Latvia may be the right place to incorporate a company in Europe or relocate your successful business. This small Baltic country is one of the top 20 most favourable countries for doing business according to the World Bank. This is due to a prosperous economy, an educated labour force, low costs of doing business, attractive tax regime and government support for entrepreneurs.
Let’s take a closer look at why you should consider registering a company in Latvia.
Latvia is a small country that doesn’t have a large solvent domestic market. Most foreign entrepreneurs register a Latvian company to gain access to the larger and richer markets of the European Union. The economy of the Republic of Latvia is part of the common economic space of the EU. For more than 10 years the country’s currency has been the euro. Latvian banks are characterised by reliability and flexible approach to corporate clients. The country is a member of the World Trade Organisation and is also a member of the Organisation for Economic Development and Cooperation.
The relatively low corporate tax rate is another significant advantage of Latvia. Only that part of the profit of a commercial structure that was distributed among the founders is subject to tax. Reinvested profits of Latvian corporations are taxed at a zero rate. In addition, Latvia has signed a large number of double tax treaties with other countries, allowing companies registered in the country to receive additional profits when operating abroad.
Special Economic Zones were established by the Latvian government to develop business activities in certain regions of the country. There are 5 Latvian SEZs in total:
The Latvian government actively encourages the development of new technologies in the country by providing subsidies and tax incentives. Every year more and more new companies involved in computer technology, hardware and telecommunication services pop up in Latvia. As of 2024, there are more than 400 high-tech startups registered in the country population of which is less than 1.9 million people.
The reforms in Latvia have significantly simplified the procedure for registering a new company, as well as reporting and tax administration.A significant part of the processes involved in starting a new company can now be carried out online. By seeking advice from Imperial & Legal’s corporate lawyer, a foreign investor will be able to register a Latvian company within a reasonable timeframe and at minimal cost, without even leaving their home country.
Let us see in details the 5 most common types of Latvian commercial organisations suitable for a foreign entrepreneur.
Let’s compare the features of joint stock companies and limited liability companies.
Partnership is another legal form of doing business in Latvia. It is an association of 2 or more participants without forming a legal entity. A partner in such a business structure can be either an individual or an organisation, including those of foreign origin.
Partnerships are usually chosen to simplify the procedure of opening a new company or to avoid spending resources on the payment of the authorised capital, as there is no minimum amount of capital for partnerships in Latvia.
Usually, foreign entrepreneurs register one of 2 types of Latvian partnerships:
A foreign company may operate in Latvia through its branch office – a separate legal entity offering the same goods and services as the main office.
A representative office is registered to study the local market and demonstrate the products or services of the parent company to potential clients.
In other words, if you want to trade in Latvia, you can register a branch office, if you are still only exploring the market, register a representative office.
The parent company located abroad is liable for all debts incurred in the course of operation of the Latvian branch or representative office.
Companies registered in the Republic of Latvia pay corporate tax on all their income, including income generated abroad. Foreign companies pay corporate tax only on income earned in Latvian.
An important advantage of doing business in Latvia is how the taxable base of a company is calculated. Corporate tax is charged only on that part of the company’s income that was distributed to shareholders in the form of dividends. Thus, any corporate income in Latvia, including capital gains and income from passive sources (dividends, interest on deposits, royalties) will not be taxed if you reinvest it into the business.
The corporate tax rate in Latvia is 20%. However, according to the current rule for calculating the taxable base, the corporate income distributed to dividends is divided by a coefficient of 0.8. This means that in reality the profit is subject to 25% corporate tax.
Micro-business tax is assessed at a flat rate of 25%. This tax is applied in order to reduce the fiscal burden on individual entrepreneurs and small family fishing or farming households registered to an individual entrepreneur. Another condition is the absence of VAT registration.
Strictly speaking, this micro-business tax is relevant for those foreign businessmen who already have citizenship or reside in Latvia on the basis of a long-term residence permit.
Latvian basic VAT rate is equal to 21%.
Latvia applies reduced value added tax rates of 12% and 5% for a number of supplied goods and services.
Export transactions outside the EU countries are subject to VAT at a zero rate. If products are supplied to a counterparty in an EU country that is registered as a VAT payer, Latvian VAT is not charged.
These taxes are imposed in Latvia on owners of land plots, residential and commercial property and even engineering structures. As a rule, the rate of property tax is set by local governments. In this case, the tax can be 0.3-3% of the official value of the property.
If the municipality has not determined the amount of property tax, the rates established by the laws of the Republic of Latvia will be used, which vary significantly depending on the type of property, its purpose, condition, etc.
The popular opinion that the standard property tax rate in Latvia is 1.5% is a strong generalisation. For example, the owner of an inexpensive residential house worth less than €56,915 will be taxed at a rate of 0.2%, while the owner of vacant agricultural land will pay 3% of its value and a further 1.5% may be assessed by the municipality.
Corporate taxation, as well as available tax incentives and methods of reducing fiscal costs in Latvia are among the most popular topics at consultations with Imperial & Legal specialists. If you need more detailed information about Latvian corporate taxation, please contact our consultants.
Let’s see how step by step to register a limited liability company in Latvia. This is the most popular legal form. With legal support from Imperial & Legal, the whole process can take as little as a week and a half.
The first step is to come up with a suitable name for your future company. Our specialists will check the name you have decided upon in the Commercial Register and for a small fee will assign it to you.
The articles and memorandum of association must contain information about your company and objectively reflect its structure. Before the formation documents can be completed, it is necessary to:
The founders can sign the memorandum and articles of association in the presence of a notary themselves or send a representative with the power of attorney. Our specialists will help the entrepreneur to obtain a visitor visa for travelling to Latvia or prepare a power of attorney.
At this stage, the company director needs to open an account in a bank registered in Latvia. You will need to use this account to transfer at least half or the minimum authorised founding capital for SIAs, which is currently €2,800. We will help your representative to open an account and verify the bank’s capital payment document for the Commercial Register.
You will need to complete and sign a standardised incorporation application form. You will then have to pay a registration fee, which for a limited company is €75. How the signature is signed and how payment is made depends on how the registration application is submitted:
You can continue your partnership with Imperial & Legal even after company registration. With our help you can optimise your taxes, open a current account in a European bank, rent, buy or sell real estate, and organise the relocation of employees to Latvia.
There are several governmental and European programmes, foundations and organisations dedicated to supporting entrepreneurs in Latvia. Here are just some of them:
The tools used to support SMEs include not only direct financing and investment, but also the creation of modern business infrastructure, marketing and information support, partial compensation of hiring and training costs, and the provision of guarantees for bank loans.
Registering your company in a special economic zone, you will significantly reduce its direct tax costs. Under certain circumstances, the corporate income tax discount can be as high as 80%, and property tax can be reduced to 0.3% of the official value of the property.
If a company carries out licensed commercial activities in a Latvian free port, goods imported into the territory of the special economic zone will not be subject to VAT and excise duties. Products imported in this way are subject to simplified customs clearance if they are intended for further export outside the EU.
Yes, under current legislation, Latvian partnerships pay income tax on all their income arising within and outside the country, after the income is distributed to the partners.
First of all, we need to obtain the following data:
The list is by no means exhaustive and it is likely that we will need further information depending on your circumstances.
How to open a company in Latvia. Advantages of doing business in this country. The main types of Latvian companies. Corporate taxation.
Accounting services
Worldwide business support
Tax solutions
Open a bank account
Residence permit in Latvia through investments
Representative of an Overseas Business visa