IIN Tax Rates 2026: 25.5% and 33% Brackets

Quick Summary

Latvia's Personal Income Tax (IIN) rates for 2026: 25.5% for the first bracket (up to EUR 105,300 annually or EUR 8,775 monthly) and 33% for the second bracket (above EUR 105,300). The second bracket is marginal - only income above the threshold is taxed at 33%, while the first EUR 105,300 always stays at 25.5%. At EUR 10,000 monthly salary, PIT would be EUR 2,642 (EUR 2,238 for first bracket + EUR 404 for second). This threshold is doubly important - above EUR 105,300, solidarity tax replaces standard VSAOI contributions. Non-taxable minimum reduces actual tax for lower incomes, but doesn't apply above EUR 5,000+ monthly. The progressive system ensures lower earners pay proportionally less, but higher earners face combined marginal rates (PIT + solidarity tax) reaching approximately 50%. This system impacts both employee net salaries and employer decisions about compensation strategies and alternative benefit structures for tax optimization.

Latvia's personal income tax in 2026 is defined by two key figures: first bracket rate, second bracket rate, and the threshold between them.

The Rates

Bracket	Annual income	Monthly income	PIT rate
First	EUR 0 – 105,300	EUR 0 – 8,775	25.5%
Second	Above EUR 105,300	Above EUR 8,775	33%

Important: the second bracket is marginal, meaning only income above EUR 105,300 is taxed at 33%. The first EUR 105,300 is always taxed at 25.5%.

Frequently Asked Questions

What are the practical PIT calculations at different salary levels? At EUR 2,000 monthly salary (EUR 24,000 annually), all income falls in the first bracket at 25.5% rate, creating EUR 510 monthly PIT before non-taxable minimum application. If the employee can utilize the non-taxable minimum, actual PIT will be significantly lower - approximately EUR 255 monthly. At EUR 5,000 monthly salary (EUR 60,000 annually), only the first bracket applies with EUR 1,275 monthly PIT, but non-taxable minimum no longer applies. At EUR 10,000 monthly salary (EUR 120,000 annually), the first EUR 8,775 is taxed at 25.5% (EUR 2,238) and remaining EUR 1,225 at 33% (EUR 404), creating total monthly PIT of EUR 2,642. Moving to the second bracket only adds EUR 92 monthly compared to applying 25.5% to all income. It's important to understand that actual tax burden will be higher when considering VSAOI or solidarity tax, which at higher incomes creates combined marginal rates around 50%.

How do PIT thresholds relate to solidarity tax and total tax burden? The EUR 105,300 threshold is doubly significant - above this amount, both higher PIT rate of 33% and solidarity tax of 25% (replacing standard VSAOI) begin applying. Solidarity tax collects 25% total (employer and employee portions combined), compared to standard VSAOI of 34.09%. The actual combined marginal rate above EUR 105,300 is approximately 50.75% (33% PIT + 25% solidarity tax, considering calculation specifics). This means from each additional euro above the threshold, an employee nets only approximately EUR 0.49. This system creates strong progressivity for higher incomes but also motivates seeking tax optimization strategies, such as using dividends as alternative compensation with appropriate company structure and planning. Many entrepreneurs with high incomes choose to combine minimal salary with dividend distributions to optimize total tax burden. Details about solidarity tax are available in our solidarity tax article.

Can PIT rates change during 2026 and how might inflation affect them? No, PIT rates and thresholds are typically not changed mid-year, providing employers and employees predictability in salary calculations throughout the calendar year. The 2026 rates - 25.5% in the first bracket up to EUR 105,300 and 33% in the second bracket - were set in the budget law for the entire year. However, inflation can affect non-taxable minimum amounts and previous year income indexation, which indirectly changes actual tax burden. If inflation were extremely high, the government could theoretically submit law amendments to Parliament, but this happens very rarely and only in exceptional circumstances. Businesses and employees can safely plan budgets based on rates and thresholds in effect at year start. Tax authorities publish all changes on official websites, and any amendments to tax laws take effect no sooner than the month following publication, allowing time for adjustment.

How is PIT calculated when salary changes during the year - does the EUR 8,775 threshold apply to each month? EUR 8,775 is the monthly equivalent of the annual EUR 105,300 threshold, but actual PIT calculation works cumulatively from year start, not monthly separately. This means if an employee had EUR 5,000 salary in January but increased to EUR 12,000 in July, the second bracket rate of 33% will only start applying when cumulative income from year start exceeds EUR 105,300. Practical calculations are performed by payroll software or accountants who track annual cumulative income and automatically apply correct rates. If year-end cumulative income is EUR 120,000, then the first EUR 105,300 will be taxed at 25.5% and remaining EUR 14,700 at 33%. The monthly threshold EUR 8,775 is only a reference point - actual calculation depends on annual cumulative amount. Therefore, employees with variable salaries may initially pay less PIT, but when reaching the threshold later in the year, rates automatically increase.

What are PIT rates for different income types and how does non-taxable minimum affect total tax amounts? PIT rates vary significantly by income type - the 25.5%/33% progressive system with EUR 105,300 threshold applies only to active income (salaries, self-employment income). Dividends have different rates: 0% in standard CIT regime (since company paid CIT) and 6% in alternative CIT regime. Interest income and capital gains apply fixed 25.5% rate, rental income has preferential 10% rate. Non-taxable minimum for 2026 is EUR 500 monthly for those with annual income not exceeding EUR 25,200, but decreases proportionally and disappears at EUR 78,000 annual income. In practice, an employee with EUR 1,500 monthly salary receives full EUR 500 non-taxable minimum (actual PIT EUR 255 monthly), but with EUR 6,500+ monthly receives no non-taxable minimum. This system creates additional progressivity within the first PIT bracket, as effective tax rate gradually increases from approximately 10% for low salaries to full 25.5% for medium and high salaries. Non-taxable minimum calculation is complex and depends on specific annual income forecasts, so payroll software calculates it automatically, considering both annual cumulative income and forecasts for remaining months.

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