As of January 1, 2025, new personal income tax (PIT) rates have come into effect in Latvia. This government decision aims to increase tax revenues and ensure a fairer distribution of tax burdens among citizens with different income levels.
- Up to €105,300 per year – the base tax rate has increased from 23% to 25.5%.
- From €105,300 to €200,000 per year – the rate is now 33%.
- Over €200,000 per year – an additional tax of 3% applies.
How will this impact citizens and businesses?
- For employees with an average income: the increase to 25.5% may result in lower net wages after tax deductions.
- For high-income individuals and entrepreneurs: the new rates may lead to higher tax burdens, prompting businesses to adjust their financial strategies.
- For foreigners working in Latvia: non-residents earning income in Latvia should take these new tax rates into account.
What’s next for Latvia’s tax policy in 2025?
The Latvian government states that these changes aim to create a more sustainable tax system and boost budget revenues. However, the business community fears that this may negatively impact the country’s investment climate.
If you operate a business in Latvia or work there, consulting tax experts is recommended to assess how these changes may affect your activities.