Open a Company in Latvia - Updated for 2021
Open a Company in LatviaUpdated on Monday 06th September 2021
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Foreign enterprisers who want to open a company in Latvia can choose between several types of entities. The Latvian Commercial Code is very flexible, allowing foreign investors to register the same type of companies as local ones without any additional requirements. Moreover, foreign investors will benefit from special incentives for opening companies in Latvia.
In this country, the commercial code allows the formation of legal entities that suit the objectives of any entrepreneur. Latvia's attractiveness for foreign entrepreneurs is such that this jurisdiction has a score of 80.3 out of 100 in the World Bank's Doing Business ranking. And we have a team of lawyers in Latvia ready to help you start your new business.
Types of companies to open in Latvia
The following types of companies are available for registration in Latvia:
- limited liability companies (SIA),
- joint stock companies (AS),
Foreign companies can establish branch offices or representative offices. Foreign entrepreneurs may also register as sole proprietors in Latvia. Our Latvian lawyers can assist you with the registration procedure and help you open a company in Latvia as soon as possible.
Steps for opening a company in Latvia
Opening a company in Latvia always requires dealing with the Commercial Registry of the Republic of Latvia (CRRL). At the very least, any investor or entrepreneur should know that without proper registration with the CRRL, a company is not considered a legal entity.
But before you dive headlong into CRRL, you need to know which type of company best meets your needs. Also, depending on the kind of company you require, the documents and requirements may vary.
The minimum share capital to open a limited liability company in Latvia is 2,800 euros, while the minimum share capital for opening a joint-stock company amounts up to 35,000 euros. Both the limited liability company and the joint-stock company can be incorporated by one or more shareholders who can be natural persons or legal entities. In the case of Latvian joint-stock companies, the share capital must be deposited in cash only.
And also, both limited liability companies and stock companies allow non-residents to be the owners. And both allow more than one shareholder to incorporate them. If you want to know more about the differences between the different types of companies, you may need to use some help from our law firm in Latvia.
The minimum share capital to open a limited liability company in Latvia is 2,800 euros, while the minimum share capital for opening a joint stock company amounts up to 35,000 euros. Both the limited liability company and the joint stock company can be incorporated by one or more shareholders who can be natural persons or legal entities. In the case of Latvian joint stock companies, the share capital must be deposited in cash only.
The steps to open a company in Latvia are:
- submitting the company formation documents with the Latvian Companies Registry,
- opening a bank account,
- registering for VAT purposes,
- registering employees for social insurance purposes.
Certain Latvian companies may also be required to obtain special licenses depending on the object of activity.
Our lawyers in Latvia can help you open a company in Latvia and navigate all the details so that you do not have any setbacks during the registration process. If you want to immigrate to Latvia, we can offer legal advice as well as help for obtaining citizenship by investment in this country.
Documents required to open a company in Latvia
The following documents must be prepared and submitted when opening a company in Latvia:
- a registration application issued by the Trade Register which must be signed before a Latvian public notary,
- the charter,
- the Articles of Association,
- proof of depositing the share capital,
- proof of registered address,
- proof of payment of the state duty,
- proof of payment of the publication fee,
- details about the shareholders and directors of the Latvian company.
For complete information about company registration or for notary services you can contact our law firm in Latvia.
We invite you to watch a short video about how you can open a company, helped by our lawyers in Latvia:
How easy is to start a business in Latvia?
The necessary time for establishing a Latvian business is no longer than one week if all the required documents are submitted in due time. The process of company incorporation includes the following steps:
- drawing up the deeds of incorporation,
- notarizing the deeds of incorporation,
- opening a bank account and depositing the minimum share capital,
- registration at the Commercial Register of Enterprises and at the State Revenue Service,
- registration of the employees for the state social insurance contribution at the State Revenue Service,
- registration for VAT in Latvia.
The formalities are relatively few compared to other European jurisdictions. In part, this is what has allowed Latvia to remain in the top twenty countries in the world in terms of ease of doing business for locals and foreign investors alike.
How easy is to hire personnel in Latvia?
The process of hiring employees can be eased by the numerous employment agencies situated in Latvia. The employers must keep in mind that there are certain mandatory actions that need to be taken in order to hire personnel, such as their registration at the State Revenue Service, in order to pay the state social insurance contributions.
