Employee Health Insurance and Tax Deduction: How to Make Smart Use of Available Benefits
- Guntis Zoldners
- Jul 17
- 3 min read
Health, Life, and Accident Insurance as a Smart Tool for Employers
A competitive employer today is not just someone who offers a good salary. It's also a company that cares about employee well-being and knows how to make smart use of the tax system to provide meaningful and financially beneficial perks.
Health, life, and accident insurance are three distinct solutions that companies can use to take care of their employees while also reducing tax burdens. In this article, we explain health insurance and tax deduction: how these solutions work, what tax benefits are available, and what to watch out for to avoid mistakes.
What Does Employee Insurance Offer?
Health insurance: covers medical expenses (treatment, diagnostics, dental care, etc.)
Accident insurance: provides fixed compensation in the event of injury or disability
Life insurance: offers financial protection to the employee’s heirs, often with a savings function
These solutions provide direct benefits to employees and are highly appreciated as a sign that the company cares about their health and safety.
What Tax Benefits Apply in Latvia?
Latvian legislation allows employers to purchase an insurance policy for employees up to €750 per year or 10% of their gross annual salary, without paying personal income tax (IIN) or state social insurance mandatory contributions (VSAOI).
Example:
If an employee earns €625 gross per month (€7,500 annually), the employer can purchase insurance up to €750 per year—without incurring additional tax liability.
These limits apply to the entire insurance “basket”—including health, life, and accident policies combined.
What Is the Benefit Compared to a Salary Increase?
Solution | Employer Cost | Employee Benefit |
|---|---|---|
Salary increase by €40/month | ~€80/month (with taxes) | ~€40/month |
Insurance policy €40/month | €40/month (no tax) | Insurance coverage worth thousands |
Clear conclusion: From a tax perspective, employee insurance is significantly more efficient than a salary increase.
What Should You Know to Avoid Mistakes?
Insurance offers on the market vary significantly in both price and coverage. Only through detailed comparison can you ensure you're not overpaying and that all necessary services are included.
Policies cannot include non-employees, such as friends or relatives, unless this is specifically agreed upon in writing with the insurer.
Insurance policies can be purchased for just a few or even a single employee, but offers for small groups may be limited or less cost-effective.
If a policy remains active after employment ends, assess whether its value exceeds 10% of the employee’s actual annual income.
There are several insurance brokers in the market who offer free comparisons of different insurance providers. A professional comparison helps make a well-informed decision. Before choosing a partner, ask:
How many offers will be compared?
Is support included after the policy is signed?
Do You Need to Take Special Steps to Receive Tax Relief?
No—the employer doesn’t need to take any additional steps. These expenses can simply be recorded as company costs.
If the policy is purchased by a private individual (e.g., a family member of the employee), they can declare the expenses in their Annual Income Tax Declaration and receive part of the amount back as a personal income tax refund.
How to Make a Smart Decision
Insurance offers on the market differ greatly—both in coverage and in price. The Perks team helps companies understand these nuances daily, compare offers, and find the most suitable solution.
Our approach:
Understand the client’s needs and current situation
Gather market offers
Compare the strengths and weaknesses of each insurer
Help make an informed and thoughtful decision
Provide ongoing support during the policy term and in claims handling
Health Insurance and Tax Deduction: Conclusion
Employee insurance gives companies a real competitive advantage, helps reduce the tax burden, and strengthens employee loyalty. When implemented wisely, together with a professional partner, everyone wins.
Book a free consultation with a Perks broker and start taking advantage of your tax benefits.