Employer Tax Obligations in Latvia

When expanding your workforce into Latvia, understanding employer tax contributions is crucial for compliance and budgeting. Employers are responsible for several mandatory contributions that form part of the total employment cost.

Total Employer Tax Burden: 20.77% - 25% + 0.36 EUR per employee monthly

State Social Insurance and Solidarity Tax: 20.77% - 25%
Business Risk Insurance: 0.36 EUR per employee

State Social Insurance and Solidarity Tax

State Social Insurance (NSIC)

Since July 2021, a minimum NSIC base has been established relative to the minimum wage (700 EUR for 2024). Employers must cover social insurance if an employee's total taxable income from all sources falls below this threshold.

For individuals working multiple jobs or combining employment with self-employment, total income is aggregated to determine if it meets the minimum amount.

Since 2014, a cap has been applied to NSIC contributions. For the 2024 fiscal year, this ceiling is set at 78,100 EUR.

The standard employer contribution rate is 23.59%. However, different rates apply to specific groups: 20.77% for employees who have reached retirement age, 29.36% - 31.07% for self-employed individuals, and 31.83% for foreign citizens employed by non-resident employers. These contributions fund pensions, disability benefits, sickness allowances, parental leave, and unemployment benefits.

Solidarity Tax (ST)

Implemented in January 2016, the Solidarity Tax applies when an employee's annual income exceeds the social insurance cap (78,100 EUR in 2024). Employers pay ST at a nominal rate of 23.59%, effectively resulting in a 25% tax rate, with overpayments refunded by September 1 of the following year.

ST revenue is allocated as follows:

1 percentage point funds healthcare services
10 percentage points contribute to personal income tax
The remainder supports the state pension budget

All ST contributors follow the same allocation structure, regardless of their NSIC rate. Annual tax returns must be filed between April 1 and July 1 for ST and personal income tax reconciliation.

Business Risk Insurance

Employers must pay a monthly unemployment risk fee of 0.36 EUR per employee directly to the state budget.

Voluntary Benefits

While not legally required, many employers enhance their compensation packages with voluntary benefits such as private health checks, flexible working arrangements, professional development programs, and wellness initiatives to attract and retain talent.

Employee Tax Responsibilities in Latvia

Employees in Latvia contribute to the social security system through deductions from their gross salary.

Total Employee Tax Deduction: 15.25% - 55.5%

State Social Insurance and Solidarity Tax: 9.25% - 10.5%
Personal Income Tax: 6% - 45%

State Social Insurance and Solidarity Tax

For 2024, employees contribute 10.50% to social insurance and solidarity tax, while those eligible for retirement contribute 9.25%. These payments entitle workers to various state benefits during unemployment, illness, maternity leave, workplace accidents, and other income-loss scenarios.

Unemployment Benefits

To qualify for unemployment benefits, individuals must register with the State Employment Agency (SEA) and meet specific contribution history requirements. Benefits are typically payable for up to eight months within one year of obtaining unemployed status.

Sickness Benefits

Employees receive sickness benefits from the State Social Insurance Agency (SSIA) after the 11th day of incapacity, covering up to 26 weeks. The benefit amounts to 80% of the insured salary. Employers cover sick pay for the first 10 days of absence.

Work Injury and Occupational Disease Compensation

Employees suffering from work-related injuries or illnesses are entitled to compensation covering medical treatment, rehabilitation, disability pensions, and survivor benefits. Compensation amounts vary based on the degree of incapacity and specific circumstances.

Funeral Allowance

The state provides funeral allowances to families of deceased insured persons, with amounts based on the deceased's average insured salary or pension benefits.

Personal Income Tax

Latvia employs a progressive income tax system with the following brackets for 2024:

Annual Income	Tax Rate
Up to 20,004 EUR	20%
20,004 EUR - 78,100 EUR	23%
Over 78,100 EUR	31%

Navigating Latvia's tax landscape requires careful attention to contribution rates, reporting deadlines, and compliance requirements. SailGlobal's HR experts can provide tailored solutions to ensure your business meets all obligations while optimizing your employment strategy.

Latvia Employer and Employee Taxes 2024: Complete Guide for Businesses