How does Latvia payroll tax work in 2026?
Employer state social insurance runs at 23.59% of gross pay in Latvia, more than double the 10.5% taken from the employee. Layer on three personal income tax bands and a monthly non-taxable minimum of €550/month, and the gap between gross salary and true employer cost is wider than most first-time hirers expect.
· Latvia guide
Illustration · Riga, Latvia
Latvia payroll has three moving parts. The employer pays state social insurance at 23.59% of gross pay. The employee pays 10.5% from the same gross.
Personal income tax then runs across three bands. It starts at 20% and rises to 31% on the highest pay. Each worker gets a non-taxable minimum of €550/month that lowers the taxable amount.
There is no minimum wage debate to track here. The gross minimum is €780/month from 1 January 2026. Latvia has no required 13th-month salary, so any annual bonus is a choice, not the law.
What does an employer pay in Latvia social tax?
The employer pays state social insurance at 23.59% of the employee's gross pay. This is the largest single payroll cost on top of salary.
A small business risk state fee is also paid per employee each month. The employer adds it to the social contribution (Law On State Social Insurance).
| Employer contribution | Rate | Applies to |
|---|---|---|
| State social insurance (employer share) | 23.59% | Gross employment income, general risk scheme |
| Business risk state fee | Fixed monthly amount per employee | Each employed worker, paid alongside social contributions |
State social insurance is Latvia's main payroll cost above salary. The employer pays 23.59% of gross employment income under the general risk scheme, set out in the State Revenue Service rules. It funds pensions, unemployment, sickness, maternity, and the rest of the state social safety net. The rate is one of the higher employer shares in the region, which is why true employer cost sits well above the headline salary.
The business risk state fee
On top of social insurance, the employer pays a small business risk state fee for every employee each month. It is a fixed cash amount per head, not a percentage, and it goes to the fund that protects wages if an employer becomes insolvent. It is paid in the same monthly run as the social contribution.
What this means for a first hire
Budget for gross salary plus the 23.59% employer social charge plus the small per-head fee. A worker on the gross minimum of €780/month still carries the full 23.59% on top. Teamed itemises each of these as a separate line so you see the real cost, never a blended figure.
What does an employee pay from a Latvia salary?
Two things come off a Latvia salary. State social insurance takes 10.5% of gross pay. Personal income tax is then charged on what is left.
The non-taxable minimum of €550/month is taken out before income tax is worked out. That lowers the taxable pay (Law On Personal Income Tax).
| Employee deduction | Rate | Applies to |
|---|---|---|
| State social insurance (employee share) | 10.5% | Gross employment income, general risk scheme |
| Personal income tax | 20% to 31% | Taxable pay after social insurance and the non-taxable minimum |
Social insurance, the employee side
The employee pays 10.5% of gross employment income into the same state social insurance system the employer funds at 23.59%. It buys the worker a contributory pension, paid sick leave from the state, and unemployment cover. The employee share is deducted at source by the employer on every run.
The non-taxable minimum
Before income tax is calculated, a monthly basic non-taxable minimum of €550/month is applied for 2026. It reduces the pay that income tax is charged on. The full amount is available to lower earners and tapers down as income rises, so the higher-paid see less of it. Getting the non-taxable minimum and the social deduction applied in the right order changes the final tax figure, even when every rate is correct.
Latvia personal income tax bands for 2026
Personal income tax runs across three bands. It starts at 20% on most pay and rises to 23% on higher income.
The top band is 31% on the highest earnings. The bands are set by annual income, then applied monthly through payroll (Law On Personal Income Tax).
| Annual income band | Rate |
|---|---|
| Lower band, on most income | 20% |
| Middle band, on higher income | 23% |
| Top band, on the highest income | 31% |
Latvia moved to a progressive personal income tax with three rates. The lower band charges 20%, the middle band 23%, and the top band 31% on the highest income, all under the Law On Personal Income Tax. The band boundaries are set in annual income terms and translated to monthly thresholds for the payroll run. Most employees on a typical Latvian salary sit in the lower band.
What comes off before income tax
Income tax is charged on taxable pay, not gross pay. The employee's 10.5% social insurance and the €550/month non-taxable minimum are removed first. Only then is the band rate applied. A high earner above the top social insurance ceiling also faces a separate solidarity tax on the income above that ceiling, but the 2026 ceiling figure is not yet confirmed, so the exact threshold is best checked with the State Revenue Service before you rely on it.
How does Latvia payroll filing and pay timing work?
Employers calculate income tax and social insurance each month and report them to the State Revenue Service. Pay must reach the worker on the agreed day.
Wages are paid at least twice a month, or once a month if both sides agree. Pay early if the payday lands on a rest day or public holiday (Labour Law, Section 69).
Employers must withhold personal income tax and state social insurance from pay and report and remit them to the State Revenue Service (VID) on the monthly reporting cycle. Work remuneration must be disbursed at least twice a month, unless the employee and employer have agreed it shall be paid once a month, and it must be paid before the date if that date falls on a rest day or a public holiday.
Source: State Revenue Service (VID): taxes and contributions
Latvia payroll runs monthly. By law the employer must issue a written payslip on each pay disbursement, showing pay made, taxes deducted, social insurance paid, and hours worked including any overtime, night, and public holiday hours, under Labour Law Section 71. The monthly reporting to the State Revenue Service covers both the employee deductions and the employer 23.59% social charge.
