Contributions

Mandatory social insurance contributions are a statutory mandatory payment to a special budget account, entitling an insured person to receive statutory social insurance services.

The rate of the state social insurance mandatory contributions (SSIMCs), if the employee is insured for all types of social insurance, is 35,09%, including 24,09% paid by the employer and 11% paid by the employee. 1% of the total rate of mandatory contributions is transferred for the financing of health care services.

Health insurance is applicable to all employees and self-employed persons who have actually made mandatory contributions, incl. for health insurance, except employees of micro-enterprises (who are paying the micro-enterprise tax/for whom the micro-enterprise tax is paid), patent fee payers (who are paying the patent fee) and seasonal agricultural workers (who are paying the agricultural workers’ income tax).

Minimum and maximum amount of the object of contributions in 2019:

  • The maximum amount is 62 800 euro a year;

The object of mandatory contributions exceeding the maximum amount of the object of mandatory contributions is an object of solidarity tax, and mandatory contributions made of this object are assigned to the solidarity tax.

Mandatory contributions of the statutory social insurance have to be made also from income exceeding the maximum threshold of the object of mandatory contributions, i.e., also from the sum exceeding 62 800 euro.

Solidarity tax is administered by the State Revenue Service, while the State Social Insurance Agency ensures registration and transfer of the calculated and paid tax in the national core budget.

  • The minimum annual amount for self-employer and voluntarily insured persons is twelve times the amount of minimum monthly wage – 5160 euro a year (12 x 430 euro);
  • The minimum amount of the object of voluntary contributions is not set for the employees of micro-enterprises, who have joined the state social insurance voluntarily. Contributions are to be made from freely selected income that does not exceed 430 euro a month;
  • The minimum amount of the object of voluntary contributions is not set for professional sportsmen as well.

The object of mandatory contributions:

  • for employees, with the exception of employees of micro-enterprises – all the income from employment, from which the individual income tax is withheld, without deducting the non-taxable minimum, tax incentives and deductible expenses;
  • for professional sportsmen – two minimum monthly salaries set by the Cabinet of Ministers. If the salary of a professional sportsman is smaller than two monthly salaries, the employer of the sportsman is obliged to cover the difference in state social insurance contributions from his own funds;
  • for self-employed persons – freely chosen income that is not less than the amount of the minimum monthly wage;
  • for persons, who receive consideration for performing foster family’s duties (from 01.01.2018 subject to pension, unemployment and disability insurance) –171 euro;
  • for a person carrying out economic activity and paying a licence fee, the object of mandatory contribution is calculated by taking into account the appropriate mandatory contribution rate and the fact that 67% of the amount of license fee is the mandatory contributions made;
  • for an employee of a micro-enterprise, the object of mandatory contribution is calculated according to the calculated amount of mandatory contributions (80% of the amount of micro-enterprise tax) in proportion to the number of employees in each month and the actual income of employees, applying the appropriate mandatory contribution rate;
  • for employees paying the income tax of seasonal farm workers, the object of mandatory contribution is calculated in proportion to the payment to a special budget account, the employee’s earned income, applying the appropriate mandatory contribution rate;
  • for a person taking care of a child up to 1,5 years old and receiving the parents’ benefit or allowance for child care – 171 euro;
  • for a person receiving the remuneration for the care of an adopted child – 171 euro;
  • for a person receiving the disabled child care benefit – 71,14 euro;
  • for a person, who has been a resident of the particular country as the spouse of a soldier fulfilling official duties, except where the soldier is taking part in an international operation, military training, war games or is on mission – 71,14 euro;
  • for a person, whose spouse fulfils the diplomatic and consular duties abroad and who is staying in the particular foreign country as the spouse of a person fulfilling the diplomatic and consular duties – 71,14 euro;
  • for an unemployed disabled person – 50% of the previous year’s average wage subject to insurance contributions;
  • for an unemployed disabled person in connection with an accident at work or occupational disease – remuneration for the loss of ability to work;
  • for a person receiving the unemployment benefit – the unemployment benefit;
  • for a person receiving the sickness, maternity or paternity benefit –  the sickness, maternity or paternity benefit;
  • for a person engaged in paid temporary community work – 71,14 euro.

The arrangements for making mandatory contributions by self-employed persons, payers and receivers of the author’s fees

For self-employed persons whose monthly income is below the amount of the minimum salary
– 5% of the income should be paid in SSIMCs for pension insurance. If the income of a self-employed person in a calendar year does not reach 50 euro, 5% can be not paid in SSIMCs.

For self-employed persons whose monthly income reaches or exceeds the amount of the minimum salary
–  from a freely chosen object, which is not smaller than the amount of the minimum wage, SSIMCs should be made in the generally applicable amount, and from the income difference and a freely chosen object5 % of the income should be paid in SSIMCs for pension insurance.

Example

Actual income of the self-employed person amounts to 500 euro. He has chosen and paid mandatory contributions in amount of 32,15% of the minimum monthly salary –430 euro.

Since the actual income of the self-employed person is 500 euro per month, additional mandatory contributions for pension insurance should be made in amount of 5% of the difference 500 – 430, namely, of 70 euro.

For the self-employed person who have income from agricultural production and whose income reaches and exceeds the amount of the minimum salary
– SSIMCs should be paid from the object which is not smaller than the amount of the minimum salary. SSIMCs should be made for the previous period by the 15th date of the following month. However, SSIMCs in amount of 5% of the difference between the income and the freely chosen object should be calculated for the whole calendar year (difference between the income from agricultural production of the whole year and expenditure associated with agricultural production of the whole year) and paid for pension insurance for the previous year by 15 April of the current year.

