Latvian Micro-Enterprises Gain Popularity

Latvian-Micro-Enterprises-Gain-PopularityIn its attempt to attract foreign investors, Latvia has introduced the concept of micro-enterprise which also comes with very advantageous tax conditions. The micro-enterprise can take the form of a sole proprietorship or limited liability company and benefit from special conditions that are updated every year.

What is a micro-company?

The greatest advantage of Latvian micro-companies is that they can be set up by anyone and can take the forms of sole traders registered with the State Revenue Service and limited liability companies. Micro-companies can activate in any field, from agriculture to manufacturing and light industry, the only requirements being:

  • - to have an annual turnover that does not exceed 100,000 euros,
  • - the shareholders of a limited liability company are natural persons,
  • - the board members of the company are employees and their number does not exceed five,
  • - the wages of an employee does not exceed 720 euros per month.

Also, in order to aid micro-enterprises, the government has introduced the “micro-company tax”. These types of Latvian companies will only be required to pay the state insurance premiums, the corporate income tax if they qualify for it and the personal income tax.

Those wanting to register as micro-company taxpayers can do it with the Latvian Commercial Register where they can apply directly for the status of micro-enterprise taxpayers or with the State Revenue Services. Those already registered as sole traders can submit an application with the State Revenue Services.

For details about setting up a micro-company, you can ask our Latvian lawyers to assist you.

What are the tax rates applicable to micro-companies?

Micro-companies fall under the regulations of the Micro-enterprise Tax Law which is why the tax rates applicable to these types of Latvian companies depend on the annual turnover as they are levied based on certain thresholds, as it follows:

  • - a 9% tax rate, if the annual turnover is below 7,000 euros,
  • - a 12% tax rate for an annual turnover between 7,000 and 100,000 euros.

The 9% tax rate applies to micro-companies during the first three years, no matter their annual turnover.

For additional information about the Micro-enterprise Tax Law, please contact our law firm in Latvia.