National social insurance contributions (NSIC)
As of 1 July 2021, a minimum NSIC object of a minimal wage (EUR 500 for FY 2021) has been introduced. In case an individual earns less from all NSIC taxable income sources, the employer is responsible for making the contributions on employees’ behalf.
Individuals employed by multiple employers or individuals who are both self-employed and employees must sum their total income to determine whether the income is within the minimum amount.
Since January 2014, income attracting NSIC has been capped. For FY 2022, the cap is EUR 78,100.
2021 brought a decrease in the contribution rates of NSIC. The contribution rates are summarised in this table:
|Employment with company registered in Latvia/EU/EEA (split rate):|
|Employment with company registered in Latvia/EU/EEA (employee eligible for retirement) (split rate):|
|Foreign national employed by foreign non-resident employer (full rate payable by either employer or employee):||31.83|
|Self-employed (eligible for retirement)||29.36|
NSIC should be reported and paid quarterly in the case of self-employed persons, whereas monthly contributions are required to be withheld, reported, and paid by Latvian employers.
An additional 5% NSIC should be contributed by self-employed individuals and payers of royalties, as follows:
- The self-employed should contribute an additional 5% NSIC on the difference between their actual monthly income and NSIC income (i.e. the excess).
- A 5% NSIC is payable in addition by a payer of royalty to Latvian-resident individuals (living in Latvia).
Solidarity tax (ST)
ST has been in place since 1 January 2016. ST is applicable on income that exceeds the maximum income attracting NSIC, i.e. EUR 78,100 a year in 2022, and during the year is payable at the same rate as NSIC: 23.59% for employer and 10.5% for employee. However, the effective ST rate is 25%. Thus, the employer will receive ST refund by September 2023 for excessive ST payments made in 2022.
- 1 percentage point to finance healthcare services, with 0.5 points coming from the employee’s part of ST and 0.5 points from the employer’s part of ST
- 10 percentage points become PIT, and
- the rest goes into the special budget for state pensions (impersonalised).
The ST Act does not provide for a different split if a person’s NSIC rate is lower than the standard rate. So the fixed percentage points apply to all ST payers regardless of their NSIC status and rates used.
Value-added tax (VAT)
The standard VAT rate on supplies of goods and services is 21%. See the Other taxes section in the Corporate tax summary for more information.
Net wealth/worth taxes
There are no net wealth/worth taxes in Latvia.
Gifts in any form from individuals are subject to the progressive PIT rate after applying an annual exemption of EUR 1,425 to the value of the gift. Small gifts of up to EUR 15 (including VAT) from the employer are exempt from PIT. Gifts between spouses and relatives up to the third degree are fully exempt.
Light corporate vehicle tax (LCVT)
If LCVT is paid by the employer, no taxable car benefit arises for employees. See the Other taxes section in the Corporate tax summary for more information on the LCVT.