Personal Income Taxation in Latvia in 2026: Complete Guide for Residents and Expats
Everything you need to know about Latvian personal income taxes: progressive rates (25.5-33%), €550 monthly allowance, 34.09% social contributions, 3% additional tax on high earners, and online filing through EDS.
Tax Residency Status
Determining Tax Residency
Your tax residency status determines whether you pay tax on worldwide income or only on Latvian-source income. Latvia uses clear criteria to establish residency for tax purposes.
Registered (declared) place of residence in Latvia - automatic residency
Physical presence in Latvia for 183 days or more in any 12-month period
Latvian citizens employed abroad by the Latvian government
Day counting uses OECD Presence test - includes arrival, departure, weekends, holidays
Non-residents taxed only on Latvian-source income at same rates as residents
Worldwide vs. Territorial Taxation
Tax Residents
Worldwide Income
all income sources taxed
Non-Residents
Latvian Source Only
domestic income taxed
Tax residents of Latvia are subject to personal income tax on their worldwide income from all sources. Non-residents pay Latvian personal income tax only on income earned from Latvian sources, including employment, business activities, real estate, and other income derived in Latvia.
Personal Income Tax Rates for 2026
Progressive PIT Rates
| Income Level | Tax Rate | Application |
|---|---|---|
| Up to €105,300 annually | 25.5% | Standard rate for employment and most income types |
| Above €105,300 annually | 33% | Applied to portion exceeding €105,300 threshold |
| Above €200,000 annually | +3% surtax | Additional rate applied when filing annual return |
| Capital income (dividends, interest, capital gains) | 25.5% | Flat rate on capital income unless 0% dividend exemption applies |
| Real estate rental income | 10% | Reduced rate after allowable expense deductions |
Important: The 33% rate and 3% surtax apply at year-end when filing annual tax returns. Monthly withholding typically uses 25.5% rate.
Additional 3% Tax on High Earners
Surtax on income exceeding €200,000
Personal Allowances and Deductions
Fixed Personal Allowance (Non-Taxable Minimum)
Latvia replaced its income-differentiated allowance system with a fixed personal allowance in 2025. This non-taxable minimum is now available to all taxpayers regardless of income level, simplifying tax calculations and providing consistent relief.
Pensioners:Individuals receiving age or disability pensions are entitled to €1,000 per month (€12,000 annually) non-taxable minimum. Working pensioners can split this: €500 to pension income and €500 to employment income.
Available Tax Deductions
Dependent Allowance
€250 per month for each dependent child or family member. Available for children under 18, children aged 18-24 in full-time education, disabled adult dependents, and parents or grandparents if they live with the taxpayer. Must be declared in tax booklet submitted to employer.
Education Expenses
Deductible expenses include tuition fees for higher education (university, college) for yourself or dependents, extra-curricular activities for children (music school, sports school, language courses, clubs). Must have receipts and proof of payment from accredited educational institutions.
Medical and Health Insurance
Medical treatment expenses exceeding €600 annually are deductible, including dental care, hospital treatment, diagnostic procedures, prescription medications, and medical supplies. Health insurance premiums paid to insurance companies also qualify. Receipts required from licensed medical providers.
Charitable Donations
Donations and gifts to registered charitable organizations and Latvian political parties are deductible. Total eligible deductions for education, medical services, and donations combined may not exceed €600 per year and not more than 50% of annual taxable income.
Disability Allowances
Additional relief available for persons with disabilities: Group I and II disabilities receive enhanced allowances. Group III disabilities receive partial enhanced allowances. Politically repressed persons also qualify for additional relief. Must provide certification from medical authorities.
Combined Deduction Limit
Social Insurance Contributions (NSIC)
Mandatory Contribution Rates
Employer Contribution
23.59%
of gross salary
Employee Contribution
10.5%
withheld from salary
National Social Insurance Contributions (NSIC) are mandatory payments funding state pensions, healthcare, unemployment benefits, maternity leave, and disability support. The combined rate is 34.09%, split between employer and employee contributions.
Employer pays 23.59% on top of gross salary (not deducted from employee)
Employee pays 10.5% deducted from gross salary before PIT calculation
Total cost to employer approximately 123.59% of gross salary
NSIC contributions reduce taxable income for PIT purposes
Contributions fund pension insurance, health insurance, and social benefits
Income Cap and Solidarity Tax
NSIC contributions are capped at €105,300 annual income. For income exceeding this threshold, Solidarity Tax (ST) applies at the same rates: 23.59% employer portion and 10.5% employee portion. However, the effective ST rate is actually 25%, and employers receive a refund of the difference.
