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Summary
Latvia uses a progressive income tax (iedzivotaju ienakuma nodoklis, IIN) with three brackets ranging from 20% to 31%. Employees also pay mandatory state social insurance contributions (VSAOI) at 10.5% of gross salary, subject to an annual ceiling. High earners above EUR 200,000 pay an additional solidarity tax in place of the standard social contributions on income above that threshold.
How it works
Your take-home pay is your gross salary minus two main deductions:
- Personal income tax (IIN) — progressive rates across three brackets, applied after deducting the personal allowance and employee social contributions
- Social security contributions (VSAOI) — 10.5% employee share of gross salary, capped at EUR 105,300 per year
Latvia treats employee social contributions as tax-deductible: the IIN is calculated on gross salary minus the VSAOI and the personal allowance.
Income Tax Bands (2025)
Latvia’s personal income tax uses three progressive brackets:
| Annual taxable income | Marginal rate |
|---|---|
| Up to EUR 20,004 | 20% |
| EUR 20,005 — EUR 78,100 | 23% |
| Above EUR 78,100 | 31% |
The personal allowance (neapliekamais minimums) is EUR 6,120 per year (EUR 510 per month) for income up to a certain threshold. For higher earners, the allowance is progressively reduced to zero.
Taxable income for IIN purposes is calculated as: Gross salary - Employee VSAOI - Personal allowance.
Social Security Contributions (Employee Share, 2025)
| Component | Rate | Annual cap |
|---|---|---|
| State social insurance (VSAOI) — employee share | 10.50% | EUR 105,300 |
| Total employee share | 10.50% |
The employer pays an additional 23.59% on top of gross salary. The combined rate (employee + employer) is 34.09%.
Solidarity Tax
For annual income exceeding EUR 200,000, the solidarity tax of 25% replaces the standard VSAOI on income above that threshold. Of this 25%, a portion (10.5%) is allocated as the employee’s share:
- Income up to EUR 105,300: standard VSAOI applies (10.5% employee)
- Income EUR 105,300 — EUR 200,000: no employee social contributions (cap reached)
- Income above EUR 200,000: solidarity tax applies at an additional 3% (approximate net employee impact above normal IIN)
Worked Example
For a gross annual salary of EUR 25,000 (single, no dependants):
-
Employee social contributions (VSAOI):
- EUR 25,000 x 10.5% = EUR 2,625.00
-
Taxable income for IIN:
- EUR 25,000 - EUR 2,625 (VSAOI) - EUR 6,000 (approximate personal allowance) = EUR 16,375
-
Income tax (IIN):
- EUR 16,375 is entirely within the first bracket (up to EUR 20,004)
- EUR 16,375 x 20% = EUR 3,275.00
-
Total deductions:
- EUR 2,625.00 + EUR 3,275.00 = EUR 5,900.00
-
Take-home pay: EUR 25,000 - EUR 5,900.00 = ~EUR 19,100/year (~EUR 1,592/month)
Note: The personal allowance used here is approximate. The exact allowance depends on total annual income and may be adjusted through a differentiated tax-free minimum formula.
Assumptions and Limitations
- 2025 rates only — uses thresholds and rates effective for the 2025 tax year
- Employment income only — salary earners under the general VSAOI regime; does not model self-employment, capital gains, or royalties
- Simplified personal allowance — the differentiated non-taxable minimum varies by income level; this example uses an approximation
- No additional deductions — does not model dependant relief, education expenses, medical expenses, or pension contributions (III pillar) that could reduce taxable income
- Solidarity tax not shown in example — the EUR 25,000 example is well below the EUR 200,000 solidarity threshold
- Single taxpayer — does not account for dependant allowances