Taxation and Social Security

Working in Europe | Taxation/salaries | Latvia

Mandatory State Social Insurance and Contributions is a payment, which gives the right to a socially insured person to receive social insurance services:

  • state pension insurance;
  • social insurance in case of unemployment;
  • social insurance in respect of accidents at work and occupational diseases;
  • invalidity insurance;
  • maternity and sickness insurance;
  • parent’s insurance.

The object of mandatory contributions of an employer and employee shall be all calculated employment income from which personal income tax must be deducted. The mandatory contribution rate shell be 35.09 % from which an employer pays 24.09% and employee pay 11%. Employees make statutory contributions through employers: employers shall deduct the contributions that employees must pay and transfer these amounts to a special budget account. From January 1, 2018 the mandatory contribution rate for author fees (royalty) should be 5%.

It is important to emphasize the application of the regulation No883/2004 of the European parliament and of the council of 29 April 2004 on the coordination of social security systems. There are cases where an employer has the need to temporarily (for a period of up to two years) send his employee to a specific job in another Member State. If the employee has been sent to work to another Member State for a period less than two years, the employee may continue to pay social security contributions in his own country. If an employee is employed in two or more Member States, the social security contributions will be paid in the Member State in which employee has closer links. In both situations, mentioned above, it is necessary to receive certificate A1 according to the Regulation.

The application of social security schemes (including pensions) to persons and their family members moving within the EU, European Economic Area and Switzerland is realized according to the principle of equal attitude and taking into account the requirements of EU directives, including the principles of aggregation of insurance and export of benefits.

The bilateral agreements in the sphere of social security (including pensions), up to the present moment, are concluded between Latvia and the United States (only regarding pensions), Canada and the Ukraine. Regarding the 3rd country persons from other countries and their family members, the legislation of Latvia will be applied concerning the social security.

 

 

 

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