Latvia (LV)
Latvia is a parliamentary republic and EU member state on the eastern shore of the Baltic Sea, bordered by Estonia, Lithuania, Russia, and Belarus.
Tax & Payslip Guide
Understanding your taxes in Latvia — tax year Calendar year (1 January – 31 December).
📊 Income Tax Brackets
| Income from | Income to | Rate | Notes |
|---|---|---|---|
| 0 | 105,300 | 25.5% | Effective 1 January 2026, Latvia replaced its former three-bracket system (20%/23%/31%) with a simplified two-bracket structure. The 25.5% rate applies to annual taxable income up to €105,300 (€8,775/month). The non-taxable minimum (neapliekamais minimums) is €6,600/year (€550/month, applied uniformly to all employees from 2026, replacing the previous income-dependent sliding scale). Employee VSAOI social insurance contributions (10.5%) are deducted from gross salary before calculating income tax. |
| 105,301 | 200,000 | 33% | Income above €105,300/year (€8,775/month) is taxed at 33%. This bracket runs from €105,301 to €200,000/year. Note: the VSAOI social insurance contribution ceiling is €105,300/year — above this, the solidarity tax (solidaritātes nodoklis) applies at the same VSAOI rates (10.5%/23.59%) instead of contributions flowing to the individual's pension account. |
| 200,001 | ∞ | 36% (33% PIT + 3% solidarity surcharge) | A 3% PIT solidarity surcharge applies to annual income above €200,000, raising the effective income tax rate to 36% on that portion. This three-tier bracket structure (25.5%/33%/36%) fully replaces the previous 20%/23%/31% regime from 1 January 2026 per Law on Personal Income Tax amendments approved in 2025. |
🏛️ Social Contributions
Mandatory state social insurance contributions fund pensions (1st and 2nd pillar), sickness benefits, maternity benefits, parental leave, occupational accident insurance, and unemployment insurance. Employee: 10.5% deducted from gross salary. Employer: 23.59% paid on top of gross salary (not deducted from employee). Total combined: 34.09%. Contributions apply only on income up to the annual ceiling of €105,300 (raised from the previous €78,100 ceiling). Above this ceiling, the solidarity tax applies instead at the same rates. Managed by VSAA (Valsts sociālās apdrošināšanas aģentūra).
Progressive income tax on salary and other personal income. Applied after VSAOI deduction and after applying the non-taxable minimum (€550/month / €6,600/year, uniform for all employees from 2026). Withheld at source by employer monthly. Annual settlement via VID (Valsts ieņēmumu dienests) through the EDS electronic declaration system at eds.vid.gov.lv.
For high earners whose salary exceeds the VSAOI ceiling (€105,300/year in 2026), contributions above that amount flow into the solidarity tax rather than into the individual's pension entitlements. Rates mirror VSAOI rates (10.5% employee / 23.59% employer). Additionally, income above €200,000/year attracts a separate 3% PIT solidarity surcharge reflected in the 36% top PIT bracket.
Simplified flat tax for small businesses and sole traders with annual turnover up to €40,000. The 25% is calculated on turnover (not profit) and covers all taxes. Limited social insurance entitlements under this regime. Not available to all business types.
🛒 VAT Rates
Latvia's VAT (PVN — Pievienotās vērtības nodoklis) is administered by VID. Businesses must register for VAT once annual turnover exceeds €40,000. The 5% rate on fresh fruit and vegetables was introduced to combat food inflation. Zero rate (0%) applies to exports and certain EU intra-community supplies.
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🌍 Special Expat Tax Rules
Latvia does not have a special flat-rate expat tax scheme comparable to Denmark's Forskerskatteordningen. The 2026 rate structure (25.5%/33%/36%) is broadly competitive within the EU for mid-range earners. The non-taxable minimum of €550/month (€6,600/year) is now applied uniformly to all employees regardless of income level — a simplification from the previous income-dependent sliding scale. EU Blue Card holders and highly skilled migrants are subject to standard Latvian tax rates. Latvia participates in the OECD CRS automatic exchange of information.
📋 Double Tax Treaties
Latvia has double taxation agreements (DTAs) with over 60 countries, including all EU member states, USA, Canada, UK, Norway, Switzerland, Japan, China, India, and Ukraine. The Russia DTA was suspended from 2023 due to the war. Latvia applies the OECD model convention. Treaty benefits protect against double taxation on salary, dividends, royalties, pensions, and capital gains. Latvia participates in Nordic-Baltic tax cooperation.
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