When must a foreigner pay compulsory social insurance contributions in Latvia?

Latvian rules

Section 5(1) of The State Social Insurance Act stipulates that social insurance is compulsory for all employees who have reached the age of 15 and who are employed by an employer – a domestic taxpayer, a taxpayer from another Member State or a branch (permanent establishment) of a merchant from another Member State, as well as self-employed and other self-employed persons.

This means that a tax resident of another country who is registered as an employee or self-employed business person in Latvia is subject to social insurance contributions in Latvia,

In addition, voluntary national insurance contributions are also possible. However, individuals who do not have a permanent place of residence in Latvia cannot make voluntary state social insurance contributions.

What if the foreigner works in several countries?

Social insurance for employees

If an employee works in more than one Member State, he/she must identify the Member State with which he/she has the closest links. These conditions apply to different professions, such as airline staff, international transport drivers, international couriers, experts in different fields and other professionals, including performing artists, etc. They apply to both employees and self-employed persons.

It is necessary to assess in which country the employee carries out the essential activity. If it is the country of residence, the employee may remain socially insured in the country of residence, but if no substantial part of the activity is carried out in the country of residence, the person must be socially insured in the country of the registered office or place of business of the employer who employs him (except where the person is employed by two or more undertakings or employers, at least two of which have their registered office or place of business in different Member States outside the Member State of residence).

If the person does not carry out a substantial part of his/her activity in the Member State of residence, he/she must pay social insurance contributions:

• in the Member State in which the person’s undertaking or employer has its registered office or place of business if the person is employed by a single undertaking or employer;
• in the Member State in which the undertakings or employers have their registered office or place of business if the person is employed by two or more undertakings or employers having their registered office or place of business in only one Member State;

– in the Member State in which the undertaking or employer has its registered office or place of business outside the Member State of residence of the person concerned, if that person is employed by two or more undertakings or employers having their registered offices or places of business in two Member States, one of which is the Member State of residence;

– in the Member State of residence, where the person is employed by two or more undertakings or employers, at least two of which have their registered office or place of business in different Member States outside the Member State of residence.

However, for flight crew and cabin crew who normally carry out passenger or freight transport services in two or more Member States, social insurance contributions are payable in the Member State in which the home base is located.

In order to assess whether a person habitually carries out an activity in two or more countries, or whether he would nevertheless be subject to the conditions for posting, the decisive factor is the duration of the activity carried out in one or more Member States (determining whether the activity is permanent, special/occasional (ad hoc) or temporary). For this purpose, an overall assessment of all relevant facts is made, paying particular attention in the case of an employed person to the place of work as defined in the employment contract.

In order to determine whether a substantial part of the activities of the employed person is carried out in the Member State, the working time and/or remuneration are taken into account. According to a general assessment, if less than 25% of the person’s working time is spent in the Member State of residence and/or if less than 25% of the person’s remuneration is earned in that Member State, this will indicate that the person does not carry out a substantial part of all activities in that Member State.

Note: The decision on the application of the applicable law (issue of an A1 certificate) to such persons is initially provisional and becomes final within two months of receipt of the information by the authorities of the participating countries, unless another national authority has a different view on the applicable law to the person.

Social insurance for self-employed persons

A person who habitually pursues an activity as a self-employed person in two or more Member States must be socially insured in the Member State of residence if he pursues a substantial part of his activity in that Member State or under the legislation of the Member State in which the centre of his interests is situated if he does not reside in a Member State in which he pursues a substantial part of his activity.

Criteria for determining whether a self-employed person pursues a substantial part of his activities in a Member State:

• turnover;
• hours of work;
• the number of services provided; and/or remuneration.

If the person does not carry out a substantial part of his activity in the country of residence, the centre of interest of the self-employed person must be determined by assessing the following criteria:

• the place where the person’s permanent establishment is situated;
• the usual nature and duration of the activities carried on;
• the number of services provided;
• and the wishes of the person concerned in all the circumstances, etc.

A person who habitually pursues activities as an employed person and as a self-employed person in different Member States must be socially insured in the Member State where he pursues his activities as an employed person.

A person employed as a civil servant by one Member State and pursuing activities as an employed and/or self-employed person in one or more other Member States is subject to the legislation of the Member State to which the administration employing him as a civil servant is subject.

It is important to distinguish between situations where persons may be subject to the rules on working in two or more Member States and situations where they are subject to the conditions for temporary posting. In the former case, the self-employed person’s activities in different Member States are part of his normal working routine and way of conducting his business, whereas self-employed persons who travel to another Member State to carry out work for a limited period and which is not of a continuous nature are more likely to be subject to the provisions of Article 12(2) of Regulation 883/2004.

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