Minimum Contribution Base:Minimum NSIC must be paid from €780 monthly (2026 minimum wage). If earning less from all sources, employer must contribute based on minimum wage. Self-employed minimum is €2,340 quarterly.
Self-Employed Contributions
Self-employed individuals and sole proprietors must pay both employer and employee portions of social insurance contributions, totaling 34.09% (in practice, often calculated differently based on activity registration).
Self-employed contribute minimum 10.5% of actual monthly income if below threshold
Quarterly contributions required rather than monthly for employees
Minimum quarterly contribution base: €2,340 in 2026
Can choose to pay full 34.09% for enhanced pension benefits
Must register as performer of economic activity with VID
Capital Income and Investment Taxation
Tax Treatment of Capital Income
| Income Type | Tax Rate | Special Rules |
|---|---|---|
| Capital gains (real estate, shares, securities) | 25.5% | Held assets for 60+ months may qualify for exemptions |
| Dividends from Latvian/EU/EEA companies | 0% or 25.5% | 0% if CIT/PIT already withheld on underlying profits |
| Dividends from tax haven companies | 25.5% | No exemption available regardless of CIT payment |
| Interest income | 25.5% | From bonds, deposits, and other debt instruments |
| Cryptocurrency gains | 25.5% | Gains matched with losses from crypto; special rules apply |
| Alternative dividend regime (new 2026) | 15% CIT + 6% PIT | For companies wholly owned by individuals, optional regime |
Important: Transitional rule: Capital asset transactions initiated but not completed by Dec 31, 2024 are taxed at 20% through 2027.
Dividend Tax Exemptions
0% on Qualifying Dividends
Dividends from Latvian, EU, or EEA companies can qualify for 0% PIT if corporate income tax or personal income tax has been withheld at source. For EU/EEA companies, tax compliance is assumed by default, though authorities may request confirmation. Dividends must be from profits earned after 2017.
New Alternative Regime (2026)
Companies wholly owned by natural persons can opt for split taxation: 15% CIT calculated on gross dividend amount (before applying 0.85 coefficient) and 6% PIT withheld from the actual dividend paid to shareholder. This regime offers planning flexibility for small business owners.
Real Estate Capital Gains Exemption
Capital gains from sale of real estate in Latvia are exempt from PIT if: (1) property held for at least 60 months, (2) registered as seller's primary residence for minimum 12 months, or (3) proceeds reinvested in another Latvian property under certain conditions.
Cryptocurrency Rules
Cryptocurrency is classified as capital asset. Gains must be matched with losses from crypto transactions to determine net annual gain/loss. Non-residents: Capital gains from publicly traded crypto-assets (Jan 1, 2025 - Dec 31, 2027) are exempt from the 3% PIT surtax.
Employment Income and Withholding
Employer Withholding Obligations
Latvian employers are required to calculate, withhold, and remit both personal income tax and social insurance contributions from employee salaries on a monthly basis. This system ensures regular tax collection and reduces year-end liabilities.
Employers withhold 10.5% NSIC from gross salary first
PIT calculated on gross salary minus NSIC and personal allowance
Standard withholding rate is 25.5% during the year
33% rate applied only when filing annual return at year-end
Monthly reporting through payroll tax declaration (Form) required
Employers must submit and pay by 23rd of following month
Tax Booklet System
Employees must submit a tax booklet to their primary employer to apply the personal allowance and dependent allowances during monthly withholding. Without a submitted tax booklet, tax is withheld from the first euro with no allowances applied.
Submit tax booklet through EDS to employer by January 15
Declares personal allowance and dependent children/family members
Can only be filed with one employer at a time
Working pensioners can split allowance between pension and employment
Employer must use submitted booklet for monthly withholding calculations
Minimum Wage and Income Thresholds
2026 Income Thresholds and Minimums
| Category | Amount | Details |
|---|---|---|
| Minimum monthly wage | €780 | Increased from €740 in 2025; applies nationwide |
| Construction sector minimum | €1,050 | Higher minimum for construction service workers |
| Non-taxable minimum | €550/month | €6,600 annually; fixed allowance for all taxpayers |
| Pensioner allowance | €1,000/month | €12,000 annually; for age and disability pensions |
| Dependent allowance | €250/month | €3,000 annually per dependent child or family member |
| NSIC income cap | €105,300/year | Maximum base for social insurance contributions |
| High earner threshold | €200,000/year | Income level triggering additional 3% surtax |
Important: Minimum quarterly NSIC contribution base for self-employed is €2,340 (3 x €780 monthly minimum) in 2026.
