Employer Payroll Taxes in Latvia 2026 — The Complete Guide

Employer Payroll Taxes in Latvia 2026 — The Complete Guide

Hiring your first employee is a big step for any LLC (SIA) owner. But the first employment contract also brings new obligations: understanding how to calculate the salary correctly, which taxes to pay, when to pay them into the state budget, and what an employee truly costs the company. This guide walks you through 2026's tax rates and rules, step by step.

Key takeaways

• To pay an employee €1,000 net, the employer's total cost is around €1,594 — nearly 60% above the net amount.

• Personal income tax (PIT) in 2026: 25.5% on annual income up to €105,300 (~€8,775/month), 33% on the excess. The social security contribution ceiling numerically matches the same threshold — above it, a separate 25% solidarity tax applies (distinct from the 3% PIT surtax above €200,000).

• Social security contributions (VSAOI) total 34.09% (employee 10.50%, employer 23.59%); the non-taxable minimum is €550/month.

• The general minimum wage is €780/month; in construction it's €1,050/month.

• The employer report is due by the 17th, taxes must be paid by the 23rd.

• A board member is not automatically required to receive the minimum wage — that depends on the deemed-income rules, not on the type of contract.

The true cost of an employee: what does €1,000 net actually cost?

One of the most common mistakes new employers make is assuming employee costs stop at the gross salary. In reality, the company's total cost is significantly higher.

For an employee to receive €1,000 net ("in hand"), here's the calculation for 2026:

So, to pay an employee €1,000 in hand, the company should budget for roughly €1,594 in total cost — nearly 60% above the net amount. This gap is often what surprises first-time employers.

How Latvia's payroll tax burden breaks down

In Latvia, the payroll tax burden consists of two main elements: personal income tax (PIT / IIN) and mandatory state social security contributions (VSAOI). Both are withheld from the employee's gross salary, while the employer additionally pays its own share of social security contributions.

PIT — personal income tax

In 2026, PIT is calculated using two rates depending on income level:

• 25.5% — on annual taxable income up to €105,300 (approximately €8,775/month)

• 33% — on the portion of income exceeding €105,300 per year

In practice, this means most employees — anyone whose monthly salary is below roughly €8,775 — have their entire taxable salary taxed at a single rate, 25.5%. The 33% rate only applies to high earners, such as executives or senior specialists.

For example, if an employee's gross salary is €10,000/month (above the monthly threshold), the taxable portion up to €8,775 is taxed at 25.5%, while the excess is taxed at 33%. For most employers, whose employees earn less, this second bracket won't come into play at all.

Important: The employer withholds PIT from the employee's salary and remits it to the State Revenue Service (VID). The employee doesn't need to do anything themselves.

VSAOI — mandatory state social security contributions

Social security contributions fund an employee's social protection — pension, sickness benefits, unemployment insurance. In 2026, the combined contribution rate is 34.09%, split as:

• Employee's share: 10.50% of gross salary (withheld from pay)

• Employer's share: 23.59% of gross salary (paid on top)

These rates have not changed for 2026 — they remain at the same level as in previous years.

The 2026 contribution ceiling: there is a maximum amount on which social security contributions are calculated — €105,300/year (approximately €8,775/month). Income above this amount is no longer subject to standard social security contributions — instead, both the employer and the employee must pay a 25% solidarity tax on the excess (explained below). The same €105,300 threshold is also the point at which the PIT rate rises to 33%. These are two separate rules — one under the Law "On State Social Insurance" (social security contributions / solidarity tax), the other under the Law on Personal Income Tax (the 33% PIT bracket) — that both happen to be set at the same threshold in 2026, so both changes kick in together for high earners.

Non-taxable minimum

In 2026, the fixed non-taxable minimum for all employees is €550/month. This means no PIT is withheld on the first €550 of income.

When calculating PIT, social security contributions (the employee's share) are deducted from gross salary first, and only then is the €550 non-taxable minimum applied. PIT is calculated on the remainder.

Minimum wage in 2026

As of January 1, 2026, the general minimum monthly wage is €780. In the construction sector, where an extended collective agreement applies, the minimum wage is higher — €1,050.

This means:

• No full-time employee can be paid less than €780 gross per month (€1,050 in construction).

• A board member's compensation can be subject to so-called deemed-income rules, which under certain conditions require social security contributions to be calculated on at least the minimum wage — this is not simply a matter of whether it's their "only job." We explain the exact conditions in the "Board member salary" section below.

