Micro-enterprise Tax (MUN) in Latvia 2026: Rates, Limits and When It Makes Sense

What is the micro-enterprise tax (MUN) regime in Latvia

The micro-enterprise tax — mikrouzņēmumu nodoklis in Latvian, commonly abbreviated to MUN — is a simplified flat-rate tax available to eligible small businesses in Latvia. In 2026, the rate is 25% of annual turnover. The key feature of MUN is that this single payment replaces multiple obligations: personal income tax, mandatory social security contributions (VSAA), and the solidarity tax. One quarterly payment to VID covers everything.

MUN is available only to individual merchants (individuālie komersanti, abbreviated IIN) and self-employed persons (pašnodarbinātie). It is not available to SIA companies. If you operate through a Latvian limited liability company, you are subject to the standard corporate income tax (UIN) regime regardless of your size, and MUN does not apply. This is the single most common misconception among foreign entrepreneurs researching Latvian business taxation.

MUN was introduced in Latvia in 2010 and has been modified several times. The current 25% rate reflects an upward adjustment from earlier years, when the rate was lower and the regime more attractive. At 25% on gross turnover, MUN is genuinely beneficial only for businesses with low operating costs — primarily service-based sole traders such as consultants, coaches, designers, and translators.

2026 MUN rates and limits at a glance

Parameter	2026 value
Tax rate	25% of annual turnover
Annual turnover ceiling	€40,000
Maximum number of employees	5
Minimum monthly social contribution (VSAA)	€10 (included in MUN payment)
Reporting and payment period	Quarterly
Payment deadline	15th of the month after quarter end

MUN does NOT apply to SIA (limited liability companies). If you operate as an SIA, you pay corporate income tax (UIN) at 20% on distributed profits, not MUN. Choosing MUN vs. SIA is a structural decision, not just a tax election.

Who qualifies for MUN in Latvia

To elect the MUN regime, a business must meet all of the following conditions:

• Registered with the Enterprise Register as an individual merchant (IIN) or with VID as a self-employed person (pašnodarbinātais)
• The primary economic activity is eligible — financial services, real estate rental as the primary income, and certain regulated professions are excluded
• Annual turnover does not exceed €40,000 (if it does, the excess is taxed at standard rates)
• No more than 5 employees at any point during the quarter
• The owner does not have employment income from another employer during the same quarter in which MUN is applied (certain restrictions vary depending on individual circumstances)

The eligibility conditions are checked quarterly, not annually. If you exceed the employee limit or acquire employment income mid-year, you may need to exit MUN for that quarter.

MUN versus standard taxation: a side-by-side comparison

Factor	MUN	Standard (IIN or pašnodarbinātais)
Tax base	Gross turnover	Net income (revenue minus allowable expenses)
Headline rate	25% of turnover	PIT 20–23% on net income + VSAA ~35% on declared salary
Business expense deduction	Not available	Yes — all legitimate business costs reduce the taxable base
Bookkeeping complexity	Minimal — only turnover tracked	Full income and expense records required
Social benefits (pension, sick pay)	Minimal — €10/month base	Proportional to contributions made
VAT registration	Available if turnover exceeds €50,000	Same threshold applies
Administrative burden	Quarterly declaration only	Annual return plus periodic declarations

The comparison reveals the fundamental trade-off: MUN saves on bookkeeping and simplifies compliance, but it taxes turnover rather than profit. A business spending 40% of its revenue on deductible expenses would pay roughly the same total tax under MUN as under standard taxation. Above that threshold, standard taxation becomes cheaper.

When MUN makes economic sense — and when it does not

MUN works well when: your business is service-based with very few direct costs (consultancy, tutoring, graphic design, copywriting, software freelancing); your annual turnover is comfortably below €30,000 so you are not approaching the €40,000 ceiling; administrative simplicity is a priority; and you have no significant fixed assets or inventory to depreciate or value.

Consider a web designer with €25,000 in annual turnover and €3,000 in expenses (software subscriptions and equipment). Under MUN: €25,000 × 25% = €6,250 total tax. Under standard taxation: (€25,000 − €3,000) = €22,000 taxable × approximately 20% PIT plus reduced VSAA on a modest declared salary might total €5,000–€6,000. At this level, the difference is marginal and MUN's simplicity may justify the slight premium.

