Salary Changes and the Minimum Wage in Latvia in 2026

Salary Changes and the Minimum Wage in Latvia in 2026

Early in January, Laima, the owner of a small IT firm, opens her payroll software and notices something's changed: the minimum wage has gone up by €40, but the PIT rate still shows 20%. The system asks her to confirm the configuration. If Laima misses this, January's salaries will be calculated using the old parameters — and the VID return won't be correct. Fixing it after the fact costs time, nerves, and late-payment interest.

⚠️ Important: The old PIT rates of 20% and 23% have not been in effect since January 1, 2025. If they still appear in your system, that's a configuration error that needs fixing urgently.

This article is written for exactly this kind of situation. We've gathered all the current payroll requirements for 2026, explained the real impact on costs, and shown exactly what to review before every payroll run.

Key takeaways for 2026

• Minimum monthly wage: €780 gross (as of January 1, 2026)

• PIT rates: 25.5% up to €105,300/year; 33% above that — unchanged from 2025

• Non-taxable minimum: €550/month — only if the employee has submitted a payroll tax booklet

• VSAOI: 23.59% for the employer, 10.50% for the employee — unchanged

What's changed and what stays the same

Before diving into the numbers, a quick overview helps. It's also the best test for your payroll software — compare it against your own settings.

The key takeaway: the 25.5% and 33% PIT rates were introduced on January 1, 2025. In 2026 they remain unchanged. The only things that have changed are the minimum wage (€740 has become €780) and the non-taxable minimum (€510 has become €550). If your system still has the old 20%/23% rates configured, it hasn't been updated — and that's a configuration error.

Minimum wage: €780 gross as of January 1

As of January 1, 2026, the minimum monthly wage is €780 gross — €40 more than in 2025. This applies to full-time work (40 hours/week).

Source: Cabinet Regulation on the minimum monthly wage

The minimum hourly rate isn't fixed throughout the year — it changes depending on the number of working hours in a given month. As a rough guide, at 160 working hours a month, it's approximately €4.88/hour.

In practice, the €40 increase means more than it seems. Employer VSAOI must always be added on top of the gross salary — so the increase in total cost per employee is larger:

Compared with 2025, the increase in total cost per employee is €49.43/month, or roughly €593/year. For five employees on minimum wage — nearly €3,000 in extra expenses a year. That's a figure worth knowing before budgeting.

Part-time employees

If someone works 20 hours a week, their minimum is €780 × (20/40) = €390. Review employment contracts where the salary is tied to the old minimum wage, or where a fixed amount below €780 is specified for a full-time position — these need to be amended.

What is the minimum wage "in hand" in 2026?

In 2026, the minimum wage "in hand" in Latvia is roughly €660/month, if the €550 non-taxable minimum is applied and a payroll tax booklet has been submitted.

For a precise calculation with your own numbers, see our payroll calculator.

PIT — rates unchanged from 2025

Personal income tax (PIT) rates in 2026 are the same as in 2025. The old 20% and 23% rates have not been in effect since January 1, 2025.

PIT rates in 2026

Source: Law "On Personal Income Tax," Article 15

The 33% rate only affects high incomes — above €8,775/month gross. The vast majority of employees in Latvia stay within the 25.5% bracket. The additional 3% PIT rate applies when annual gross income exceeds €200,000 — this should not be confused with the solidarity tax, which is a separate, distinct payment: 25% on the portion of income above €105,300 (the maximum VSAOI contribution base), paid jointly by the employer and the employee.

How to calculate PIT correctly — the most common mistake

PIT is not calculated directly from gross salary. The sequence is fixed:

1. Deduct employee VSAOI (10.50%) from the gross salary

2. The resulting amount is the PIT base

3. Calculate PIT (25.5%) from the PIT base

For example, from €1,500 gross:

• Employee VSAOI: €1,500 × 10.50% = €157.50

• PIT base: €1,500 − €157.50 = €1,342.50

• PIT: €1,342.50 × 25.5% = €342.34

If someone calculates PIT directly from gross (€1,500 × 25.5% = €382.50), that's a mistake — the employee ends up with €40.16 too much withheld per month. Over a year, that's nearly €500 in losses for the employee, plus an error in VID filings. Check a detailed payroll calculation with our calculator.

VSAOI — a stable system

State social insurance contribution (VSAOI) rates in 2026 have not changed. That's good news for employers — no need to change your settings.

