Payroll and HR in Latvia

Personal Income Tax (PIT)

The Latvian government adopted a progressive tax scheme in 2018. Those who earn €20,004 or less are subjected to 20% tax, those earning between €20,005 and €62,800 must pay 23%, and anyone earning more than €62,800 are subjected to 31.4% tax. These rates apply to all residents of Latvia, that is; those who have declared Latvia as their country of residence, those living in Latvia for a period of 183 days or more in one year, and Latvian citizens who are employed abroad by an employer that is registered in the Republic of Latvia.

Social security contributions are payable by both the employee and the employer. The rate for the employee is either 11% or 9.56% if they are eligible for retirement, and for the employer, it is 24.09% or 21.31% if the employee is eligible for retirement.

Corporate Income Tax (CIT)

As of 2018, a company’s income is not considered taxable until it is distributed, that is; kept by the company. At this stage the income is subjected to a CIT of 20%, however, there are some additional expenses which are also subjected to tax at a rate of 25%. These include dividends, loans issued to related parties, interest payments and bad debts to be written off.

These CIT rates apply to both Latvian-resident companies and foreign companies that have a permanent establishment in Latvia.

What are the regular working hours in Latvia?

Normal working hours in Latvia are 40 hours per week across five days, working out to eight hour days. Business hours are usually between 8.30am and 5pm, however many employees work late into the evening – including on weekends. Office hours can vary, and Fridays are generally shorter – ending at 4pm or earlier.

Shops in the bigger cities are usually open between 10am and 7pm, and banks are usually open 10am-2pm and 3pm-5pm. Banks are closed on weekends.

Vacation, maternity and sickness

Employees in Latvia are entitled to four weeks of paid annual leave, plus there are 13 public holidays on which employees are not expected to work in ordinary circumstances.

In Latvia, expectant mothers are entitled to a minimum of 56 and maximum of 70 days of paid leave prior to the birth of their child, and an additional 56-70 days of paid leave after the birth. The amount payable is 80% of the average insurance contribution wage. In addition to maternity leave, mothers in Latvia can share another 18 months of partially paid, parental leave.

Employers must pay their employees for up to ten days of sick leave. This is in the amount of 75% of their salary for days two and three, and 80% of their salary for days four to ten. From the 11^th day, the employee must provide a medical certificate in order to apply for social support in the form of sick pay, which will be in the amount of 80% of their salary from day 11 and up to 26 weeks.

Termination

Employment can be terminated by either party in Latvia, as long as appropriate notice is given. This is between ten and 30 days. Employers can terminate an employee’s contract with immediate effect if there has been unlawful activity. Employees should be paid a severance pay according to their length of service; this will be between one and four month’s salary.