Switching from Micro-Enterprise to Standard Regime (and Back)

A web developer in Liepaja spent three years under the micro-enterprise regime, paying 25% on every euro of revenue. In 2025, his annual revenue hit EUR 35,000 -- but his actual expenses (software licenses, equipment, coworking space, travel to client meetings) totaled EUR 12,000. Under the micro-enterprise tax, none of those expenses mattered. His tax bill: EUR 8,750. Had he been on the standard self-employed regime, his tax after expenses and VSAOI would have been roughly EUR 5,900. He switched in January 2026 and will save approximately EUR 2,850 this year.

The regime switch itself is simple. Knowing when to switch -- and understanding the consequences of switching at the wrong time -- is where the real value lies.

The Two Regimes, Briefly

Micro-enterprise tax (MEN): 25% flat rate on gross revenue. No expense deductions. VSAOI and IIN are replaced by this single tax. Maximum revenue EUR 40,000 per year, maximum five employees.

Standard self-employed regime: VSAOI at 31.07% on income (minimum base EUR 780/month) plus IIN at 25.5%/33% on income after expenses and VSAOI. Full expense deductions available.

(For a detailed comparison, see our micro-enterprise vs. self-employed article.)

How to Switch: The Mechanics

From micro-enterprise to standard self-employed:

Submit an application through VID EDS to deregister from the micro-enterprise regime
Register as a self-employed person (if not already registered under that status)
The change takes effect from January 1 of the following year

From standard self-employed to micro-enterprise:

Submit an application through VID EDS to register as a micro-enterprise taxpayer
Ensure you meet the MEN eligibility criteria (revenue under EUR 40,000, maximum five employees, no disqualifying activities)
The change takes effect from January 1 of the following year

The critical deadline: Applications must be submitted by December 15 for the switch to take effect on January 1. Miss this date and you are locked into your current regime for another full year.

There is no mid-year switching. If you realize in March that you are on the wrong regime, you must wait until December to apply and until the following January for the change to take effect. This makes the decision a twelve-month commitment at minimum.

How many times can you switch? There is no explicit limit on the number of lifetime switches, but you can only switch once per calendar year. Rapid back-and-forth switching may attract VID scrutiny, though in practice this is rare.

When Switching from MEN to Standard Makes Sense

The math is straightforward. MEN taxes revenue at 25%. The standard regime taxes profit (revenue minus expenses) at the combined VSAOI + IIN rate. The break-even point depends on your expense ratio.

Rule of thumb: If your documented business expenses exceed roughly 20-25% of your revenue, the standard regime is likely cheaper. The higher your expense ratio, the bigger the advantage.

Consider these scenarios (all at EUR 30,000 annual revenue):

| Expenses | MEN tax | Standard regime total tax (approx.) | Savings from switching | |---|---|---|---| | EUR 0 | EUR 7,500 | ~EUR 10,200 | MEN wins by EUR 2,700 | | EUR 5,000 | EUR 7,500 | ~EUR 8,500 | MEN wins by EUR 1,000 | | EUR 10,000 | EUR 7,500 | ~EUR 6,800 | Standard wins by EUR 700 | | EUR 15,000 | EUR 7,500 | ~EUR 5,100 | Standard wins by EUR 2,400 |

The standard regime also provides full VSAOI coverage. Under MEN, your social contributions are limited -- pension credits accumulate at a reduced rate, and certain benefits may be lower. For people whose self-employment is their primary income source, this hidden cost of MEN can matter significantly over time.

When Switching from Standard to MEN Makes Sense

The reverse switch -- moving to MEN -- makes sense when:

Your business expenses are minimal (under 15-20% of revenue)
You value administrative simplicity over tax optimization
You already have social insurance coverage through other means (employment, spouse's insurance)
Your revenue is well below the EUR 40,000 ceiling

A translator earning EUR 20,000 per year with virtually no business expenses (working from home on a personal laptop, no travel, no special software) would pay approximately EUR 6,800 under the standard regime but only EUR 5,000 under MEN. The simplicity bonus is real, too: MEN requires less bookkeeping and fewer declarations.

What to Watch Out for When Switching

Asset transition: If you have been depreciating business assets under the standard regime and switch to MEN, the depreciation schedule stops. If you switch back later, you resume from where you left off -- but the interrupted depreciation can create accounting complications.

VAT registration: If you are VAT-registered under the standard regime, switching to MEN does not automatically deregister you from VAT. You must evaluate whether VAT registration is still required or beneficial under MEN and take separate action if needed.

Contract continuity: Switching regimes does not affect your existing contracts or client relationships. Your invoicing continues normally. The only visible change from a client's perspective might be VAT treatment on invoices.

Revenue ceiling risk: If you switch to MEN and then exceed EUR 40,000 in revenue during the year, you face penalty rates on the excess. The standard regime has no revenue ceiling. If your revenue is growing and approaching EUR 40,000, staying on or switching to the standard regime is the safer choice.

In our experience, the most common mistake is switching to MEN for simplicity without running the numbers. The regime is genuinely simpler -- but "simpler and more expensive" is not a good trade for most people earning above EUR 15,000 per year.

December 15 Is Coming. Have You Run the Numbers?

Switching between self-employed and micro-enterprise is free, but you only get one chance per year -- and the deadline is December 15. We model both regimes with your actual revenue and expense data so you walk into January under the regime that costs you less.

Run a regime comparison before the deadline →