IIN and VSAOI are the two payroll taxes deducted from Latvian wages in 2026: VSAOI social contributions of 10.5% come off gross first, then the tax-free allowance is subtracted, and 25.5% income tax applies to what remains.
IIN is iedzīvotāju ienākuma nodoklis, the personal income tax. On wages it is withheld by the employer every month at 25.5% (VID, verified 13 August 2026).
VSAOI is valsts sociālās apdrošināšanas obligātās iemaksas, the mandatory state social insurance contributions. Both sides pay: 10.5% is withheld from the employee's gross pay and 23.59% is paid by the employer on top of gross (VID, verified 13 August 2026). For an employee of state pension age the rates are lower, 9.25% and 20.77%.
Only two lines reduce take-home pay: VSAOI at 10.5% and IIN at 25.5%. The employer's 23.59% is not a deduction from the wage; it is an employer cost above the gross figure.
The common mistake is to take 25.5% straight off gross. The sequence is different. VSAOI of 10.5% comes off gross first. Then the tax-free allowance of €550 per month and €250 per month for each dependant are subtracted. IIN of 25.5% applies only to what is left (VID, verified 13 August 2026).
Worked example: gross €1,750 per month, no dependants, tax book filed with the employer, employee below state pension age. VSAOI at 10.5% = €183.75. Taxable income: 1,750 - 183.75 - 550 = €1,016.25. IIN at 25.5% = €259.14. Net pay: 1,750 - 183.75 - 259.14 = €1,307.11 per month.
If the tax book has not been filed with the employer, neither the allowance nor dependant relief is applied in the monthly calculation, and 25.5% is charged on the whole remainder after VSAOI. The unapplied allowance can be recovered through the annual income declaration.
For a pensioner the allowance is €1,000 per month (VID, verified 13 August 2026) and it takes the place of the €550 figure at the same step.
In the monthly payroll calculation the IIN rate is always 25.5%. The progressive 33% rate applies to the part of annual income above €105,300 a year and is settled in the annual income declaration, never withheld monthly (VID, verified 13 August 2026). A further 3% solidarity rate applies to annual income above €200,000.
VSAOI contributions have an annual ceiling of €105,300. No mandatory social contributions are charged on the part of annual income above that amount, although income tax still is (VID, verified 13 August 2026).
That is why, at higher incomes, the monthly figure and the annual declaration do not match. This page and the calculators compute figures from the rates VID publishes; they are not tax advice.
IIN is iedzīvotāju ienākuma nodoklis, Latvia's personal income tax, withheld from wages and other income. In 2026 the employer withholds 25.5% each month, and that rate applies not to gross pay but to what is left after 10.5% social contributions and the tax-free allowance have been subtracted. Source: VID, verified 13 August 2026.
VSAOI is valsts sociālās apdrošināšanas obligātās iemaksas, Latvia's mandatory state social insurance contributions. In 2026, 10.5% is withheld from the employee's gross pay and the employer pays 23.59% on top of gross; at state pension age the rates are 9.25% and 20.77%. These contributions build entitlement to a pension and social insurance cover. Source: VID, verified 13 August 2026.
No. In Latvia in 2026 the 25.5% income tax is charged on taxable income, not on gross pay. VSAOI of 10.5% is deducted from gross first, then the tax-free allowance of €550 per month and €250 per dependant, and only the remainder is taxed at 25.5%. Applying 25.5% directly to gross overstates the tax. Source: VID, verified 13 August 2026.
Example for 2026: gross €1,750 per month, no dependants, tax book filed, employee below state pension age. VSAOI at 10.5% = €183.75. Taxable income: 1,750 - 183.75 - 550 = €1,016.25. IIN at 25.5% = €259.14. Net pay: €1,307.11 per month. Rate source: VID, verified 13 August 2026.
In 2026 the 33% rate applies to the part of annual income above €105,300 a year. It is never withheld from a monthly wage — the employer withholds 25.5% each month — and the difference is settled in the annual income declaration. Annual income above €200,000 carries a further 3% solidarity rate. Source: VID, verified 13 August 2026.
The annual VSAOI ceiling in 2026 is €105,300. No mandatory social contributions are charged on the part of annual income above that amount, although income tax still is. In practice, once the ceiling is reached during the year the VSAOI deduction stops and monthly net income rises. Source: VID, verified 13 August 2026.