Employee health insurance in an IT company: the tax relief many overlook
Finding a good developer or system administrator in Latvia is hard, and keeping one is harder. Salary is only part of the conversation: candidates increasingly ask what comes on top of it, and health insurance is usually first on that list. The good news is that the state supports this benefit with a tax relief, and many companies either do not use it or still calculate it against an outdated limit.
How the relief works
A health insurance premium paid by the employer is exempt from personal income tax and mandatory state social insurance contributions when three conditions are met at the same time:
- the premium does not exceed 750 EUR per year per employee;
- it does not exceed 10% of the employee's annual gross salary;
- the insurance contract runs for at least one year.
The legal basis is Section 8, Paragraph five of the law "Par iedzīvotāju ienākuma nodokli" and Cabinet Regulation No. 899. One detail matters: the 750 EUR limit has applied since 1 January 2024, and before that it was 426.86 EUR. If your accountant still works from the old figure, the company is leaving almost half of the available relief unused.
If the limit is exceeded, only the excess is taxed, not the whole premium.
What it means in numbers
Take a development team of ten people. If each gets a policy within the limits of the relief, the company can put up to 7 500 EUR a year into the team's health without that sum attracting payroll taxes. The same money paid as a salary bonus would reach the employee noticeably smaller.
The second condition, 10% of gross salary, mostly constrains lower paid roles in practice. In IT, where salaries tend to be higher, the 750 EUR ceiling is reached first.
What a programme usually covers
The contents of a policy are flexible, and this is where companies most often choose blind. A basic programme usually includes doctor consultations, diagnostics and laboratory tests, while dentistry, physiotherapy, sports activities or vaccination can be added separately. For a remote team, telemedicine is often the practical part, because the person is not tied to one city.
It is also worth thinking about how easy the policy will be to use. If the nearest clinic that accepts the insurer is on the other side of town, the benefit stays on paper.
How to choose
Programmes are usually available to companies from two employees upwards, so a small team is not excluded. Offers differ both in coverage and in how simple it is to claim, so comparing at least a few is worth the time.
Offers from several insurers can be compared through a broker: employee health insurance costs the company nothing to arrange this way, because the broker's service is free of charge.
Before signing, go through with your accountant how the premium will appear in the payroll calculation, and make sure the contract term is not shorter than a year. Otherwise the relief does not apply, whatever the amount.