• For self-employed individuals and sole proprietors, social security contributions work differently: if monthly income is below €780, the contribution is 10% of actual income; from €780 upwards it is 31.07% of €780 (€242.35) plus 10% of the income above €780.

Step-by-step: calculating a salary

Let's look at a practical example for an employee with a €2,000 gross salary in 2026.

1. Calculate the employee's social security contribution (10.50%)

€2,000 × 10.50% = €210

2. Deduct the non-taxable minimum

Taxable income = €2,000 – €210 – €550 = €1,240

3. Calculate PIT

• The full €1,240 is well below the €8,775 monthly threshold, so the 25.5% rate applies.

  €1,240 × 25.5% = €316.20

4. Calculate net salary

€2,000 – €210 – €316.20 = €1,473.80

5. Calculate the employer's social security contribution (23.59%)

€2,000 × 23.59% = €471.80

6. Total employer cost

€2,000 + €471.80 = €2,471.80

If an employee's salary exceeded roughly €8,775/month (€105,300/year), the portion above that threshold would be taxed at 33%, but the calculation logic would remain the same.

VID payment deadlines

Each month, the employer must complete two actions:

1. Submit the "Employer's Report"

   • The report is filed electronically via EDS (VID's Electronic Declaration System).

   • Deadline: by the 17th of the month following the reporting month.

2. Pay the calculated taxes (PIT and both social security contribution shares)

   • Payment is made as a single amount, using VID's designated account (the single tax account).

   • Deadline: by the 23rd of the month following the reporting month.

Example: for January's salaries, the employer's report is due by February 17, and taxes must be paid by February 23.

If a deadline falls on a weekend or public holiday, it moves to the next working day.

Important to remember

• The employer's report must list all employees and their gross salaries, calculated taxes, and information about the start and end of employment relationships.

• If the company has no employees, no report is required (unless a board member receives compensation).

• If payment is late, VID calculates late-payment interest (0.05%/day) and may impose a fine — for details on the consequences of missed deadlines, see our article on missed VID deadlines.

Special cases

Board member salary

If an SIA owner is also a board member and receives compensation, the same PIT and social security rates and calculation rules apply to that compensation regardless of the type of contract — VID treats any board member compensation (whether under an employment contract or a mandate/authorization agreement) as income subject to payroll tax, from which social security contributions must be made.

A more complex issue is the so-called deemed income rule — a situation where VID requires social security contributions (and consequently PIT) to be calculated on at least the minimum wage (€780/month), even if the board member actually receives no compensation or less than that. This obligation applies only if both of the following conditions are met simultaneously:

1. the company has no employee or board member already receiving at least the minimum wage, and

2. the company's turnover for that month exceeds five times the minimum wage (€3,900 in 2026).

If either condition is not met — for example, the company already has at least one employee earning ≥€780, or monthly turnover is below €3,900 — the deemed-income obligation does not apply, even if the board member receives no compensation at all. Exceptions also apply during the company's registration year, and where a board member already receives compensation of at least five times the minimum wage from another company in the same group.

This rule is often misunderstood — it does not depend on whether a formal employment contract exists. If in doubt about a specific situation, it's best to have an accountant evaluate it.

Employees with disabilities

Employers who hire people with disabilities are entitled to an additional PIT relief. Importantly, this is not an increased non-taxable minimum — it's a separate, additional deduction added on top of the standard €550/month non-taxable minimum:

• €154/month (€1,848/year) — for persons with disability group I or II

• €120/month (€1,440/year) — for persons with disability group III

For example, for an employee with a group II disability, an additional €154 is deducted from taxable income on top of the standard €550 non-taxable minimum — €704 in total before PIT is calculated. This relief does not affect the social security contribution calculation — it only changes the PIT base.

Employees with a second job

If an employee works at multiple workplaces, the €550 non-taxable minimum can only be applied at one workplace (usually the one with the higher salary). At other workplaces, PIT is calculated without deducting the non-taxable minimum, or it can be split between workplaces if the employee has indicated so in VID's EDS system.

The solidarity tax and the additional PIT rate for high earners

Latvia has two separate, unrelated charges on high earners that are often confused with each other:

• Solidarity tax (25%) — applies to the portion of income exceeding the social security contribution ceiling (€105,300/year). Both the employer and the employee pay it, and it effectively continues in place of standard social security contributions above the ceiling (see the social security section above).

