Latvia made several important tax adjustments in 2025 that directly affect employees, freelancers, self-employed people, and investors.
While some changes are quite technical, a few will noticeably influence how expats structure their work, investments, and businesses in the country.
Here’s a clear, practical breakdown of the key updates.
Latvia Switches to a Two-Rate Income Tax System
The biggest shift is the simplification of personal income tax (PIT). From 2025, Latvia uses just two main rates:
- 25.5% on annual income up to €105,300
- 33% on income above €105,300
The old three-bracket system is gone. For the majority of expats and freelancers in Latvia, the 25.5% rate will be the one that matters most. The 33% rate mainly hits higher earners.
New 3% Surcharge on Very High Incomes
There’s also a new additional 3% tax on annual taxable income above €200,000. This applies to most types of income — salary, self-employment earnings, capital gains, dividends, and other capital income (with some exemptions).
Most expats won’t hit this threshold, but entrepreneurs, serious investors, and well-paid remote workers should keep it in mind when structuring their total income.
Capital Gains Tax Rises to 25.5%
One of the most impactful changes for investors: the capital gains tax rate increased from 20% to 25.5%.
This now covers gains from property sales, shares, company equity, crypto, and other capital assets.
There is a transitional period — certain transactions started before the end of 2024 can still use the old 20% rate in some cases, up until the end of 2027.
Minimum Wage and Non-Taxable Minimum Increase
The national minimum monthly salary rose to €740.
This matters not just for employees, but also for self-employed individuals because it affects minimum social security contributions. The fixed non-taxable minimum is now €510 per month.
Small Changes for Small Businesses
The minimum wage increase also pushed up the monthly turnover threshold linked to management board taxation — from €3,500 to €3,700. This is relevant for small Latvian companies, micro-businesses, and freelancers operating through an SIA.
Author Royalties – No Major Change
The existing withholding tax system for author royalties remains unchanged. Latvian payers (publishers, media companies, etc.) continue to deduct tax at source. This affects writers, photographers, journalists, and content creators working with local clients.
What This Means for Expats and Freelancers
- Investors take the biggest hit — capital gains are now taxed noticeably higher.
- Income structuring matters more — if you mix salary, freelance income, dividends, and investments, you’ll want to review how everything is organized.
- Choice of company structure becomes more important — the difference between self-employed status, micro-enterprise, and a full SIA is more relevant than before.
- Slightly higher baseline costs for self-employed people due to the increased minimum wage and social contributions.
Final Thoughts
Latvia’s 2025 tax changes don’t overhaul the entire system, but they do raise the tax burden in several key areas — particularly for investors and higher earners.
For expats and digital nomads, Latvia remains relatively straightforward, but thoughtful tax planning is now even more important if you plan to stay long-term.
Understanding how these rules apply to your specific situation (residency, income mix, company structure) is the smartest move you can make this year.