Latvia Personal Income Tax Guide 2026

Overview — Tax Administration (VID)

The Valsts ieņēmumu dienests (VID) — the State Revenue Service — administers all direct taxes in Latvia. Every taxpayer receives a personal identification number (personas kods) that serves as the tax identification number. Latvia operates a self-assessment system where individuals file annual returns and VID assesses the tax due. The tax year follows the calendar year (1 January to 31 December). Annual tax returns must be filed by 1 June of the following year. VID has modernised its digital services through the Electronic Declaration System (EDS) portal.

Latvia tax residents are taxed on worldwide income. Non-residents are taxed only on Latvia-source income. Tax residency is determined by physical presence (183+ days) or having the primary residence in Latvia.

Personal Income Tax Rates — Progressive 20–31%

Latvia applies a progressive two-bracket rate scale for 2026:

• Up to EUR 78,100: 20%
• Above EUR 78,100: 31%

The EUR 78,100 threshold is indexed annually. Income below approximately EUR 500 per month may be partially or fully exempt through the differentiated non-taxable minimum (see below). The progressive system applies to employment income, business income, rental income, and most other types of taxable income.

Differentiated Non-Taxable Minimum

Latvia's differentiated non-taxable minimum (DNTM) replaces the flat personal allowance. The allowance varies based on annual gross income:

• Annual income up to EUR 6,000: Non-taxable minimum of EUR 6,000 per year (EUR 500 per month)
• Annual income EUR 6,001 to EUR 21,600: Non-taxable minimum is gradually reduced using a formula: EUR 6,000 − (income − 6,000) × 0.38462
• Annual income above EUR 21,600: Non-taxable minimum of EUR 0

The DNTM is automatically applied by employers through the payroll system. Taxpayers with multiple income sources may need to adjust their declared allowances in the EDS portal. Additional non-taxable amounts apply for dependent children (EUR 250 per child per month in 2026).

Tax Deductions

Latvia offers several deductions from taxable income:

• Social security contributions: Fully deductible (employee share of social contributions ~10.5%)
• Mortgage interest: Deductible for housing loans (limited to EUR 2,000 per year per person for the first 3 years)
• Pension contributions: Contributions to private pension funds (third pillar) are deductible up to 10% of gross income (maximum EUR 4,000 per year)
• Life insurance premiums: Deductible up to EUR 600 per year per person
• Education expenses: Tuition fees for vocational and higher education (for the taxpayer and dependents)
• Medical expenses: Deductible for medical and dental expenses (limited to EUR 600 per year)
• Charitable donations: Deductible up to 20% of taxable income

Tax Credits

• Dependent child credit: EUR 250 per month per child (applied through the non-taxable minimum mechanism)
• Disabled person credit: Increased non-taxable minimum for persons with disabilities (Group I: EUR 154 per month, Group II/III: varies)
• Political donations credit: 50% of donations to political parties (up to EUR 600 per year)
• Patent fee credit: For micro-business patent holders

Income Subject to IIT

• Employment income: Salaries, wages, bonuses, benefits in kind, and all other remuneration from employment
• Self-employment income: Business profits from sole proprietorships and professional activities
• Rental income: Income from renting or leasing property (with deduction options)
• Capital gains: Gains from the sale of shares, real estate, and other assets (generally 20%, with exemptions)
• Investment income: Dividends, interest, and other investment earnings (subject to separate rates or included in IIT)
• Pension income: State and private pensions are taxable as ordinary income

Filing and Payment

Individual taxpayers must file an annual income tax return by 1 June of the following tax year. Filing is mandatory for all taxpayers whose income exceeds the non-taxable minimum. The return is filed electronically via the VID Electronic Declaration System (EDS). Employees generally have tax withheld at source by their employer through the monthly payroll. Self-employed individuals and those with significant non-employment income must pay quarterly advance payments (prognozētie maksājumi). Overpaid tax is refunded by VID within 90 days of filing.

FAQs

What is the effective top marginal rate in Latvia?

The top marginal rate is 31% for income exceeding EUR 78,100. Including social contributions (employee share ~10.5%), the combined marginal burden on employment income can reach approximately 41.5% at the top bracket.

How does the differentiated non-taxable minimum work for multiple jobs?

If you have multiple employers, each may apply the standard DNTM unless you adjust your allowance through the EDS portal. You should reconcile the total allowance in your annual return to avoid underpayment.

Do non-residents pay Latvia income tax?

Non-residents are taxed on Latvia-source income only. Employment income for work performed in Latvia is taxable at 20–31%. Non-residents may be eligible for treaty relief under Latvia's extensive DTT network (60+ treaties).

Disclaimer

This guide provides general information about Latvia personal income tax (IIT) for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Latvian tax advisor (nodokļu konsultants) or VID directly for advice specific to your situation. InvestmentKit does not provide tax advice.