Taxes on the Board Members’ alleged income

UPDATE: The data in the following post is expired. Please see updated post at link.

A company has to pay payroll tax from minimal salary in a month when both of the following conditions applies:

• the company does not have any employees who receive at least minimal salary;
• the company has monthly sales exceeding 5 minimal salaries.

For 2018, the minimal salary is EUR 430 a month, therefore monthly sales treshold is EUR 2,150.

In this case, the company will have to pay approximately EUR 235 for the month when the above conditions apply. The aforementioned tax amount is calculated as follows:

Minimal salary:	A	430.00
Employee’s part of social security contributions (10.5%1 of A):	B	45.15
Taxable income:	A-B	384.85
Corporate income tax (23%) of A-B:	C	88.52
Social Security Contributions (34.09%1) of A:	D	146.59
Total tax:	C+D	235.11

It is important to know that if a company has several board members, by default the tax should be paid on each of the board members.

There is a legal way to limit the tax to one board member. If this is applicable to you, please contact us for consultations and help.

¹ Clause 18 (1) of the Latvian Law on Social Security. Law edit that sets in force on 1 January 2018.