Board member salary in an SIA: when must it be paid and how to arrange it correctly?

If you are an SIA owner in Latvia and also a board member, sooner or later a practical question arises: do I have to pay myself a salary?

Short answer: not always. However, everything depends on the specific situation - whether remuneration has been set for the board member, what the company’s monthly turnover is, and whether the company already has an employee or board member for whom taxes are paid at least from the minimum wage amount.

In this article, we will look at:

• what an SIA board member is;
• when a board member may act without remuneration;
• when remuneration becomes mandatory;
• what a board member’s deemed income is;
• what the turnover threshold is in 2026;
• which reports must be submitted to VID;
• how pats.lv can help organize payroll and accounting processes.

What is a board member in an SIA?

A board member is a person who manages the company and represents it in day-to-day operations. In a small SIA, this is often the company owner - the person who signs contracts, issues invoices, communicates with clients, makes decisions and takes care of the company’s development.

It is important to understand: the status of a board member by itself does not automatically mean that an employment contract has been concluded with this person or that they must be paid a salary every month.

There may be different legal relationships with a board member, for example:

• an employment contract;
• an authorization or management agreement with remuneration;
• an authorization or management agreement without remuneration.

If remuneration has been set for a board member, payroll taxes usually have to be calculated from it - personal income tax (IIN) and mandatory state social insurance contributions (VSAOI).

Can a board member act without a salary?

Yes, in certain situations a board member may act without remuneration. For example, if an authorization or management agreement without remuneration has been concluded with the board member and the special deemed income criteria are not met, the board member does not have to be considered an employee only because they are a board member.

If no remuneration has been set for the board member, information about employees usually does not have to be submitted for them and they do not have to be included in the employer’s report. The exception is a situation where the criteria are met due to which the company must pay IIN and VSAOI from the board member’s deemed income.

So the answer is not simply “must pay” or “does not have to pay”. The specific circumstances must be assessed:

• whether remuneration has been set for the board member;
• how large the company’s monthly turnover is;
• whether the company has an employee or board member with remuneration at least in the amount of the minimum wage;
• whether the company is not in its first year of registration;
• whether the exception regarding another company in the same company group applies.

When is a board member’s remuneration considered salary?

If remuneration has been set for a board member, for tax purposes it is treated as salary. It does not matter whether the remuneration is set in an employment contract, authorization agreement, management agreement or another civil law agreement.

In this case, the company usually has to submit the following for the board member:

• information about employees;
• the employer’s report;
• a notification about amounts paid to a natural person.

This applies both to situations where there are employment relations with the board member and to cases where remuneration is actually set under another agreement.

What is a board member’s deemed income?

A board member’s deemed income is a situation where, for tax purposes, it is considered that the board member has received income from which IIN and VSAOI must be calculated, even though no salary has actually been paid.

This may happen if two main conditions are met at the same time:

• in the relevant month, the capital company has no employee or board member who receives remuneration at least in the amount of the minimum monthly wage;
• the capital company’s turnover in the relevant month is greater than five minimum monthly wages.

In this case, the board member is considered an employee for tax purposes in the relevant month, and VSAOI and IIN must be calculated from deemed income at least in the amount of the minimum monthly wage. VID explanations about a board member’s deemed income emphasize exactly these criteria - monthly turnover and whether the company has a person with remuneration at least in the amount of the minimum wage.

An important nuance: this rule may apply to each board member, not only to one “main” company owner.

What is the turnover threshold in 2026?

From 1 January 2026, the minimum monthly wage in Latvia within normal working time is 780 EUR.

Therefore, the threshold of five minimum wages in 2026 is:

5 × 780 EUR = 3900 EUR

Important: this refers to turnover that is greater than 3900 EUR per month, not simply “3900 EUR or more”.

Even more importantly - turnover should not automatically be equated with the full amount of issued invoices or all money received in the bank account.

In practical terms, this means: if the company issues invoices with VAT, the relevant turnover without VAT should be considered, not the total invoice amount with VAT.

Practical examples

Example 1: an SIA starts operating and turnover is small

The SIA owner is also the only board member. In January, the company provides services, and the monthly net turnover is 2500 EUR. No remuneration has been set for the board member, and the company has no employees.

Since the monthly turnover does not exceed the threshold of five minimum wages, the deemed income criteria are usually not met in this month.

