Payroll Taxes for Employers in Latvia 2026 — Complete Guide

Hiring your first employee is a major milestone for any Latvian company. But along with the first employment contract come new responsibilities: calculating salaries correctly, paying the required taxes, meeting deadlines, and understanding the true cost of employment.

This guide explains Latvia’s 2026 payroll tax system step by step — with real examples.

The Real Cost of an Employee: What Does €1,000 Net Salary Actually Cost?

One of the most common mistakes new employers make is assuming that employee cost equals gross salary. In reality, the total cost is significantly higher.

To pay an employee €1,000 net, the calculation in 2026 looks like this:

So, to pay €1,000 net, the employer must budget approximately €1,594 total cost, which is nearly 60% above net salary.

Breakdown of Payroll Taxes in Latvia

Payroll taxes consist of two main components:

• Personal Income Tax (PIT)

• Mandatory State Social Insurance Contributions (SSIC)

The employee pays part of these taxes, while the employer pays an additional portion.

Personal Income Tax (PIT)

In 2026, PIT is applied progressively:

• 25.5% on annual income up to €20,004 (~€1,667/month)

• 33% on income above €20,004

Example:

If an employee earns €2,500 gross monthly:

• The first portion is taxed at 25.5%

• The excess is taxed at 33%

Important:

The employer withholds PIT and pays it to the tax authority. The employee does not need to take action.

Social Contributions (SSIC)

Social contributions fund pensions, healthcare, and unemployment benefits.

Total rate in 2026: 34.09%, split as follows:

• Employee: 10.50%

• Employer: 23.59%

These rates remain unchanged from previous years.

Contribution ceiling (2026)

There is a maximum income threshold:

• €62,800 per year (~€5,233/month)

Income above this limit is not subject to social contributions.

Non-taxable minimum

In 2026, the fixed non-taxable minimum is €550 per month.

Calculation order:

1. Deduct employee social contributions

2. Apply €550 non-taxable minimum

3. Apply PIT rate to the remaining amount

Minimum wage in 2026

From January 1, 2026:

• General minimum wage: €780/month

• Construction sector: €1,050/month

Implications:

• Full-time employees cannot be paid below €780 gross

• Board members must also meet this threshold if it is their only job

• Self-employed minimum contributions are based on this amount

Step-by-step salary calculation example (€2,000 gross)

**1. Employee social contributions (10.50%)**€2,000 × 10.50% = €210

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

**3. Personal income tax (25.5%)**€1,240 × 25.5% = €316.20

4. Net salary€2,000 – €210 – €316.20 = €1,473.80

**5. Employer social contributions (23.59%)**€2,000 × 23.59% = €471.80

6. Total employer cost€2,000 + €471.80 = €2,471.80

Tax payment deadlines

Each month, the employer must:

1. Submit Employer Report

• Filed via the Electronic Declaration System (EDS)

• Deadline: by the 17th of the following month

2. Pay taxes

• Includes PIT + both parts of social contributions

• Paid as one combined payment

• Deadline: by the 23rd of the following month

Example:

January salaries:

• Report by February 17

• Payment by February 23

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

Important notes

• The report must include all employees, salaries, and taxes

• If there are no employees, no report is required (except for paid board members)

• Late payments result in penalties and interest

Special cases

Board member salary

If the owner is also a board member receiving salary:

• Same tax rules apply

• Minimum salary requirement applies if it is their only employment

If the person has another job:

• Lower salary may be allowed

• Must be justified

Employees with disabilities

Employers may apply additional tax relief:

• Non-taxable minimum increases to €900/month (2026)

This reduces PIT but does not affect social contributions.

Employees with multiple jobs

The €550 non-taxable minimum can only be applied at one workplace (usually the main job).

Other employers:

• Apply full PIT without minimum

• Or split it if officially declared

Final thoughts

Payroll taxes in Latvia may seem complex at first. However, once the system is set up correctly, it becomes a routine process.

The key is:

• accurate calculations

• meeting deadlines

• proper reporting

Need help?

We help companies:

• set up payroll correctly

• avoid costly mistakes

• ensure full compliance with Latvian tax rules

Contact us for support.

Last updated: April 2026. Based on current Latvian tax regulations.