For payers and receivers of the author’s fees

  • The payer of the authority’s fee from his own funds should make SSIMCs in amount of 5% of the authority’s fee (for pension insurance of the receiver of the author’s fee). The payer of the author’s fee does not have to pay SSICMs in amount of 5% for the receiver of the author’s fee who is a disabled person of I or II group, has been granted the old age pension, whose permanent place of residence is not in the Republic of Latvia, as well as for the heirs of author’s rights and other legal successors of author’s rights.
  • The receiver of the author’s fee, if the income from the author’s fee per month reaches or exceeds the amount of the minimum salary, should make SSIMCs as a self-employed person. Namely, he/she should register with the State Revenue Service as a self-employed person and make SSIMCs in the generally applicable amount from the freely chosen object which is not smaller than the amount of the minimum salary.
  • The receiver of the author’s fee does not have to pay SSIMCs from the amount of the received author’s fee if the receiver of the author’s fee is concurrently an employee and his/her salary from one or several employers together reaches or exceeds the amount of the minimum salary.

The object of voluntary contributions is the means chosen by a voluntarily insured person, from which the voluntary contributions shall be calculated and made according to the procedures laid down in the Cabinet Regulation No. 976 “Regulations Regarding Voluntary Joining of the State Social Insurance” of 12 October 2010.

The person complying with the following requirements is entitled to join the voluntary state pension insurance:

  • the person is at least 15 years of age,
  • the person is a permanent resident of Latvia,
  • the person has not been voluntarily socially insured,
  • the person has not been granted old-age pension according to the Law on State Pensions.

The person complying with the following requirements is entitled to join the voluntary state pension insurance, disability, maternity, sickness or parents’ insurance:

  • the person is at least 15 years of age,
  • the person is a permanent resident of Latvia,
  • the person is a spouse of a self-employed person,
  • the person has not been voluntarily socially insured,
  • has not reached the age entitling a person to receive the state old-age pension or has not been granted old-age pension (including prematurely).

Employee of a company paying the micro-enterprise tax may voluntarily join social insurance, if the person is not an employee of another employer or is not mandatorily insured as a self-employed person.

If an employee of a micro-enterprise is mandatorily insured for all types of social insurance, the person may voluntarily join all types of social insurance.

But:
– if an employee of a micro-enterprise has reached the age entitling a person to receive the state old-age pension or the state old-age pension has already been granted (including prematurely) – to voluntarily join the insurance of pension, accidents at work, maternity and sickness, as well as the parents’ insurance,
– if an employee of a micro-enterprise is receiving service pension or is disabled – receiver of the state special pension –, the person may voluntarily join the insurance of pension, accidents at work, disability, maternity and sickness, as well as the parents’ insurance.

Person, who is engaged in seasonal agricultural works and is paying the income tax of seasonal farm workers, can voluntarily join the pension insurance, if the person is not an employee of another employer or is not mandatorily socially insured as a self-employed person.

Professional sportsmen (worker’s status since 01.01.2018) can voluntarily join pension insurance by making contributions from a freely chosen amount, namely, the minimum amount of voluntary contributions is not set.

According to the Law on State Social Insurance, social insurance is a set of measures organised by the State in order to insure the risk of a person or dependants thereof to loss of income for work in connection with the following of the socially insured person:

  • old age,
  • unemployment,
  • an accident at work or the contraction of an occupational disease,
  • disability,
  • sickness,
  • maternity,
  • additional expenditures in connection with nursing of a child,
  • additional expenditures in connection with the death of the socially insured person or dependants thereof.

At the same time they are granted the right to receive health care services paid from state budget resources.

Types of social insurance:

  • state pension insurance,
  • insurance for the case of unemployment,
  • insurance against accidents at work and occupational diseases,
  • disability insurance,
  • maternity and sickness insurance,
  • parents’ insurance,
  • health insurance.

People subjected to social insurance:

  • all employees that have reached the age of 15,
  • persons taking care of a child up to 1,5 years old and receiving the parents’ benefit or allowance for child care,
  • persons receiving the remuneration for the care of an adopted child,
  • for persons, who receive consideration for performing foster family’s duties (from 01.01.2018),
  • persons receiving the disabled child care benefit,
  • persons receiving the unemployment benefit,
  • persons receiving the maternity, paternity or sickness benefit,
  • unemployed disabled persons,
  • a person, whose spouse fulfils the diplomatic and consular duties abroad and who is staying in the particular foreign country as the spouse of a person fulfilling the diplomatic and consular duties;
  • a person, who is a resident of the particular country as the spouse of a soldier fulfilling official duties, except where the soldier is taking part in a military operation, military training, war games or is on a mission,
  • a person, who has been a resident of the particular country as the spouse of a soldier fulfilling official duties, except where the soldier is taking part in an international operation, military training, war games or is on mission,
  • self-employed persons,
  • persons carrying out economic activity and paying a licence fee,
  • persons engaged in paid temporary community work,
  • persons engaged in seasonal agricultural works and paying the income tax of seasonal farm workers.

A person (employee) is socially insured with the insurance of accidents at work, insurance against unemployment, disability insurance, maternity and sickness insurance, and parents’ insurance, and the person has to pay mandatory contribution for the said insurance as of the day when the person has acquired the status of an employee.

A person is insured with pension insurance, if the person has actually made the social insurance contributions.

If the employer has not made the mandatory contributions, the employee that has reached the age entitling a person to the state old-age pension can make the mandatory contributions of pension insurance according to the procedure established by the Cabinet of Ministers.

A self-employed person is socially insured, if the person has actually made the social insurance contributions

An employee of a micro-enterprise is socially insured as of the day, when the person has acquired the status of an employee of a micro-enterprise.

Seasonal agricultural worker acquires the status of an employee and is subject to pension insurance, if the person’s income (in total, from all payers of the agricultural worker’s income) exceeds 70 euro a calendar month.

Published date: [02.01.2019]