On January 1, 2026, Latvia activated its implementation of the EU's DAC8 directive, requiring crypto-asset service providers to report user transactions to VID. That same date marked the start of CARF (Crypto-Asset Reporting Framework) obligations. For the first time, Latvian tax authorities have automated access to data about who is buying, selling, and holding digital assets — and the days of treating cryptocurrency gains as something VID cannot see are definitively over.

Latvia's approach to crypto taxation is straightforward in principle but demanding in practice. This guide covers every scenario a Latvian crypto holder or business might face in 2026.

Capital Gains: The 25.5% Rule

Profits from selling, exchanging, or otherwise disposing of cryptocurrency are subject to personal income tax (PIT) at a flat rate of 25.5% on the capital gain.

What counts as a taxable event:

Selling crypto for EUR or any fiat currency.
Exchanging one cryptocurrency for another (BTC → ETH is a taxable event).
Using crypto to purchase goods or services.
Receiving crypto as payment for work or services (taxed as income at that point, then again as capital gain if later sold at a higher price).

What does NOT trigger tax:

Transferring crypto between your own wallets.
Holding crypto without selling (unrealized gains are not taxed).
Receiving crypto via airdrop — until you sell it (acquisition cost: zero, so the entire sale price is gain).

Calculating the gain:

Capital gain = sale price in EUR (at the transaction date) minus acquisition cost in EUR (at the date you acquired the crypto) minus directly attributable transaction costs (exchange fees, gas fees).

Example: You bought 2 BTC in March 2024 for EUR 52,000 each. You sell both in February 2026 for EUR 78,000 each. Exchange fees total EUR 280.

Sale proceeds: EUR 156,000
Acquisition cost: EUR 104,000
Fees: EUR 280
Taxable gain: EUR 51,720
Tax (25.5%): EUR 13,188.60

Losses. Capital losses on crypto can offset capital gains from other crypto transactions within the same tax year. They cannot be carried forward to future years, and they cannot offset other income categories (salary, rental income, dividends). This means if you have EUR 30,000 in gains from Bitcoin and EUR 12,000 in losses from an altcoin, your net taxable gain is EUR 18,000.

Which method for cost basis? Latvia does not prescribe a specific method (FIFO, LIFO, specific identification), but you must use one method consistently and document it. FIFO is the safest choice — it is widely accepted and produces auditable results. Switching methods between years will raise questions.

Mining Income

Cryptocurrency mining falls into one of two categories depending on how you operate:

Individual mining (hobbyist): Revenue from mining — calculated as the fair market value of the mined coins on the date received — is taxable income. If you mine as an individual without registering as self-employed, VID classifies this as "other income" subject to 25.5% PIT. You cannot deduct electricity costs, equipment depreciation, or other expenses.

Mining as a business activity (registered SIA or self-employed): Revenue is the fair market value of coins when mined. Electricity, equipment, cooling, and facility costs are deductible business expenses. The mined crypto becomes inventory or an intangible asset (depending on your accounting policy). When sold, the gain is business income subject to CIT (for SIA) or PIT + social contributions (for self-employed).

The economics of mining in Latvia are challenging. Electricity prices averaged EUR 0.22/kWh for business consumers in 2025 — higher than Nordic countries where most profitable mining operations locate. A mining SIA generating EUR 100,000 in revenue with EUR 70,000 in electricity costs and EUR 20,000 in equipment depreciation produces EUR 10,000 in pre-tax profit. Worthwhile only if you have access to below-market energy rates.

Staking Rewards

Staking — locking cryptocurrency in a proof-of-stake network to earn rewards — creates taxable income at the moment you receive the rewards.

Tax treatment: Staking rewards are taxed as capital income at 25.5% PIT. The fair market value on the date of receipt determines the taxable amount. When you later sell the staked rewards, you pay capital gains tax on the difference between the sale price and the value at which you were already taxed (acquisition cost = fair market value at receipt).

DeFi staking and liquidity provision. Providing liquidity to decentralized protocols (Uniswap, Aave, Curve) creates similar tax events — but the complexity multiplies. Impermanent loss, reward token issuance, and protocol fee sharing each have potential tax implications. Latvia's tax law does not specifically address DeFi, so VID applies general principles: any economic benefit received is income, taxed at 25.5%.

Practical challenge: Some staking protocols distribute rewards continuously (every epoch, every block). Recording the fair market value of every micro-reward is impractical. An acceptable approach: aggregate rewards daily and use the daily average price as the fair market value. Document your methodology.

