Health insurance is one of the most sought-after employee benefits in Latvia - and one of the few supported by the state through tax relief. A properly arranged policy lets a company take care of its team without paying payroll taxes on the amount. Here is how the relief works and what an employer should keep in mind.

What is the tax relief?

Health insurance premiums paid by the employer are exempt from both personal income tax (IIN) and mandatory state social insurance contributions (VSAOI) if three conditions are met at the same time:

  • the premium does not exceed 750 EUR per employee per year (the limit applies from 1 January 2024; previously it was 426.86 EUR);
  • the premium does not exceed 10% of the employee's gross annual salary;
  • the insurance contract term is at least one year.

Legal basis: Section 8, Paragraph 5 of the law "On Personal Income Tax" and Cabinet Regulation No. 899.

What does it mean in practice?

If the premium amount were paid to the employee as salary, the company would pay VSAOI and the employee would pay IIN and their share of VSAOI. An insurance policy within the limit is exempt from these taxes: for a team of 10 employees, a company can allocate up to 7,500 EUR per year to employee health without paying payroll taxes on this amount.

What happens if the limit is exceeded?

Only the excess is taxed - it is treated as salary. For example, if a policy costs more than 750 EUR per employee per year, taxes are paid only on the difference. For employees joining the policy mid-year, the exemption applies proportionally to the period worked.

What else should an employer know?

  • the policy can be tailored to the company budget - from a basic programme to premium coverage with dentistry, sports and medication;
  • programmes are usually available to companies starting from 2 employees;
  • a policy is also a strong retention tool - it reduces sick days and builds team loyalty.

Read more about coverage, programmes and applying in the employee health insurance section - Agento will compare offers from several insurers for your company free of charge.

Frequently Asked Questions

Does the 750 EUR limit apply to each employee separately? Yes, the limit is 750 EUR per year per employee. Additionally, the premium must not exceed 10% of that employee\'s gross annual salary.
What happens if an employee joins the policy mid-year? The exemption applies proportionally to the period the employee is covered. What matters is that the insurance contract itself has a term of at least one year.
Does the relief apply if the policy term is shorter than a year? No, one of the mandatory conditions is an insurance contract term of at least one year. The exemption does not apply to shorter-term policies.