Solidarity Tax: Who Pays 25% and When

Above EUR 105,300 in annual income (EUR 8,775/month), Latvia's tax system shifts. Standard social contributions (VSAOI) stop. The solidarity tax starts. Same rate — 25% combined — but the money goes to different places.

Most employees never reach this threshold. For those who do, the mechanics matter.

How It Works

For income up to EUR 105,300/year, standard VSAOI applies: 23.59% employer + 10.50% employee = 34.09% combined. This funds pensions, sick leave, unemployment insurance, and other social benefits.

For income above EUR 105,300, the solidarity tax replaces VSAOI at a combined rate of 25%. The split mirrors VSAOI proportions, but a portion is redirected to the state budget rather than social insurance funds.

Practical example: An employee earns EUR 12,000/month (EUR 144,000/year).

First EUR 8,775/month: standard VSAOI applies (34.09% combined)
Remaining EUR 3,225/month: solidarity tax applies (25% combined)
The employee portion of the solidarity tax is approximately 10.50%
The employer portion is approximately 14.50%

The solidarity tax is lower than VSAOI (25% vs. 34.09%), so crossing the threshold actually reduces the marginal social contribution rate. However, solidarity tax contributions do not build additional pension or social benefit rights — they are essentially a surcharge on high income.

Who Is Affected?

In 2026, the EUR 105,300 threshold corresponds to a monthly gross salary of approximately EUR 8,775. This captures:

Senior executives and C-suite employees
High-earning professionals (lawyers, doctors in private practice, IT specialists)
Self-employed individuals with significant income
Board members of major companies

For context, the average gross salary in Latvia in 2025 was approximately EUR 1,800/month. The solidarity tax threshold is nearly five times the average — so this affects a small but economically significant group.

The Double Threshold Effect

EUR 105,300 is where two things happen simultaneously:

PIT rate jumps from 25.5% to 33% on the marginal income
VSAOI is replaced by the solidarity tax

The combined effect: crossing EUR 105,300 changes the total marginal tax profile, but not as dramatically as it might seem. The higher PIT rate (33% vs. 25.5%) increases the tax by 7.5 percentage points, but the lower solidarity tax rate (25% vs. 34.09%) decreases the social contribution by 9.09 percentage points.

Net effect on total marginal burden: roughly similar. The composition changes — more goes to PIT, less to social contributions — but the total percentage is comparable.

For Employers

The key impact is payroll processing. When an employee's cumulative gross salary exceeds EUR 105,300 in the calendar year, the employer must switch from VSAOI to solidarity tax calculations for the excess. This typically happens mid-year for high earners and requires payroll system adjustments.

If you employ people earning above this threshold, ensure your payroll software handles the transition correctly. The switch point varies by employee depending on their salary — a EUR 10,000/month employee hits it in November; a EUR 15,000/month employee hits it in August.

Managing High-Income Tax Obligations?

CORVUS Accounting & Tax handles payroll and tax planning for high-earning employees and business owners, including solidarity tax calculations and optimization strategies.

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