DAC8 and CARF: What Gets Reported in 2026

The EU's DAC8 directive and the OECD's Crypto-Asset Reporting Framework (CARF) are both operational in Latvia from January 1, 2026. Here is what this means:

Who reports: Crypto-asset service providers (CASPs) operating in the EU — exchanges, custodial wallet providers, and certain DeFi protocols with identifiable operators. This includes Latvian-registered platforms and EU platforms serving Latvian users.

What gets reported:

The identity of the user (name, address, tax identification number, date of birth).
Aggregate transaction data: total proceeds from sales, total quantity transferred, number of transactions.
Year-end portfolio value by asset type.

What this means for you: VID will receive automated reports of your crypto activity from every regulated exchange you use. If your annual tax declaration does not include crypto gains that match the reported data, VID's automated matching system will flag the discrepancy. The penalty for undeclared income is 20–30% of the unpaid tax plus late interest.

Non-EU exchanges. CARF extends beyond the EU through bilateral information exchange agreements. If you trade on a non-EU exchange (Binance's global entity, for example), data sharing depends on whether that jurisdiction has signed a CARF agreement. As of 2026, major jurisdictions (Singapore, Japan, UK, Switzerland) have committed to CARF implementation. Peer-to-peer transactions without a CASP intermediary are not automatically reported — but you are still legally obligated to declare gains.

Record-Keeping Requirements

VID requires documentation for every crypto transaction. Practically, this means maintaining:

Transaction logs showing date, type (buy/sell/exchange/transfer), asset, quantity, price in EUR, fees, and counterparty (exchange or wallet address).
Cost basis records tracking the acquisition cost of each position, using your chosen method (FIFO, specific identification).
Wallet addresses you own, with evidence of ownership (screenshots of wallet interfaces, exchange account statements).
Exchange account statements — download and archive these regularly. Exchanges close, rebrand, or lose data. FTX users learned this the hard way.
DeFi transaction records — etherscan/blockchain explorer exports for on-chain transactions.

Retain records for at least 5 years from the tax year in which the transaction occurred. VID can audit crypto transactions within the standard 3-year limitation period, extended to 5 years in cases of suspected fraud or negligence.

Tools: Koinly, CoinTracker, and similar portfolio trackers can generate tax reports compatible with Latvian requirements. The output needs adjustment — these tools are designed for US/UK tax systems — but they provide a solid starting point for transaction aggregation.

Business Use of Cryptocurrency

Accepting crypto as payment. If your Latvian SIA accepts Bitcoin for services, the revenue is recorded at the EUR fair market value on the date of the transaction. This is not optional — Latvian financial statements must be in EUR. The crypto received becomes an asset. When converted to EUR, any gain or loss between the recording date and conversion date is a separate taxable event.

Holding crypto on the company balance sheet. Under Latvian GAAP, cryptocurrency does not fit neatly into existing asset categories. The prevailing treatment:

Crypto held for sale in the ordinary course of business (a trading company): inventory, valued at lower of cost or net realizable value.
Crypto held as a long-term investment: intangible asset, carried at cost less any impairment. Increases in value are not recognized until sale.

Paying employees in crypto. Legally possible but practically complex. The salary must be reported and taxed in EUR at the exchange rate on the payment date. PIT, social contributions, and all payroll taxes apply to the EUR equivalent. The employee then has a crypto asset with an acquisition cost equal to the EUR value on the date received.

Common Mistakes

Not reporting crypto-to-crypto exchanges. Swapping BTC for ETH is a taxable event. Many holders treat this as non-taxable because no fiat currency was involved.
Using exchange prices that do not match VID's reference. Use the price from the exchange where the transaction occurred, or a widely recognized data source (CoinGecko, CoinMarketCap). Cherry-picking favorable rates across exchanges invites audit adjustments.
Ignoring staking rewards until sale. The tax event occurs at receipt, not at sale. Failing to declare staking income in the year received creates a past-due liability.
Mixing personal and business crypto wallets. If your SIA holds crypto, it must be in a wallet controlled by the company, not your personal Ledger device.

Crypto accounting in Latvia is no longer optional or obscure. With DAC8 reporting active, VID has the data. If your crypto portfolio needs proper tax treatment, reach out to our team.

Cryptocurrency and Digital Assets Tax in Latvia (2026)