MUN does not make sense when: your turnover is approaching or exceeding €35,000–€40,000 (the effective rate on the last euros of turnover becomes punishing once you account for standard rates applying to the excess); you have significant business expenses that could be deducted under standard taxation; you want to build meaningful pension entitlements (the €10/month minimum contribution under MUN is negligible); you are hiring staff and scaling; or you need limited liability protection that only an SIA can provide.

A common mistake is staying in MUN when turnover grows significantly. At €40,000 turnover the MUN payment is €10,000 per year. Under standard self-employment at the same turnover with expenses of even €10,000, the net income of €30,000 taxed at blended PIT and VSAA rates would often result in a lower total tax burden — plus much better pension accumulation.

How to register for MUN in Latvia

Before electing MUN, you must already be registered either as an individual merchant (IIN) with the Enterprise Register or as a self-employed person with VID. You cannot elect MUN before completing that foundational registration.

• Log into VID's Electronic Declaration System (EDS) at eds.vid.gov.lv
• Submit an MUN application before the start of the quarter in which you wish the regime to take effect
• VID confirms registration; the regime begins from the first day of the elected quarter
• Each quarter, file the MUN declaration in EDS and pay the 25% of that quarter's turnover within 15 days of the quarter end

MUN applications must be submitted before the quarter starts, not after. If you miss the window, the earliest you can enter MUN is the following quarter.

Common MUN mistakes and how to avoid them

Mixing MUN with SIA operations. Some entrepreneurs hold both an IIN registered under MUN and an SIA. If work is performed through the SIA, that turnover is not MUN-eligible — it is subject to UIN. Only revenue invoiced by the IIN counts for MUN. Mixing up which entity invoiced which client creates compliance risk.

Not tracking turnover quarterly. Because MUN's ceiling is annual (€40,000), some sole traders lose track of cumulative turnover until late in the year. If you invoice €30,000 in January to September and add another €15,000 in October, the €5,000 excess over €40,000 is taxed at standard PIT + VSAA — which can come as an unpleasant surprise in January.

Ignoring pension implications. The €10/month VSAA contribution under MUN accumulates to €120 per year. The minimum pension contribution for a standard self-employed person is substantially higher. Over a career of 20–30 years, choosing MUN for its convenience can mean a significantly lower state pension entitlement. This rarely appears in the financial comparison but is a real long-term cost.

Assuming MUN means no bookkeeping. MUN does significantly reduce bookkeeping requirements — you only track turnover, not expenses. However, you still need to retain source documents, issue properly numbered invoices, and maintain a turnover register. VID can request these records during a routine check.

MUN and social protections: what you actually get

Under MUN, the mandatory social contribution is €10 per month, which is included within the 25% payment. This covers the legal minimum for VSAA registration but provides correspondingly minimal benefits.

Pension: Your future state pension is calculated based on lifetime social contributions. At €10/month, your pension accrual is negligible. A standard employed worker or standard self-employed person contributing the full VSAA rate builds pension entitlements 10–20 times faster than an MUN payer at minimum contribution.

Sick pay: VSAA sick pay benefits are proportional to contributions. An MUN payer at minimum contribution will receive minimal sick pay if they become ill and unable to work. This matters particularly for sole traders with no other income source.

Parental leave and maternity benefits: Calculated on VSAA contributions. Same limitation applies.

For young entrepreneurs with a long working life ahead, the social protection deficit of MUN is worth taking seriously. The €10/month minimum is not a feature — it is a ceiling imposed by the structure of the regime.

When you should register an SIA instead of using MUN

MUN is a regime for sole traders. If any of the following apply, registering an SIA is the more appropriate structure:

You need limited liability — protection of personal assets from business debts and legal claims. An IIN or pašnodarbinātais has unlimited personal liability; an SIA limits exposure to the company's assets.

You have business partners or co-founders who will hold equity. An SIA can have multiple shareholders with defined ownership proportions. A sole trader structure does not accommodate shared equity.

You are seeking investment or external financing. Banks and investors require a legal entity with auditable accounts. An IIN under MUN is not a suitable vehicle for institutional financing.

Your annual turnover is expected to exceed €40,000 within the first year of operations. At that point, MUN provides no meaningful benefit over standard self-employment taxation, and an SIA with proper accounting may offer a lower effective tax rate depending on profit distribution strategy.

You want to employ staff in a structured way. While MUN allows up to 5 employees, most founders who anticipate meaningful headcount growth choose an SIA from the start to avoid restructuring later.

Frequently asked questions about MUN in Latvia

Deadlines and amounts can change. Check vid.gov.lv and ur.gov.lv before deciding, or ask us.

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