Latvia 2026: Replace All Your Taxes With One Flat Payment — Small Business Secret

If you are running a small business in Latvia and still filing separate income tax, social security contributions, and business declarations every quarter, you may be paying thousands of euros more than you legally have to. Latvia's micro-enterprise tax is a single tax payment that replaces mandatory State social insurance contributions, personal income tax, and the business risk fee for employees — all in one go. And most small business owners in Riga and across the country have no idea they can switch.

The Tax Burden Most Latvian Small Businesses Are Silently Carrying

Here is what the standard tax system actually looks like for a Latvian sole trader or individual merchant in 2026. The standard mandatory state social insurance contributions (MSSIC) for employees run at 34.09 percent — 23.59 percent paid by the employer and 10.50 percent paid by the employee. On top of that, Latvia applies a progressive income tax: 25.5 percent on annual income up to €105,300, and 33 percent on the portion above that. Then there is bookkeeping, quarterly declarations, annual filings, and the constant anxiety of getting it wrong.

For a small business owner doing consulting, trades, creative work, or running a one-person service operation, that is an enormous administrative and financial burden. You are essentially running a mini finance department — just to pay yourself. Simple accounting, a fixed rate, and low administrative costs make the micro-enterprise regime attractive for both new entrepreneurs and experienced business owners with lower turnover. So why are so many people still not using it?

The honest answer is that the system is not advertised. The State Revenue Service does not send you a letter saying "hey, you could save a fortune." You have to know to ask. That is exactly what this article is here for.

What the Law Actually Says

The micro-enterprise tax is defined as a tax that includes compulsory State social security contributions for the micro-enterprise owner and the personal income tax for the micro-enterprise owner for the part of the income from the economic activity of the micro-enterprise. In plain language: one payment, one number, one deadline. That is it.

Comparing the micro-enterprise tax regime with the general tax regime, the micro-enterprise tax regime is a preferential tax regime, which provides for reduced administrative requirements and easier tax payment procedures. The legal basis for this is the Micro-Enterprise Tax Law (Mikrouzņēmumu nodokļa likums), which is administered by the State Revenue Service — VID (Valsts ieņēmumu dienests). The current rates and conditions for 2026 are published directly on the VID's official website at vid.gov.lv.

The MET regime is available only to certain types of small businesses: individual merchants, individual enterprises, farm or fishing farm owners, and natural persons registered as economic operators. SIAs (limited liability companies) can no longer be MET payers — this right was withdrawn as of 1 January 2022. Tax is paid on turnover (not profit) at a flat rate of 25 percent. It replaces personal income tax and VSAOI on income from economic activity.

A micro-enterprise pays the micro-enterprise tax for the turnover of each quarter by the 15th day of the month following after the quarter. That is four payments a year. Compare that to the monthly or bi-monthly filing circus under the general regime. This is not a loophole — it is a deliberately designed simplification tool that the law has made available to you.

The Real Numbers for 2026

Category	Figure	Source
Minimum monthly wage (from 1 Jan 2026)	€780	lm.gov.lv (Ministry of Welfare)
MET flat rate on turnover	25 percent	vid.gov.lv (State Revenue Service)
MET annual turnover cap	€40,000	vid.gov.lv / Micro-Enterprise Tax Law
MET minimum annual payment	€50	vid.gov.lv
MET quarterly declaration deadline	15th of month following the quarter	vid.gov.lv
Standard employer VSAOI (general regime)	23.59 percent	vid.gov.lv
Standard employee VSAOI (general regime)	10.50 percent	vid.gov.lv
Total VSAOI (general regime)	34.09 percent	vid.gov.lv
Personal income tax — bracket 1 (up to €105,300/year)	25.5 percent	vid.gov.lv / Law on PIT
Personal income tax — bracket 2 (above €105,300/year)	33 percent	vid.gov.lv / Law on PIT
Non-taxable monthly minimum	€550	vid.gov.lv
VAT standard rate	21 percent	fm.gov.lv

As of 1 January 2026, the state-set minimum monthly wage in Latvia increased from €740 to €780. That is your baseline for understanding what workers and small business owners are dealing with in a market where every euro counts.