If you plan to open a company in Latvia, you will feel at ease when hiring workers because the country's workforce is generally multilingual and open to new challenges.
The Latvian workforce is one of the best academically prepared in the world. This country ranks 7th in the world in new entrants to bachelor programs according to Education at a Glance, 2019.
This is why Latvia has earned its place as a hub for companies in need of highly qualified employees to work in technology and other industries.
Something else you should know about hiring employees in Latvia is that in this country the local government promotes the importance of training programs within companies. So there are several economic incentives that you can enjoy if you meet some requirements with your workers.
What are the taxes in Latvia?
Any company incorporated in Latvia is taxed based on residency. Non-resident companies are only taxed on their Latvian income and foreign corporations can also benefit from reduced tax rates according to the provisions of a double tax treaty if such an agreement exists between their country of residence and Latvia.
The corporate income tax in Latvia is 15% but permanent establishments that have been operational for more than 12 months can benefit from a simplified tax regime: a tax imposed on 20% of the turnover. There is no capital duty imposed in Latvia. Companies must pay other taxes like the payroll tax, the real property tax, stamp duty and social security.
Corporate taxes in Latvia are regulated according to the Corporate Income Tax Law and Cabinet Regulation No. 677 of 14 November 2017 "Regulations on the Application of Norms of the Corporate Income Tax Law." Without going into the legal details, you should know that the corporate income tax in Latvia is 20%. It is calculated on a coefficient of 0.8 of net dividends or distribution, which makes the effective rate 25%, not the lowest in the region exactly.
There is no capital duty imposed in Latvia. Companies must pay other taxes like the payroll tax, the real property tax, stamp duty, and social security.
It is also relevant to know that foreign investors and entrepreneurs can take advantage of Latvia's double taxation treaties with 50 countries around the world. This allows the most prepared investors to execute tax optimization strategies more efficiently.
Opening a company in Latvia without a tax planning strategy can be challenging. If you want to know the Latvian tax system from top to bottom. Our lawyers in Latvia can help you with tax compliance in the country and certain measures for tax minimization.
Our lawyers in Latvia can help you with tax compliance in the country and certain measures for tax minimization after you decide to open a company in Latvia.
What are the main points of interest for foreign investors?
The main advantages come from Latvia’s strategic position and the status of a member in many organizations, such as EU, Schengen and World Trade Organization, this leading to all the benefits of free and open trade on the international market.
An advantage facilitating the trades is the good infrastructure that Latvia has. There are three major ports and from the Riga’s airport, the planes are flying to more than 80 destinations all over the world. All of the above are facilitating the trades, not only from Latvia to the foreign countries but also from these countries to Latvia.
The country also has important touristic potential and the services provided by the entrepreneurs involved in this business are considered affordable at a good quality. The tourism sector is bringing a considerable contribution to the Latvian GDP.
Latvia not only shines with a well-developed communication and transportation infrastructure but also has one of the most developed telecommunications infrastructures in the world. This allows it to provide any type of company with the highest quality connections to its customers regardless of the type of business.
According to the World Broadband Speed League, out of more than 160 countries in the world, Latvia has the 16th fastest internet connection, leaving behind other European and North American countries.
What are the advantages of a holding company in Latvia?
The holding companies enjoy mostly the provisions of the double tax treaties signed by Latvia over the years. According to it, the corporate income tax can be exempt or credited while the withholding taxes on dividends, interests and royalties paid to the subsidiaries can be minimized or even exempt from the provisions of such treaties.
Also, the European directive related to the parent-subsidiary coming from the state members is stipulating exemptions granted to the withholding taxes on dividends, interests, and royalties.
One of the best ways to execute a tax optimization strategy in Latvia is through these types of companies. And although it is true that you can incorporate this type of corporate structure in other countries, Latvia's advantage is that, while its most direct rivals such as Estonia or Lithuania have complex tax systems, Latvia has a tax simplicity that makes it the ideal choice for most investors.
Why should you do business in Latvia?
- Latvia is the 30th freest economy in the world, according to the Index of Economic Freedom.
- Latvia has its foreign debt and fiscal deficit under control.
- Latvia has a 20% corporate tax rate, which is in the low end among European countries.
- Latvia is considered the 19th easiest country to do business according to the World Bank.
- You can open a company in Latvia in just five days.
For more information about how you can start a business in this country, you may contact our Latvian lawyers.