In a previous article, we informed readers about the new regime for the supervision of crypto-asset transactions, including the automatic exchange of information. This generated great interest, and in this article, we offer a continuation, focusing on the tax obligations of private individuals. The purpose of this publication is to help you understand how to correctly declare income from crypto-asset transactions and avoid inaccuracies in tax calculations. The popularity of crypto assets continues to grow worldwide, and more and more people in Latvia are engaging in the trading of these digital assets. Income from such transactions is subject to tax, and its correct calculation is essential for financial planning. Understanding these tax nuances helps ensure compliance with the law and effective management of tax liabilities.
Definition of Crypto Assets and Tax Application
Starting from 2024, the term “crypto-asset” is used in Latvian legislation. It means a digital representation of value that can be traded, transferred, or used for settlement or investment. Crypto assets do not include currencies issued by central banks, traditional securities, or other financial instruments.
Crypto assets are considered capital assets, and income from their sale is subject to the Capital Gains Tax rate of 25.5%.
The tax must be paid at the moment the crypto asset is sold and fiat currency (e.g., Euro or another national currency) is received in return. Income is considered earned on the day of conversion, not at the moment when the funds are transferred to the bank account.
Important to remember: Capital Gains Tax applies only to conversion to fiat money or other goods/things. Exchanging between different cryptocurrencies (e.g., BTC to USDT) does not trigger a tax obligation. The State Revenue Service (SRS) also emphasizes that the moment income is earned is the moment the crypto asset is converted to Euros on the exchange, not the transfer to the bank account.
Income from the disposal (capital gains) of publicly traded crypto assets for a non-resident in Latvia is exempt from tax from January 1, 2025, to December 31, 2027.
Calculation of Taxable Income
Taxable income is determined as the positive difference resulting from transactions between the sale value and the acquisition cost, including expenses related to the acquisition.
If transactions in the reporting period resulted in both profits and losses, losses can be offset against the income of the following period by submitting an amended declaration.
The acquisition value of a crypto asset – as with other capital assets – also includes expenses related to its acquisition: state fees for confirming inheritance rights or for a last will or inheritance agreement entering into legal force, commission fees, and other similar expenses.
The acquisition value of a crypto asset also includes interest payments paid on a loan for its acquisition, if documentary evidence allows for the identification of the link between the loan and the crypto asset’s purchase.
If it is impossible to determine the original acquisition value of a crypto asset, its acquisition value is considered to be €0.
Declaration Deadlines:
- If quarterly income exceeds €1000 – the Capital Income Declaration must be submitted to the SRS by the 15th day of the following month, and the tax must be paid by the 23rd day.
- If income does not exceed €1000 – the declaration must be submitted by January 15th of the following year, and the tax must be paid by January 23rd.
Declarations submitted during the year are adjusted in the annual summary, ensuring that losses from one period are correctly offset by profits from the next.
The SRS indicates that income from crypto-asset transactions conducted as a private investment on an exchange is capital gains, not economic activity (business). This means:
- There is no need to register as an economic activity (business) performer if the transactions are conducted solely for the purpose of capital gain.
- VAT registration is not mandatory, as the exchange of crypto assets is considered a financial transaction that is not a good or service in the context of VAT. This position is also consistent with the 2015 judgment of the European Union Court of Justice (Case C-264/14).
Frequently Asked Questions about Crypto-Asset Transactions
| Question | Answer |
| Do I need to register as an economic activity (business) performer? | No, if transactions are conducted only for the purpose of capital gain. |
| Do I need to register for VAT? | No, the buying, selling, and exchange of crypto assets is not a VAT-subject service. |
| When does the tax obligation arise? | Only when converting the crypto asset into Euros, another currency, or other goods/things. Exchanging between cryptocurrencies does not lead to a tax obligation. |
| How to calculate taxable income? | As the positive difference between the sale value and the acquisition cost, including expenses related to the acquisition. |
| How to document transactions? | Must indicate the date, type and amount of crypto asset, acquisition price, expenses, and sale or conversion value. |
| Which method to use for calculation? | FIFO (First-In, First-Out) or the Weighted Average Price method; the chosen method must be used consistently, usually for at least 10 years. |
| What to do with losses? | Losses from the disposal of crypto assets can be offset against profits from the sale of crypto assets. Losses from other capital assets can be used to cover income from crypto assets. |
| Where to submit the declaration? | In the Capital Gains Declaration (DK form) – according to the deadlines mentioned above for the quarter or year. The submitted declaration can be amended within three years. If, as a result of amending the quarterly DK declaration, the income does not exceed €1000, then an empty quarterly DK declaration is submitted, as well as the annual DK declaration. If the total annual taxable income (including capital gains income declared in the DK or GD form) and tax-exempt dividends and liquidation quotas exceeds €200,000, an additional 3% tax is calculated in the annual income declaration. |
| Where to pay the capital gains tax? | The tax on capital gains income is paid to the unified tax account: Recipient: State Budget (SRS) Registration No.: 90000010008 BIC Code: TRELLV22 Account (IBAN): LV33TREL1060000300000 |
Accurate record-keeping and timely declaration help ensure lawful action and avoid ambiguities or sanctions. If any uncertainties arise, it is recommended to contact a qualified INNOVATOR tax consultant, who will provide support in both transaction accounting and declaration preparation, ensuring compliance with the current regulations.
©INNOVATOR 21.10.2025.
