How Your Tax is Calculated — Latvia
Latvian tax calculation straightforward with fixed allowances and two-rate system. Electronic systems handle most calculations automatically for employed workers.
How Your Tax is Calculated
Latvian tax calculation straightforward with fixed allowances and two-rate system. Electronic systems handle most calculations automatically for employed workers.
Calculate Gross Income
Sum all income: employment salary, self-employment profits, rental income, investment income, foreign income (if tax resident). This is total before deductions.
Apply Personal Allowance
Subtract €550/month allowance (€6,600/year) for standard taxpayers, or €1,000/month (€12,000/year) for pensioners. Plus €250/month per dependent if applicable.
Calculate Income Tax
Apply 25.5% rate to income up to €105,300 (after allowances). Apply 33% to portion above €105,300. Apply additional 3% to portion above €200,000. Sum all portions.
Calculate Social Contributions
Employee: 10.5% of gross salary (before allowances) up to €105,300, then Solidarity Tax at same rate above. Employer pays 23.59% separately (not from your salary).
Total Tax Liability
Income tax (after allowances) + Employee social contributions (10.5% of gross) = total deducted from salary. Monthly withholding by employer. Annual settlement if needed.
Example: €30,000 annual salary (single, no dependents)
Employer's total cost is ~124% of gross salary. With dependents, would save additional €3,000/year per dependent (€250×12). Pensioners would save additional €5,400/year with enhanced allowance.
Calculate Your Tax in Latvia
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Social Insurance Contributions (NSIC)
Latvia's mandatory state social insurance contributions (NSIC) fund comprehensive welfare including pensions, healthcare, unemployment, maternity/paternity benefits, and sickness insurance. Combined rate of 34.09% makes Latvia competitive compared to Western Europe while providing solid social protection.
02Personal Income Tax (PIT) 2026
Latvia's progressive PIT system reformed in 2025 with simplified two-tier structure. Fixed personal allowance of €550/month replaces complicated differentiated system. Administered by State Revenue Service (VID) through modern electronic systems.
04Capital Income & Investment Taxation
Latvia integrates capital income into regular PIT system with few exceptions. No separate capital gains regime - most investment income taxed at progressive PIT rates. Exceptions for dividends (20% flat) and certain property sales.
05Business Taxation & Microenterprises
Latvia unique in EU with 0% corporate tax on retained profits. Only pay 20% when distributing dividends. Microenterprise Tax regime (MET) offers simplified 25% flat rate for small businesses. Attractive for startups and reinvestment strategies.