Two pay-timing rules catch out new employers. First, pay is due at least twice a month unless both sides agree to monthly pay. Second, if the agreed payday falls on a weekly rest day or a public holiday, wages must be paid before that date, never after. Miss the timing and you are in breach even when the amount is right.
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Collect pay data
Gather salary, hours, overtime, and any taxable benefits for the month before the run closes.
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Apply the non-taxable minimum
Work out the worker's monthly non-taxable minimum and subtract it, along with the employee social share, to find taxable pay.
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Calculate income tax
Apply the progressive band rate to taxable pay. Most workers sit in the lower band, higher earners cross into the upper bands.
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Calculate employer contributions
Add the employer social insurance charge and the per-head business risk state fee on top of gross salary.
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Report and pay VID
File the monthly report and remit income tax and social insurance to the State Revenue Service, and pay the worker on time.
Pension, sickness and the wider social stack in Latvia payroll
There is no separate workplace pension line in Latvia. The state social insurance contribution funds pensions, sickness, unemployment, and maternity together.
The employer pays 23.59% and the employee pays 10.5%. One contribution covers the whole social stack (Law On State Social Insurance).
Latvia does not bolt a separate auto-enrolment pension on top of payroll the way some countries do. The single state social insurance contribution funds the whole social stack: pensions, sickness benefit, unemployment, parental and maternity cover. The employer pays 23.59% and the employee pays 10.5% of gross, both into that one system.
Employer-paid sick days
Sickness is where the employer cost shows up directly. The employer pays for the early days of a worker's illness before the state takes over. Statutory sick pay is at least 75% of average earnings for the second and third day of incapacity, and at least 80% for the fourth to ninth day. From the tenth day the State Social Insurance Agency pays the benefit, so the employer cost stops there for that absence.
No required 13th-month pay
Latvian law sets no 13th-month or 14th-month salary and no compulsory annual bonus. The Labour Law remuneration rules contain no such entitlement, so any annual or holiday bonus you offer is a contractual choice, not a legal duty. That keeps the annual payroll budget simpler than in many neighbouring markets.
How does Teamed handle Latvia payroll for you?
Teamed becomes your legal employer of record in Latvia for from $599 per employee per month, with zero FX mark-up in any currency.
Social insurance, personal income tax, payslips, and the full Latvia employment law stack all run on one platform.
Real HR and legal experts handle your Latvia hires, from the first offer letter through every monthly filing to the State Revenue Service. An actual person, not a chatbot or a pooled queue. There is no setup fee and no exit fee. Employer cost passes through at cost, itemised on every invoice, so you see the 23.59% social charge and the per-head state fee as separate lines, never a blended figure.
EOR payroll, contractor onboarding, and entity setup all live on one platform. A Latvia contractor who converts to payroll keeps their record. That same employee can graduate from EOR to your own Latvia entity without switching systems. Run the Employer Cost Calculator to see gross salary, the 23.59% employer social charge, and the take-home after the €550/month non-taxable minimum. EOR is the right model for a first Latvia hire, until it isn't. Start from the Latvia hiring overview.
Key sources: State Revenue Service (VID), the Law On Personal Income Tax, and the Labour Law.
Frequently asked questions
What does an employer pay in Latvia social tax in 2026?
The employer pays state social insurance at 23.59% of the employee's gross employment income under the general risk scheme. A small business risk state fee is also paid per employee each month. Together they sit on top of gross salary, so true employer cost is well above the headline pay.
What is deducted from a Latvia employee's salary?
Two deductions come off pay. State social insurance takes 10.5% of gross. Personal income tax is then charged on the taxable pay that remains after the social deduction and the monthly non-taxable minimum of €550/month.
What are the Latvia personal income tax bands for 2026?
Personal income tax is progressive with three bands. The lower band is 20%, the middle band is 23%, and the top band is 31% on the highest income. The bands are set in annual income and applied monthly through payroll, with a non-taxable minimum of €550/month reducing taxable pay.
How often must employees be paid in Latvia?
Work remuneration must be paid at least twice a month, unless the employee and employer agree it shall be paid once a month. If the payday falls on a weekly rest day or a public holiday, wages must be paid before that date. The employer must also issue a written payslip on each disbursement (Labour Law, Section 69 and Section 71).
Does Latvia require a 13th-month salary?
No. Latvian law sets no 13th-month or 14th-month salary and no compulsory annual bonus. The Labour Law remuneration rules contain no such entitlement, so any annual or holiday bonus is a contractual choice. The gross minimum wage is €780/month from 1 January 2026.
Who pays for sick leave in Latvia?
The employer pays for the early days of illness. Statutory sick pay is at least 75% of average earnings for the second and third day of incapacity, and at least 80% for the fourth to ninth day. From the tenth day the State Social Insurance Agency pays the benefit.
The Latvia payroll figure that surprises first-time hirers is the employer social charge. At 23.59 percent of gross it more than doubles the employee's own 10.5 percent share, so the cost of a Latvian hire sits well above the salary on the contract. Model the loaded cost before you agree a number, not after the first invoice lands.
Latvia payroll is salary plus an employer social charge of 23.59%, more than double the 10.5% the employee pays.
Three income tax bands run from 20% up to 31%, after a non-taxable minimum of €550/month.
See the loaded cost before you set the gross.