Tax Filing and Compliance
Annual Income Tax Return
Filing Window
April 1 - July 1
for standard filers
Alternative Window
March 1 - June 1
for some taxpayers
Annual income tax returns (Declaration D) must be filed through the State Revenue Service's Electronic Declaration System (EDS). The filing deadline depends on your income level and whether you need to pay additional tax.
Standard deadline: April 1 - July 1 for taxpayers with 33% rate income
Alternative deadline: March 1 - June 1 for some taxpayers
Mandatory filing if self-employed or need to pay additional PIT
Voluntary filing available to claim refunds of overpaid taxes
EDS pre-populates data from employers and other payers
Automated refunds available for eligible taxpayers who don't file
Electronic Declaration System (EDS)
Latvia's EDS is the mandatory platform for filing annual tax returns and accessing tax documents. Starting 2026, secure electronic identification is required for residents to access EDS.
Access at https://eds.vid.gov.lv with secure e-ID from 2026
Non-residents can continue using username and password (must change every 90 days)
System pre-fills data from employers, banks, and other payers
Upload supporting documents (receipts, invoices) electronically
View tax account balance, overpayments, and liabilities
Submit correspondence and inquiries to VID through EDS
Payment Deadlines
If your annual tax return shows additional tax liability, payment deadlines depend on the amount owed and your filing deadline.
Additional tax up to €640: Due by June 23 or July 23 (based on filing deadline)
Additional tax over €640 (June 1 filers): Split into 3 installments
Installments due: June 23, July 23, and August 23
Monthly advance payments for self-employed: 23rd of following month
Automated refunds processed automatically if no filing required
Who Must File Annual Returns
Mandatory Filers
Self-employed individuals and performers of economic activity must file annual returns. Those with income from multiple sources where tax wasn't properly withheld must file. Individuals with additional tax liability exceeding amounts withheld by employers must file. Those claiming special deductions or applying for refunds must file.
Voluntary Filers
Employees whose only income is employment salary may voluntarily file to claim refunds of overpaid taxes, especially if eligible for education, medical, or donation deductions not claimed monthly. Filing allows recovery of excess withholding or application of unused personal allowance amounts.
Exempt from Filing
Employees with properly withheld tax from single employer with no additional income may not need to file. Latvia introduced automated PIT refund system (effective Jan 1, 2023) for eligible individuals who don't file returns if certain criteria are met. System automatically refunds overpayments.
Common Income Scenarios
Employee with Single Employer
Typical Tax Burden
~25.5%
PIT after allowances
Social Contributions
10.5%
employee NSIC withheld
Employer withholds 10.5% NSIC from gross salary automatically
Personal allowance of €550/month reduces taxable income (€6,600/year)
PIT withheld at 25.5% on remaining taxable income during year
Tax booklet submitted to employer ensures proper allowance application
Annual filing optional unless claiming additional deductions
Net take-home approximately 63-65% of gross salary depending on income level
Self-Employed / Sole Proprietor
Tax Rate
25.5-33%
progressive PIT rates
Social Contributions
34.09%
or 10.5% minimum
Must register as performer of economic activity with State Revenue Service
Quarterly NSIC contributions required (minimum €2,340 per quarter in 2026)
Can choose 10.5% NSIC on actual income if below minimum threshold
Operating expenses deductible when calculating taxable income
Operating losses can be carried forward 3 years to offset future profits
Must file annual income tax return - mandatory, not optional
Investment and Rental Income
Capital Income
25.5%
flat rate
Rental Income
10%
after deductions
Capital gains, dividends, and interest generally taxed at 25.5%
Dividend exemption (0% rate) available if CIT already paid on profits
Real estate rental income taxed at reduced 10% rate after expense deductions
Capital losses from cryptocurrency must be matched with crypto gains
Real estate sale exemption available if held 60+ months as primary residence
Must report all capital income on annual tax return
Pensioners with Employment
Pensioner Allowance
€1,000/month
non-taxable minimum
Split Option
€500 + €500
if working
Age and disability pensioners entitled to €1,000 monthly allowance (€12,000/year)
Working pensioners can split: €500 to pension, €500 to employment income
Must submit tax booklet to employer by January 15 to enable split
Without split, €1,000 allowance applied to pension only by default
Employment income taxed from first euro if allowance not split properly
Can claim refund through annual return if allowance not optimally applied during year
Special Situations and Rules
Additional Tax Considerations
Foreign Employment Income
Residents employed by foreign employers must calculate and pay advance income tax monthly themselves (not withheld by employer). Register with VID and make monthly payments by 23rd of following month. Annual return filing mandatory to finalize tax liability.
