Latvia Rental Income Tax Guide 2026

Overview — Rental Income Taxation in Latvia

Rental income from immovable property is classified as income from economic activity in Latvia. It is subject to personal income tax (IIT) administered by VID. The regime applies to both resident and non-resident property owners. Landlords have flexibility in how they calculate taxable income — either deducting actual expenses or using a simplified flat-rate method. Latvia does not have a separate rental income tax; rental income is integrated into the general IIT system.

Tax Rates on Rental Income

• Progressive IIT rates (20–31%): Net rental income (after allowable deductions) is added to other income and taxed at the progressive scale: 20% up to EUR 78,100 and 31% above EUR 78,100.
• Flat-rate alternative: A simplified 20% withholding tax on 40% of gross rental income (60% deemed expense deduction). Total effective rate: 8% of gross rent (20% × 40% = 8%).

Option 1 — Actual Expense Deduction

Landlords may deduct actual expenses incurred in generating rental income. Allowable deductions include:

• Maintenance and repairs: Costs for maintaining and repairing the property
• Management fees: Property management and agent fees
• Insurance: Property insurance premiums
• Mortgage interest: Interest on loans used to acquire or improve the property
• Utilities: If paid by the landlord (water, electricity, heating, internet)
• Real estate tax: Annual NIN (0.2–3% of cadastral value)
• Depreciation: Depreciation of the building (2% per year on the construction cost)
• Legal and professional fees: Costs for legal advice, contract preparation, and tax filing

To claim actual expenses, the landlord must maintain proper records (receipts, invoices, contracts) and submit a detailed income and expense statement with the annual tax return.

Option 2 — Flat-Rate Expense Allowance

As an alternative to itemised deductions, landlords may elect a flat-rate expense allowance:

• Deemed expense: 60% of gross rental income is treated as expenses
• Taxable portion: Only 40% of gross rental income is subject to tax
• Tax rate: A flat 20% withholding rate applies (not progressive IIT rates)
• Effective tax: 20% × 40% = 8% of gross rental income
• No further deductions: Actual expenses cannot be deducted under this option

This option is popular for landlords with low actual expenses or those who prefer simplicity. The election is made on the annual tax return.

Registration Requirements

• Business registration: Landlords who rent out property on a regular basis must register as an economic operator (saimnieciskās darbības veicējs) with VID
• VAT registration: If annual rental income exceeds EUR 50,000, VAT registration is required (residential rental is generally VAT-exempt, commercial rental may be taxable)
• Filing: Rental income is declared on the annual personal income tax return (by 1 June of the following year)

Non-Resident Landlords

Non-residents renting out property in Latvia are subject to the same rules as residents. Rental income is Latvia-source income and must be declared and taxed in Latvia. Non-residents may be eligible for treaty relief under Latvia's DTT network (60+ treaties), which typically grant Latvia the primary taxing right on immovable property income regardless of the owner's residence.

FAQs

Which deduction method is better for rental income?

The flat-rate method (8% effective on gross rent) is simpler and may be better for properties with low actual expenses. The actual expense method is better for properties with significant mortgage interest, maintenance costs, or depreciation. Landlords should calculate both options to determine the most favourable outcome.

Can I use the flat-rate method for commercial rental?

Yes, the flat-rate expense allowance is available for both residential and commercial rental income. The same 60% deemed expense rate applies to all types of property rental.

Do I need to register for VAT as a landlord?

Residential rental is generally exempt from VAT. Commercial rental may be subject to VAT if the landlord elects to tax the rental (opcija) or if the annual turnover exceeds the EUR 50,000 VAT registration threshold.

Disclaimer

This guide provides general information about Latvia rental income taxation for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Latvian tax advisor (nodokļu konsultants) or VID directly for advice specific to your situation. InvestmentKit does not provide tax advice.