pay but also the calculation of a number of indicators tied to the minimum wage. That is why, when calculating wages, it is important to apply the new amount.

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What will the non-taxable minimum be?

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From 2026, the minimum not subject to personal income tax is planned at 550 euros per month. Previously it was 510 euros, so it grew by 40 euros. The higher the non-taxable minimum, the more money stays in the employee hands. For pensioners, a separate procedure for applying the non-taxable minimum is in effect.

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When and on what food is VAT reduced?

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From 1 July 2026 to 30 June 2027, within a pilot project, a reduced VAT rate of 12% is applied to bread, milk, poultry meat, and eggs. The standard VAT rate is 21%. After the pilot ends, the state will assess its results. That is why trade companies should set up their systems for this rate in advance.

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Who can apply the alternative profit tax?

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The alternative regime is available to companies registered in Latvia whose members are only natural persons. Such companies can choose to pay a 15% profit tax at the company level and a 6% personal income tax on natural persons dividends. The regime is voluntary and requires the consent of all members. For those who do not choose it, the existing procedure remains.

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Did the VAT rate on books change?

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Yes, from 1 January VAT was raised from 5% to the standard rate of 21% for books, magazines, and other publications that are not in the state language, the languages of European Union member states or candidate states, or the languages of the Organisation for Economic Co-operation and Development countries. For publications in these languages, the preferential rate remains. That is why importers and sellers of foreign literature should review their pricing.

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How Lex&Finance Specialists Will Help with the Tax Changes

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The Lex&Finance team specialises in accounting and tax support and has worked with Russian-speaking clients in Latvia for many years. The company specialists know the current rates and the deadlines for the changes entering into force. That is why they help clients correctly apply the new wage indicators, VAT rates, and profit tax regimes rather than act on outdated data.

Lex&Finance specialists update wage calculations with the minimum wage and non-taxable minimum, set up VAT accounting for preferential goods, and assess the benefit of the alternative profit tax regime. They help companies with foreign or local members calculate the consequences of choosing the regime and make a reasoned decision. In addition, the company advises on excise duties, reporting, and other changes of 2026. Turning to professionals turns confusing tax novelties into a clear and precise action plan.