Source: State Social Insurance Law, Article 18

Important to remember: employer VSAOI (23.59%) is in addition to gross salary, not deducted from it. If the payroll shows a gross of €1,500, the employer pays €1,500 + €353.85 = €1,853.85 total.

In practice this means: gross salary is almost never the business's actual cost. At €1,500 gross, the real cost exceeds €1,850/month.

For more on payroll taxes from the employer's perspective, see our article on payroll taxes for employers.

Non-taxable minimum: €550/month — but not automatic

The non-taxable minimum is a fixed €550/month (€6,600/year). But there's an important nuance here: it's applied only if the employee has submitted a payroll tax booklet. Until the booklet is submitted, the employer applies a non-taxable minimum of €0 — and the employee pays significantly more PIT.

💡 If a new employee starts work and doesn't submit the booklet in time, the first month's salary will be calculated without the non-taxable minimum. Explain this to employees already at hiring.

Special groups

Pensioners have a pensioner's non-taxable minimum of €12,000 per year (IIN Law art. 12, part 5) instead of the regular €550 per month. By default it is applied by the pension payer. If the pensioner also submits the tax booklet to an employer, the minimum is split: the employer applies one twenty-fourth (€500 per month) and the pension payer applies the other part (part 12.¹). The pensioner can opt out of the split in the VID EDS.

Ukrainian civilians working in Latvia under the Law on Support for Ukrainian Civilians and who are non-residents for personal income tax purposes are entitled to a €510/month non-taxable minimum. A VID-issued certificate is required, which the employee submits to the employer.

Source: Law on Support for Ukrainian Civilians

Dependent allowances: +€250 for each

In addition to the non-taxable minimum, an employee is entitled to a dependent allowance — €250/month for each dependent (a child, a spouse with a disability, etc., if the specified criteria are met). The allowance is applied based on the employee's application and supporting documents.

For example: for an employee with one dependent, the combined non-taxable amount is €550 + €250 = €800/month. This significantly reduces PIT — especially at minimum wage, where with one dependent PIT can drop to nearly zero.

Net salary ("in hand") in 2026

An approximate calculation with the €550 non-taxable minimum applied and no additional allowances.

Calculated using 2026 rates: employee VSAOI 10.50%, PIT 25.5%, NTM €550. Employer cost includes gross + 23.59% VSAOI.

A practical payroll calculation — three scenarios

The detailed examples below show the tax mechanics in three versions: without the non-taxable minimum, with it, and with it plus a dependent. This lets you see how much each element actually affects net salary.

Scenario 1 — Minimum wage (€780)

It's clear: the non-taxable minimum raises net pay from €520 to €660 — a €140 difference per month. With a dependent — another €38 more. The employer's cost doesn't change.

Scenario 2 — Average salary (€1,500)

For a precise calculation with your own numbers, see our payroll calculator.

Scenario 3 — Higher salary (€3,000)

Sick pay and vacation pay

The tax treatment of these two differs, and it often raises questions in accounting.

Vacation pay — taxed with PIT and VSAOI exactly like regular salary. No exceptions.

Employer-paid sick pay ("A" sick leave form) — the employer covers sick pay for the first days of incapacity, in the amount set by law (from the 2nd to the 9th day of incapacity). This amount is taxed with PIT and VSAOI just like salary.

VSAA-paid sick pay ("B" sick leave form) — taxed only with PIT (25.5%), with no VSAOI. This is paid by the State Social Insurance Agency (VSAA), not the employer.

In practice: the employer calculates "A" form pay with full taxes, while "B" form pay has no VSAOI — VSAA handles that automatically.

Filing with VID: deadlines

PIT and VSAOI must be paid to VID by the 23rd of the following month.

The employer's report (on salaries and taxes) must be filed via EDS by the 17th of the following month.

VID automatically calculates late-payment interest on overdue payments. Delays create not only financial losses but also worsen your company's standing with VID.

Do it yourself, or hire a specialist?

If you're handling it yourself, make sure: the PIT rate in your software is 25.5% (not 20%/23%), the NTM is €550, and employer VSAOI is 23.59%. These three parameters are the ones most often wrong in systems that haven't been updated since 2024.

For information on outsourced accounting costs for a small business, see our separate article.

What to specifically review in 2026 — a checklist

1. Check that salaries meet the minimum wage (€780). For part-time work — proportionally. Employment contracts where the salary was tied to the old minimum wage, or where a fixed amount is specified, need to be amended.