• Additional PIT rate (3%) — applies to the portion of income exceeding €200,000/year (from all sources combined). It's added on top of the progressive PIT (25.5%/33%) and is part of the PIT calculation, not the social security/solidarity tax system.

The two can stack for very high earners, but they have different thresholds, different rates, and a different legal basis. Most employers won't encounter either in practice, but it's worth knowing the distinction if the company employs highly compensated executives or specialists.

Frequently asked questions

What is the minimum gross salary in Latvia in 2026?

€780/month under the general regime. In construction, where an extended collective agreement applies, the minimum wage is higher — €1,050/month.

Is the non-taxable minimum applied automatically?

No — the employee must indicate in VID's EDS system which employer should apply the non-taxable minimum. If an employee works at multiple jobs, the €550 can only be used at one workplace, or split between them.

What's the difference between gross and net salary in 2026?

The employee's social security contribution (10.50%) is deducted from gross salary first, then the non-taxable minimum (€550) is applied, and PIT (25.5% or 33%) is calculated on the remainder. Net salary is what's left after both deductions — typically around 75–77% of gross salary at mid-range income levels.

When must the employer's report be filed and taxes paid?

The report must be filed via VID's EDS by the 17th of the following month, and taxes (PIT and both social security contribution shares) must be paid by the 23rd.

Does a board member always have to be paid at least the minimum wage?

No. The minimum-wage (deemed income) requirement only applies if the company has no employee earning ≥€780 AND monthly turnover exceeds €3,900. This is not determined by the type of contract.

What tax relief applies when employing a person with a disability?

On top of the standard €550 non-taxable minimum, a separate additional relief applies — €154/month (group I/II) or €120/month (group III). It doesn't affect the social security contribution calculation.

What's the difference between the solidarity tax and the 3% additional PIT rate?

The solidarity tax (25%) applies to income above the social security contribution ceiling (€105,300/year) and is paid by both employer and employee. The additional PIT rate (3%) applies to a much higher threshold — €200,000/year — and is part of the PIT calculation. They're two independent mechanisms that can stack.

What happens if I miss the employer's report or tax payment deadline?

VID calculates late-payment interest (0.05%/day) on overdue taxes and may impose an administrative fine. For details on the consequences and what to do, see our article on missed VID deadlines.

Common mistakes

• Assuming employee cost equals gross salary. The true cost is gross salary plus the employer's social security contribution (23.59%) — see the section above.

• Using an outdated PIT threshold. Until 2024, the 33% rate kicked in at a much lower income level — in 2026 it's €105,300/year, not a lower figure.

• Forgetting that the social security contribution ceiling and the 33% PIT threshold numerically coincide in 2026 (€105,300), even though they're two separate rules.

• Confusing the solidarity tax (25% above the social security ceiling) with the 3% additional PIT rate (above €200,000). They're two different charges with different thresholds.

• Assuming a board member must always be paid at least the minimum wage. This depends on the deemed-income conditions (turnover, other employees' wages), not on the type of contract or whether it's their only job.

• Missing the 17th or 23rd deadline. Even a short delay means late-payment interest from day one.

Do it yourself or hire a specialist?

Conclusion

Payroll tax rates can seem complex, but once you understand the fundamentals and set up a correct payroll calculation system, the process becomes routine. The most important things are not missing deadlines (the 17th and 23rd), accurately reflecting data in VID reports, and correctly evaluating special cases — especially board member compensation. Want to check exactly what a specific salary will cost at your company? Use our salary calculator to quickly calculate gross/net pay and total employer cost using 2026 rates. Get in touch with Balansis — we help both new and experienced employers keep their payroll accounting running smoothly.

Related reading: 2027 business risk state fee.

See also: taxation of employee benefits and sick leave and sick pay.

Legal sources and references

• VID, "Personal Income Tax Rates"

• Law "On Personal Income Tax"

• Law "On State Social Insurance" (including transitional provisions on deemed income for board members)

• VID methodological material "Personal Income Tax Relief"

• VID, "Solidarity Tax Rates"

• VID, "Deadlines for Filing Declarations and Paying Taxes"

• Cabinet of Ministers regulations "Noteikumi par minimālās mēneša darba algas apmēru normālā darba laika ietvaros un minimālās stundas tarifa likmes aprēķināšanu"

• ifinanses.lv — From 2026, the minimum wage in construction is €1,050

Last updated: September 2026. Information based on the Law "On Personal Income Tax," the Law "On State Social Insurance," and official VID materials reflecting 2026 rates.