Apartment for Rent — Without a Fight: About Latvian Features of Passive Income 0 10

Utility payments tick away inexorably. Short-term rentals bring in quite high incomes — but there are some pitfalls.

Participants in the Tourist Market

The Saeima's Commission on Economic Affairs, Environment, and Regional Policy has been considering amendments to the Tourism Law since autumn, which states that all short-term rental properties — whether on platforms like Airbnb, Booking.com, Expedia Group, Tripadvisor, or ss.com — fall under the definition of "tourist accommodations." A tourist is defined as any person traveling outside their place of residence — for leisure or business purposes, whether for a business trip or a motivational event.

Very often — especially in small towns or seaside villages — there are no official hotels on the aforementioned portals, only private properties.

However, if you decide to rent out real estate, the state is right there — this is an economic activity, and accordingly, taxes must be paid on the income received.

Becoming a Strong Entrepreneur

Who knows what (non)taxpayers have for real estate — it could be a mansion in the dunes or, for example, an auto service. Rental companies sometimes manage quite tempting pieces — for instance, the loudest deal of early 2026 was the sale of "Easter Island," the former summer residence of ex-Prime Minister Maris Gailis.

Among the co-owners of the company that purchased the former marine station for biologists by the rocky beach of Kaltene in the vicinity of Roi is SIA Booking Groop Corporation, representing the resource EconomyBookings.com. So, it is likely that soon the residence of the head of government from 30 years ago will be available for summer rental. By the way, Gailis had been waiting for a buyer since 2018 — this speaks to how in-demand real estate is in Latvia right now, even elite properties.

If you wish to join the ranks of entrepreneurs — then register your economic activity and pay:

• a rate of 25.5% on annual income not exceeding €105,300;
• an increased rate of 33% on annual income exceeding €105,300.

Is that not enough? Since last year, an additional personal income tax rate of 3% has also been introduced, applicable if the total annual income of an individual exceeds €200,000. This rate is calculated and paid by the individual — the income recipient — on the portion exceeding €200,000.

Furthermore, if in 2026 the landlord's income exceeds €780 per month, mandatory state social security contributions must be paid. Additionally, pension insurance contributions of 10% are required on the difference between the freely chosen mandatory contributions and actual income.

If, however, in 2026 the income is below €780 per month, mandatory pension insurance contributions of 10% on actual income must be paid.

The State Social Insurance Agency calculates the minimum mandatory contributions additionally payable by self-employed individuals within three months after the end of the quarter and informs the State Revenue Service about these contributions by the 20th of the third month.

Becoming a Civilized Landlord

But most often, to rent out an apartment without problems — it is enough to notify the SRS about receiving money and not registering economic activity. In this case:

• 10% of rental income is paid;
• The owner has no right to deduct expenses for economic activity, except for property tax;
• The owner does not pay mandatory state social security contributions;
• Only revenue is taken into account;
• The non-taxable minimum and benefits do not apply.

Of course, for renting out housing, one can also choose the micro-enterprise tax regime. In this case, the tax rate is set at 25%. For such individuals, the non-taxable minimum and benefits for dependents also apply when paying personal income tax.

Brave Individuals

From July 1 to December 19, 2025, in the register of the State Revenue Service, in addition to the 232 individuals already present at the beginning of this period, 479 individuals joined, wishing to provide guest accommodation services through foreign digital platforms. Here, VAT must be paid.

The SRS informed the Saeima subcommittee on combating the shadow economy that "taxpayers have the right to provide the tax administration with an amendment or clarification of the tax declaration within three years." This also applies to the tourism sector. A seminar has already been organized for all interested parties, and only 2 complaints regarding incorrect taxation have been received. In one case, the director of the SRS reviewed the application and deemed it unfounded.

The fiscal authority can charge penalties of 0.05% for each overdue day. For example, if a taxpayer notifies that they declared a tax of €4,000 as of December 19, 2025, with a payment deadline of February 23, 2023, a penalty of €1,600 is automatically calculated.

The Director General of the SRS, Baiba Shmite-Roke, emphasized in a letter to parliament that those working with foreign platforms are not the only ones who have to pay:

"It should be taken into account that the specified legal regulation applies not only to those providing accommodation services but also to VAT payers in all sectors receiving various services from merchants of other EU member states or third countries... If special regulation is created only for representatives of the accommodation sector, it would violate the principle of both competition and VAT neutrality, which requires equal treatment of all market participants."

Feel Free to Complain

However, when embarking on the path of entrepreneurship, it should be noted that the tourist market is highly competitive. Therefore, more than 10,000 hotels in Europe, including in Latvia, joined a collective lawsuit last year against the Amsterdam-based booking platform Booking.com — seeking compensation for losses incurred over the past 20 years. The President of the Latvian Association of Hotels and Restaurants, Andris Kalniņš, did not disclose the amount of the claim, citing confidentiality.

The previous order prohibited hotels and individuals providing tourist services from offering rooms on their websites at a lower price than Booking.com. This rule was introduced to avoid situations where customers find a hotel on this platform but make reservations on the website of a legal or physical person.

Hoteliers were encouraged by the European Court's decision on September 19, 2024, which deemed the "best price clause" illegal.

The lawsuit, supported by the HOTREC Accommodation Sector Association and hotel associations from over 30 countries, will be heard by a Dutch court and coordinated by the Hotel Claims Alliance fund created for this purpose.

Meanwhile, SIA Booking.com (Latvia) was registered in 2011, with a share capital of €65,452. The sole owner of the company is Booking.com International, registered in the Netherlands.