Company formation and accounting in Latvia
Last updated: 2017-12-25
State social insurance mandatory contributions - mandatory payments (established by law) to the state budget. And these payments give the insured person the right in certain cases to receive certain services from the state (government).

Certain private (natural) persons may voluntarily pay social insurance contributions.

Social insurance types and services.

The State (government) organizes a set of measures to insure certain individuals from the risk of losing labor income because of:
  • illness,
  • maternity,
  • unemployment,
  • old age,
  • an accident at work or occupational disease,
  • childcare.

Types of social insurance:
  • state pension insurance,
  • unemployment insurance,
  • insurance against accidents at work or occupational diseases,
  • disability insurance,
  • insurance in case of illness and maternity,
  • insurance of parents.

What persons are socially insured?

Socially insured person is an employee ("recipient of work"), reached the age of 15 years.
Also socially insured are self-employed persons and persons that voluntarily joined the social insurance, if these persons actually pay social insurance contributions.

In the meaning of legislation an employee / "recipient of work" is (not full list, just most common types of persons):
  • A natural person who on the basis of an employment contract, for the agreed salary, performs certain work under the supervision of the employer.
  • A member of the board of directors and a member of the council of commercial company, procurator (authorized person) and also another person who holds position that givers rights for remuneration if remuneration is actually defined.
  • A person who has concluded undertakings (contractor), sharecropping or transportation contract and has not registered as a taxpayer from economic activities and also in some other cases (if relationships between parties actually are employment relationships).
  • Authorized person of a foreign merchant, if the authorized person are not in employment relationships with the merchant and represents the merchant in activities, related with a branch office of the foreign merchant.
  • A person who, in the territory of the Republic of Latvia, works for a foreign taxpayer if the foreign taxpayer in Latvia has permanent representation (in the meaning of the law "On tax and duties").
  • A person who works for a foreign taxpayer if the foreign taxpayer rents the person (rent of personnel/staff) to Latvian taxpayer.
  • A person who works for a payer of the micro-enterprise tax, if the payer of the micro-enterprise tax provides labour force ensuring services.
  • A member of the board of directors of the limited liability company or the joint stock company if turnover of a company increases certain limit (1900 euro for Year 2017) and during particular month the company has no employee with salary in amount of at least the minimum salary (380 euro for Year 2017).

A self-employed is a person who receives income as:
  • The person doing the individual work.
  • A person who permanently resides in Latvia and who receives a royalty, with the exception of the heir of copyright or other legal successor of copyright.
  • A sworn notary, lawyer, auditor, court officer.
  • A practicing doctor, pharmacist, veterinary surgeon, optometrist.
  • Another individual who permanently resides in Latvia and who is registered as doing economic activities or whose work is paid from from funds of foreign technical assistance or loans from international financial institutions.
  • In certain cases an owner of an agriculture (fishing) farm.
  • A sole trader.

Who must pay social insurance contributions?

An employer must pay for employees (part of amount an employer withholds from salaries of employees).
A self-employed person independently (by himself/herself) must pay the contributions.
An employee ("recipient of work") that works for employer - foreigner in general also independently (by himself/herself) must pay the contributions.

How much to pay?

An employer (Latvian resident) pays 34.09% (general rate for Year, 2017) from calculated salary (for Year, 2018 general rate is 35.09%).
An employer withholds 10,50% (general rate for Year, 2017) from salaries of employees (during Year, 2018 employer withholds 11% from employee salary). Minimum salary for full time job for Year, 2017 is 380 euro per month (for Year, 2018, - 430 euro per month).

An employee (Latvian resident) who works for foreign employer also, for Year, 2017 pays 34.09% (general rate) from received remuneration. For Year, 2018 general rate is 35.09%.

A self-employed person in general must pay only if income less expenses per month reaches certain amount (380 euro and more for Year, 2017; 430 euro and more for Year, 2018).
If self-employed person must pay the state social insurance mandatory contributions, then taxable amount per month for Year, 2017 must be at least 380 euro and general rate during Year, 2017 is 31,13%. For Year, 2018 minimum taxable amount must be 430 euro and general rate is 32.15%.

When you have to pay?

The employer must pay each month before the date that is specified in a special letter received from the State Revenue Service.

A self-employed person and an employee, working for an employer - foreigner must pay every 3 months (January, April, July, October) until 15th date of the relevant month.

A person who has voluntarily joined the social insurance, pays contributions every month until the last day of a month.

Minimum object of the state social insurance mandatory contributions.

If company's monthly net turnover does not increase 5 minimum monthly salaries (for Year 2017, - 380 euro * 5 = 1900; for Year 2018, - 430 euro * 5 = 2150), then minimum object, taxable with social insurance contributions, is actual calculated salary.

If company's net turnover per month is at least 5 minimum monthly salaries, then minimum object is the minimum salary.

Minimum object for self employed and for persons, that voluntarily joined to the social insurance, for Year, 2017 is 4560 euro per year. For Year, 2018, - 5160 euro per year.

Maksimum object of the state social insurance mandatory contributions and the solidarity tax.

Until 1st January, 2016 there was no obligation to pay social insurance payments if salary increased certain amount. From 1st January, 2016 the Solidarity tax law is in force. According to the law, if salary or profit of a self-employed increases certain limit (for 2017, the limit is 52 400 euro per year; for Year, 2018 the limit is 55 000 euro per year), then there is obligation to pay the solidarity tax. And rate of the solidarity tax is the same as for social insurance payments.

Tax reports.

Reports must submit to the State revenue service.

An employer each month must submit report about employees. In the report must write information about employees, calculated salary and social insurance payments, and other information. The state revenue service informs an employer about deadline for submission of the report.

A self employed person must submit a report only if a self employed person must pay social insurance payments. The report need to submit once per 3 months, until 15th date of corresponding month.

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