Government supports changes to labor taxes

RIGA - The government today supported amendments to labor taxes, which stipulate higher personal income tax rate, minimum wage and non-taxable minimum, to be compensated by higher excise and other taxes.

According to the Finance Ministry, the tax changes provide for increasing income for around 95 percent the working population, or all those whose gross monthly wage is up to EUR 4,000, with the steepest increase for employees earning up to EUR 2,500 per month.

In 2025, the minimum wage is set at EUR 740, in 2026 at EUR 780, in 2027 at EUR 820 and in 2028 at EUR 860.

There are also plans to simplify the tax-free minimum, setting it at EUR 510 in 2025, EUR 550 in 2026 and EUR 570 in 2027. At the same time, a non-taxable minimum of EUR 1,000 is foreseen for pensioners from next year.

The agreement also provides for the introduction of two rates of personal income tax - a 25.5 percent rate on annual earnings of up to EUR 105,300, or EUR 8,775 per month, and a 33 percent rate on income above EUR 8,775 per month.

There will be an additional income tax rate of 3 percent on earnings above EUR 200,000 per year.

As a compensatory mechanism, a one percentage point transfer of contributions from the second tier to the first tier of pensions is foreseen.

In order to achieve the EU's climate neutrality objectives, excise taxes on fuel and natural gas will be raised to EUR 10 per ton of CO2 in 2025 and EUR 20 per ton of CO2 in 2026.

Excise tax on soft drinks with sugar content of up to eight grams per 100 milliliters will increase from EUR 7.4 per 100 liters to EUR 11 per 100 liters from 2025.

From 2027, in order to harmonize excise tax rates with the other two Baltic countries, excise tax on alcoholic beverages, including beer, tobacco products and products similar in purpose, such as chewing tobacco, tobacco leaf, e-liquid and tobacco substitutes, will also be increased.

All vehicle taxes will be raised by an average of 10 percent from 2025.

The tax on lotteries will be increased to 15 percent from 2025.

Value added tax on fresh fruit, berries and vegetables specific to Latvia will continue to be 12 percent.