However, accounting still has to be kept from day one: income, expenses, bank transactions and documents must be recorded. It is more convenient to do this in an automated accounting system, such as pats.lv, where it is possible to track the company’s transactions and prepare the necessary reports in one place.

Example 2: turnover exceeds 3900 EUR, but there is no salary

In February, the SIA has 4700 EUR net turnover from its main activity. The company has no employees. No remuneration has been set for the board member.

In this situation, the board member’s deemed income must be assessed because:

• the company’s monthly turnover is greater than 3900 EUR;
• the company has no employee or board member with remuneration at least in the amount of the minimum wage.

If none of the exceptions apply, the company may have an obligation to calculate IIN and VSAOI from the board member’s deemed income.

Example 3: remuneration below the minimum wage has been set for the board member

The SIA’s monthly net turnover exceeds 3900 EUR. Remuneration of 400 EUR per month has been set for the board member. There are no other employees.

This is one of the situations that is often misunderstood. It is not enough that “some salary” has been set. If the remuneration is lower than the minimum monthly wage and the turnover criterion is met, the obligation to pay taxes from an object at least in the amount of the minimum wage must additionally be assessed.

In other words - remuneration of 100 EUR, 300 EUR or 400 EUR by itself does not always solve the issue if the company’s turnover exceeds the set threshold and there is no other person in the company for whom VSAOI is paid at least from the minimum wage object.

Example 4: the company has an employee with the minimum wage

The SIA’s monthly net turnover exceeds 3900 EUR, but the company has an employee for whom VSAOI is paid from an object at least in the amount of the minimum wage.

In this situation, the deemed income risk may not be the same, because one of the criteria is no longer met - the company already has a person with remuneration at least in the amount of the minimum wage.

However, it is important that this is not only a formal solution. Employment relations must be properly arranged, taxes must be calculated, and reports must be submitted on time.

This is where the pats.lv payroll module is useful. It helps calculate salaries, taxes, absences, bonuses and prepare the necessary reports.

Example 5: the company has several part-time employees

The SIA’s monthly turnover exceeds 3900 EUR. The company has two employees, and each receives 500 EUR per month. No remuneration has been set for the board member.

In this case, it cannot automatically be assumed that everything is fine only because the company has employees. It must be checked whether there is at least one person for whom VSAOI is paid from an object at least in the amount of the minimum monthly wage.

Two part-time employees with a monthly salary of 500 EUR each do not by themselves remove the obligation to assess the board member’s deemed income if the other criteria are met.

When does deemed income not have to be applied?

There are two important exceptions.

The first - the deemed income rule does not apply in the calendar year when the capital company is registered in the Enterprise Register.

The second - the rule may not apply if, in the relevant month, the board member receives remuneration as a board member in another capital company within the same company group, and that remuneration is not lower than five minimum monthly wages.

This means that for a new SIA, in its first year of registration, this specific deemed income obligation usually does not have to be applied. However, this does not mean that accounting can be postponed. Invoices, expenses, bank transactions, contracts and tax obligations must be recorded from the first day.

Which reports must be submitted to VID?

If remuneration has been set for the board member or an obligation arises to pay taxes from deemed income, the company must submit the relevant reports to VID.

Depending on the situation, these may include:

• information about employees;
• the employer’s report;
• a notification about amounts paid to a natural person;
• in the case of a non-resident - the relevant IIN report on income received by a non-resident.

The employer’s report for the reporting month must be submitted to VID by the 17th day of the following month. Mandatory contributions for each employee are paid into the single tax account by the 23rd day of the following month.

If taxes are paid from deemed income, the deemed income is indicated in the relevant section of the employer’s report.

Common mistakes made by SIA owners

1. Thinking that “if money has not been withdrawn, there are no taxes”

This is not always correct. If the deemed income criteria are met, the obligation to calculate IIN and VSAOI may arise even if no salary has actually been paid.

2. Confusing invoice amount with turnover

The total invoice amount is not always the amount that must be assessed for applying this rule. This is especially important for VAT payers, because VAT is not the company’s net turnover.

3. Assuming that any small salary solves the issue

If remuneration has been set for the board member, but it is lower than the minimum wage, and the company’s monthly turnover exceeds the threshold of five minimum wages, an additional tax calculation up to the minimum wage object may be required.