Now think about what the numbers mean in practice. If you are an individual merchant earning €30,000 in annual turnover under the MET regime, your entire tax obligation is €7,500 — paid in four clean quarterly installments. Under the general regime, you would be calculating VSAOI on your income, filing income tax at 25.5 percent, handling bookkeeping, and paying an accountant on top of everything. Instead of separately paying corporate income tax, personal income tax, and social security contributions for employees, the company pays a single fixed percentage of total turnover. That is the real value proposition.

What Your Employer Will Never Tell You

If you work as a contractor or freelancer and have been asked by a client to "just invoice them," here is what most people never find out: you have a legal right to register as an individual merchant and apply for MET status yourself, entirely online. You do not need an accountant. You do not need a registered office. You submit a notification of application of the micro-enterprise tax to the State Revenue Service (via the EDS system at eds.vid.gov.lv).

This is where workers get caught out. Many freelancers and contractors in Latvia are paying the full general regime tax burden — including the brutal 34.09 percent combined social insurance rate — when they could legally switch to a flat 25 percent on turnover and simplify their entire financial life. Employees under MET are able to receive tax relief for dependants, and from 2022 can submit an annual income declaration and receive overpaid personal income tax. The micro-enterprise owner can also apply the tax-free minimum and benefits to income subjected to personal income tax.

Here are three things you can do right now that your accountant or employer is unlikely to volunteer:

1. Check your eligibility directly on the official VID portal at vid.gov.lv/en/microenterprise-tax — the full conditions and eligible business types are listed there in English.
2. Register via EDS (the VID Electronic Declaration System at eds.vid.gov.lv) — this is where you submit your MET notification and all quarterly declarations, completely online, free of charge.
3. Calculate your actual tax saving using the EuroDuty salary calculator to compare what you currently pay under the general regime versus what you would owe under MET at 25 percent of your actual turnover.

If the micro-enterprise did not have turnover in the taxation period (calendar year) or the calculated amount of the micro-enterprise tax does not exceed €50, a micro-enterprise taxpayer shall pay the micro-enterprise tax into the budget in an amount of €50. That is the floor. Even in a slow year, you know exactly the worst-case number. That kind of certainty is worth something.

Latvia vs The Rest of Europe

Latvia's flat 25 percent MET looks very different when you put it next to the standard tax burden in neighbouring Baltic states. Lithuania's statutory minimum wage is €1,153 per month (gross) in 2026 for full-time employment, and this rate applies nationally. Lithuania's 2026 income tax reform also made the system progressive with rates of 20 percent on income up to €83,237, 25 percent up to €138,729, and 32 percent above that — a more complex, three-bracket structure for self-employed workers to navigate compared to Latvia's single MET rate. At the same time, Latvia's minimum wage from 1 January 2026 is €780 per month — significantly lower than Lithuania's floor, which means the pressure to maximise net income is even greater for Latvian small business owners.

Eurostat data confirms that among EU countries with minimum wages below €1,000 per month in 2026, Latvia sits at €780 alongside Romania at €795, Hungary at €838, Estonia at €886, Slovakia at €915, Czechia at €924, and Malta at €994. In this competitive environment, Latvia's MET regime is a genuine structural advantage for small businesses — a tool that most neighbouring countries simply do not offer in the same form. Use the EuroDuty salary comparator to see how your net take-home stacks up against equivalent workers across all 27 EU member states.

How to Claim What You Are Owed

1. Verify your eligibility — visit vid.gov.lv/en/microenterprise-tax and confirm that your business type qualifies. Individual merchants (IK), agricultural or fishing enterprises, and natural persons registered as economic operators are eligible. SIAs are not eligible since 2022.
2. Register on EDS — go to eds.vid.gov.lv, log in with your e-signature or internet banking credentials, and submit the notification of application for micro-enterprise tax status. You can switch from the general regime effective from the start of the next taxation year.
3. Track your quarterly turnover — the strict annual turnover cap is €40,000. If your annual turnover exceeds this, you must switch back to the general tax regime in the following year. Set a calendar reminder and monitor your running total.
4. File your quarterly declarations — by the 15th day of the month following the quarter, submit your Micro-Enterprise Tax Declaration to the State Revenue Service through EDS.
5. File your annual income declaration if applicable — from 2022, employees under MET can submit an annual income declaration and potentially receive overpaid personal income tax back. Do not skip this step — it can mean money back in your account.
6. Get a free comparison — run your numbers through the EuroDuty salary calculator before you switch, to confirm that the flat 25 percent on your specific turnover is genuinely lower than what you currently pay under the general regime.

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