Double Taxation Treaties
Latvia has tax treaties with over 65 countries to prevent double taxation. Treaties may provide reduced rates on cross-border dividends, interest, and royalties. EU/EEA workers earning 75%+ of income in Latvia can claim same allowances as residents. Consult treaty text for specific country rules.
Controlled Foreign Companies (CFC)
Latvian tax residents with substantial participation (25%+ ownership, equity, or voting power) in foreign entities must report CFC income. CFC income from tax havens subject to progressive PIT rates. Complex rules apply - professional tax advice recommended for cross-border structures.
Stock Options and Equity Compensation
Stock option gains can be exempt from PIT if: (1) employment contract maintained during minimum vesting period, (2) minimum one-year holding/vesting period, (3) employer notified VID within 2 months of grant. If employee leaves before exercising, employer must pay NSIC at rate applicable when employment ended.
Royalties and Intellectual Property
Individuals receiving royalties face 25% PIT if not registered as performer of economic activity. Transitional regime in place through end of 2027. Registration as self-employed may offer more favorable treatment with expense deductions. Special rules for authors, artists, and creators.
Micro-Enterprise Tax (MBT) Alternative
2026 Updates and Changes
Increased Personal Allowance to €550
The fixed personal allowance (non-taxable minimum) increases from €510 per month in 2025 to €550 per month in 2026 (€6,600 annually). This continues the gradual increase announced in 2025 tax reform. Further increase to €570 per month planned for 2027. Pensioner allowance remains at €1,000 per month.
Minimum Wage Increase to €780
The minimum monthly wage increases from €740 to €780 starting January 1, 2026. This affects minimum NSIC contribution base for employees and self-employed (quarterly minimum becomes €2,340). Construction sector minimum wage increases to €1,050 per month for service workers.
EDS Access Requires Secure E-ID
Starting January 1, 2026, access to the State Revenue Service Electronic Declaration System (EDS) requires secure electronic identification tools for residents. Non-residents can continue using username and password but must change password every 90 days. Enhanced security measure to protect taxpayer data.
Alternative Dividend Tax Regime
New optional regime for companies wholly owned by natural persons: 15% CIT (calculated on gross before 0.85 coefficient) plus 6% PIT on actual dividend received by shareholder. Offers flexibility for small business owners to optimize dividend taxation. Companies can choose between standard and alternative regime.
3% Surtax Now in Effect
The additional 3% PIT rate on income exceeding €200,000 annually, introduced in 2025, continues in 2026. Applied when filing annual tax returns for previous year (e.g., 2026 returns for 2025 income). Includes all income: employment, capital gains, dividends, and other sources. Effective rate remains 25.5% for those paying full NSIC/ST.
Real Estate Exemption Period Extended
New rule from January 1, 2026: 60-month period to claim PIT exemption for compensation related to real estate alienated for public use. Also, support payments for revitalizing historically degraded extraction sites are now exempt from PIT. Enhances support for environmental restoration and public infrastructure projects.
Penalties and Compliance
Non-Compliance Consequences
Late Filing Penalties
Penalties apply for late submission of annual income tax returns. Standard fines range from €35 to €700 depending on delay length and taxpayer category. Repeated non-compliance results in increased penalties. Filing deadline strictly enforced - late submissions not accepted without valid justification.
Late Payment Interest
Interest charged on late or unpaid taxes at rates set by Cabinet of Ministers. Late payment interest calculated and charged twice monthly (1st and 15th). No late payment interest charged if overdue tax received by last day of month of payment due date. Compound interest accumulates on outstanding balances.
Incorrect Information
Providing incorrect information on tax returns or failing to declare all income sources can result in additional assessments, penalties, and potential criminal prosecution for serious tax evasion. VID has access to data from employers, banks, and other sources to cross-check returns. Penalties scaled based on severity.
Self-Employed Minimum Fee
Self-employed individuals registered as performers of economic activity must pay €50 minimum fee if their income for tax period is less than minimum wage or zero. This applies even if no income earned during period. Failure to pay results in additional penalties and potential deregistration.