2. Review your payroll calculation system. PIT rate 25.5%, NTM €550. The old 20%/23% rates are an error.

3. Review employment contracts. If they reference the minimum wage — €780 applies automatically. If a fixed amount below €780 is specified for full-time employees — the contract needs to be amended.

4. Register new employees with EDS before they start work. Registering after the fact isn't lawful and can lead to sanctions.

5. Make sure employees have submitted their payroll tax booklets. Without one, the non-taxable minimum is €0 — and the employee pays significantly more.

6. Distinguish "A" form from "B" form for sick pay. "A" form — full taxes. "B" form — PIT only.

Frequently asked questions

Does the €780 minimum wage apply to all employers?

Yes, without exception. All employers in Latvia — regardless of company size, industry, or legal form — must ensure that an employee's monthly gross salary is not below €780 for full-time work.

Is the €780 minimum wage also mandatory for micro-enterprises?

There's no minimum wage requirement for the owner of a micro-enterprise tax (MUN) payer, since the tax is paid on the company's turnover (25%). For employees, including those of a microenterprise tax payer, the minimum wage is mandatory; payroll taxes on them are paid under the general rules.

Does the 33% PIT rate affect most employees?

No. The 33% rate only kicks in if annual gross income exceeds €105,300 — that's above €8,775/month. In the Latvian context, that's a very high threshold, reached by a small share of employees.

Are bonuses and allowances taxed the same way?

Yes. Bonuses, overtime pay, night-shift pay, holiday pay — all of it is taxed under the same VSAOI and PIT rules as base salary.

How is the part-time minimum wage calculated?

Proportionally to actual working time. 20 hours/week = €780 × 0.5 = €390. 30 hours/week = €780 × 0.75 = €585.

Does a board member's remuneration follow the same rates?

Yes. A board member's remuneration (even without an employment contract, based on an authorization) is taxed with PIT and VSAOI just like a salary. If the board member is also a SIA shareholder, see also our dividends vs. salary comparison.

Is a self-employed person's VSAOI the same as an employee's?

No. Self-employed individuals are subject to a different VSAOI calculation, not the same rates as employees: if monthly income is €780 or more — €242.35 (31.07% of €780) plus 10% of the income above €780; if lower — 10% of actual income. See VID's website on self-employed persons for details. If a self-employed person hires employees, the standard rates apply to those employees' salaries (23.59% for the employer, 10.50% for the employee).

Are the PIT rates new for 2026?

No. The 25.5%/33% system took effect on January 1, 2025. In 2026 it remains unchanged. The change happened in 2025 — the shift from 20%/23% to 25.5%/33%.

Is the €550 non-taxable minimum applied automatically?

No. The employee must have submitted a payroll tax booklet to that specific employer. Without the booklet, the employer applies an NTM of €0.

Is the additional 3% PIT rate above €200,000 the same thing as the solidarity tax?

No — these are two different payments. The additional 3% PIT rate applies to the portion of annual gross income above €200,000. The solidarity tax is a separate, distinct payment — 25% on the portion of income above €105,300 (the maximum VSAOI contribution base), paid jointly by the employer and the employee. Both can apply at the same time for high earners, but they're calculated on different thresholds at different rates.

Conclusion

2026 isn't a year of major changes in payroll — but that doesn't mean there's nothing to do. Two main tasks: check that salaries meet the minimum wage (€780), and make sure your system has the PIT rates introduced in 2025 (25.5%/33%) and the fixed NTM of €550.

The most common mistake we see in our practice: systems still running the old 20%/23% PIT rates. That's a configuration error that generates incorrect filings — and potential penalties — every single month.

If you have questions about payroll calculations or setting up your tax system, get in touch with our team. Also check out our payroll calculator — you can model any gross salary scenario there using current rates.

For questions about your company's legal structure and tax optimization, see also our article comparing SIA vs. IK vs. self-employed — it will help you understand which form minimizes your total tax burden in your specific situation.

Legal sources and references

• Law "On Personal Income Tax," Article 15

• State Social Insurance Law, Article 18

• Cabinet Regulation on the minimum monthly wage

• Law on Support for Ukrainian Civilians

Want a precise payroll calculation for your specific situation? Use our payroll calculator or get in touch with us — we'll help you set everything up correctly.

Article prepared in May 2026. Tax legislation changes — consult a certified accountant before making decisions, or get in touch with the Balansis team.