Latvia has implemented a significant change to how cryptocurrency investment gains are taxed. The reform, which passed parliament on October 15, moves away from taxing individual trades and instead focuses on the net value an investor withdraws from an eligible account relative to their deposits.
Under the new investment-account approach, moving between different cryptocurrency assets within the account no longer triggers an automatic tax event. Investors will continue to need records documenting their deposits and withdrawals to establish their cost basis.
Historical Holdings Declaration
The legislation addresses a practical challenge for early cryptocurrency adopters who lack documentation of their original purchase costs. A declaration mechanism will allow eligible holders to regularize historical positions through a one-time process scheduled for 2027.
Holders declaring older positions will face a 10% charge based on the value of their assets at the end of 2026. The application window runs from April 1 through May 31, 2027, with payment due by July 23.
Future Cryptocurrency Tax Payments
Separately, Latvian officials have discussed the possibility of allowing cryptocurrency payments for taxes as a potential development in 2027. However, this service remains under consideration, and details including supported currencies, service providers, and operational arrangements have not yet been announced. This proposed capability should not be confused with the investment-account tax reform that parliament has already adopted.
Implications for EU Markets
Latvia's legislative approach reflects how European governments are adapting traditional tax frameworks to assets that can be exchanged continuously. The practical effectiveness of the new system will depend on how investment-account eligibility is defined and how recordkeeping requirements are enforced.