Frequently Asked Questions
What are the personal income tax rates in Latvia for 2026?
Latvia has a progressive personal income tax system with two main rates: 25.5% on annual income up to €105,300 and 33% on income exceeding €105,300. An additional 3% surtax applies to total income exceeding €200,000 annually. Capital income (dividends, interest, capital gains) is generally taxed at a flat 25.5% rate, while rental income from real estate is taxed at 10% after deductions.
How do I become a tax resident of Latvia?
You become a Latvian tax resident if you have a registered (declared) place of residence in Latvia, or if you are physically present in Latvia for 183 days or more during any 12-month period. Latvian citizens employed abroad by the Latvian government are also considered tax residents. Tax residents are taxed on worldwide income, while non-residents pay tax only on Latvian-source income.
What is the non-taxable minimum in Latvia for 2026?
The fixed personal allowance (non-taxable minimum) is €550 per month in 2026, or €6,600 annually. This applies to all taxpayers regardless of income level. Pensioners receiving age or disability pensions are entitled to a higher allowance of €1,000 per month (€12,000 annually). Working pensioners can split this allowance: €500 to pension income and €500 to employment income.
What social contributions do employees and employers pay in Latvia?
Employees pay 10.5% National Social Insurance Contributions (NSIC) withheld from gross salary. Employers pay 23.59% NSIC on top of gross salary (not deducted from employee). The combined rate is 34.09%. NSIC contributions are capped at €105,300 annual income; income above this threshold is subject to Solidarity Tax at the same rates. These contributions fund pensions, healthcare, unemployment benefits, and other social insurance.
When must I file an annual income tax return in Latvia?
The annual income tax return filing period is typically April 1 to July 1 for most taxpayers (or March 1 to June 1 for some categories). Filing is mandatory if you are self-employed, have income from multiple sources where tax wasn't properly withheld, or owe additional tax. Employees with single employer and properly withheld tax may file voluntarily to claim refunds for education, medical, or donation expenses. Returns must be filed electronically through the EDS system.
What deductions can I claim on my Latvian tax return?
You can claim: (1) dependent allowance of €250/month per dependent, (2) education expenses for yourself or family members, (3) medical expenses exceeding €600 annually, (4) health insurance premiums, and (5) charitable donations. The total deduction for education, medical, and donations combined cannot exceed €600 per year and no more than 50% of taxable income. Family members (dependents) have a separate €600 annual limit for their education and medical expenses.
How are dividends taxed in Latvia?
Dividends are generally taxed at 25.5%. However, dividends from Latvian, EU, or EEA companies can qualify for 0% PIT if corporate income tax or personal income tax has already been withheld on the underlying profits (typically for profits earned after 2017). Dividends from tax haven companies are always taxed at 25.5%. A new alternative regime starting 2026 allows companies wholly owned by individuals to opt for 15% CIT plus 6% PIT on dividends.
What is the minimum wage in Latvia for 2026?
The minimum monthly wage is €780 in 2026 (increased from €740 in 2025). The construction sector has a higher minimum of €1,050 per month for construction service workers. The minimum wage determines the minimum base for social insurance contributions - employers must contribute based on at least the minimum wage even if employees earn less. For self-employed, the minimum quarterly NSIC base is €2,340 (3 x €780).
Do I have to use the EDS system to file my tax return?
Yes, annual income tax returns must be filed electronically through the State Revenue Service's Electronic Declaration System (EDS) at https://eds.vid.gov.lv. Starting January 1, 2026, residents need secure electronic identification to access EDS. Non-residents can continue using username and password but must change it every 90 days. The EDS system pre-fills data from employers and other payers, and allows you to upload supporting documents electronically.
What is the Solidarity Tax in Latvia?
Solidarity Tax (ST) applies to income exceeding €105,300 annually - the cap for regular NSIC contributions. ST is payable at the same rates as NSIC: 23.59% employer portion and 10.5% employee portion. However, the effective ST rate is 25%, and employers receive a refund of the difference. The ST is split between healthcare budget, PIT budget, and state pension budget. For individuals paying full NSIC and ST on all income, the effective overall tax rate remains 25.5%.
Calculate Your Personal Income Tax in Latvia
Use our comprehensive calculator to estimate your personal income tax, social contributions, and net salary. See how allowances, deductions, and progressive rates affect your take-home pay in Latvia.
Sources and Further Reading
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