4. Forgetting that the rule may apply to each board member

If the company has several board members, the situation of each board member must be assessed, not only the status of one owner.

5. Confusing salary and dividends

Salary and dividends are not the same. Salary is remuneration for work or performance of duties, while dividends are profit distribution. Dividends by themselves do not resolve the question of board member remuneration and deemed income.

6. Not monitoring monthly turnover

The deemed income issue must be assessed month by month. It is not enough to look only at the total annual result.

7. Postponing accounting until the end of the year

When a company starts operating, documents must be recorded immediately. Later, it will be much more difficult to restore invoices, expenses, bank transactions and salary calculations.

When is the right time to start paying a salary?

There is no single universal answer for all companies. It depends on the company’s turnover, cash flow, the owner’s role and development plans.

However, there are several signals that the issue should not be postponed:

• the company has regular monthly turnover;
• monthly net turnover is approaching 3900 EUR or exceeds it;
• the company has no employees;
• the board member regularly performs the company’s day-to-day work;
• the company owner starts withdrawing money for personal needs;
• the company plans to hire employees;
• the company needs to introduce orderly payroll and tax accounting.

It is better to organize this issue in time rather than deal with it only when data from previous months already has to be corrected.

How does pats.lv help SIA owners?

pats.lv is a practical tool that helps an SIA owner organize accounting processes in one place.

With pats.lv, it is possible to:

• record income and expenses;
• track company transactions;
• prepare reports;
• control important tax deadlines;
• calculate salaries and related taxes;
• prepare salary-related documents.

Especially useful in this case is the payroll module. It helps calculate gross and net salary, IIN, vacation pay, compensation and prepare salary-related documents, such as the employer’s report and the notification about amounts paid to a natural person.

This helps reduce the risk of manual calculations and keep the payroll process transparent - especially for a small SIA where the owner wants to understand what is happening with the company’s money but does not want to search for tables, formulas and reporting deadlines every time.

Frequently asked questions

Does an SIA board member have to be paid a salary?

Not always. If no remuneration has been set for the board member and the deemed income criteria are not met, a salary may not be mandatory. However, the company’s monthly turnover must be monitored, as well as whether the company has an employee or board member with remuneration at least in the amount of the minimum wage.

Can a board member act without remuneration?

Yes, a board member may act without remuneration, for example on the basis of an authorization or management agreement. However, if the deemed income criteria are met, the company may have an obligation to calculate IIN and VSAOI even without actual salary payment.

What is a board member’s deemed income?

It is income that, for tax purposes, in certain situations is considered to have been received even if the board member has not actually been paid a salary. In this case, IIN and VSAOI must be calculated from the deemed income.

What is the deemed income threshold in 2026?

In 2026, the minimum monthly wage is 780 EUR, so the threshold of five minimum wages is 3900 EUR. The deemed income criterion must be assessed if the company’s turnover in the relevant month is greater than 3900 EUR.

Should the issued invoice amount or turnover be considered?

The relevant monthly turnover should be considered, not automatically the full amount of issued invoices. For VAT payers, it is especially important to remember that VAT is not the company’s net turnover.

Is it enough to pay the board member 100 or 400 EUR per month?

Not always. If the remuneration is below the minimum wage, the company’s monthly turnover exceeds the threshold of five minimum wages and there is no other person for whom VSAOI is paid from an object at least in the amount of the minimum wage, an obligation may arise to calculate taxes from an object at least in the amount of the minimum wage.

Does a new SIA have to pay taxes from deemed income in the first year?

The law provides that the deemed income rule does not apply in the calendar year when the capital company is registered in the Enterprise Register. However, accounting must still be kept from the first day.

Can dividends replace salary?

No. Dividends and salary are different types of income. Salary is remuneration for work or performance of duties, while dividends are profit distribution. Payment of dividends does not automatically solve the question of board member remuneration and deemed income.

When must the employer’s report be submitted?

The employer’s report for the reporting month must be submitted by the 17th day of the following month. Tax payment deadlines must be assessed according to the specific report and VID requirements.

Can pats.lv help calculate a board member’s salary?

Yes, the pats.lv payroll module helps calculate salary, taxes and prepare salary-related documents. This is especially useful for small SIA companies where the owner wants to see the entire process in one place and avoid manual calculations.

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