Company registration in Latvia

In today's dynamic business environment, where every step requires deliberation and precision, it is important to have clear guidance when carrying out key corporate processes. In this context, we invite you to dive into the essence of company registration in Latvia, a country where tradition meets innovation and where efficient registration becomes an important step on the road to successful entrepreneurship. We will cover all the main nuances that you cannot do without and that require expert advice.

Features and benefits

Among the Baltic pearls, this country deserves attention for its strong economy and attractive surroundings. Nature and developed infrastructure attract tourists from all over the world, but locals also actively use various services and goods. This creates an influx of both regular and seasonal customers.

One of the key features that make this country a magnet for entrepreneurs is its strategic location. The country serves as a bridge between East and West, providing easy access to European and CIS markets. Its transport routes and port facilities make Latvia an ideal base for exporting and importing goods.

The tax system is also quite attractive. Moderate tax rates and broad tax incentives for new companies facilitate the creation of competitive businesses. A flexible approach to taxation, including no tax on dividends and zero income tax on reinvested profits, favours growth and development.

Latvia is also renowned for its innovative environment and highly skilled labour force. A strong academic education and scientific base create favourable conditions for research and development. This is especially important if you are focused on technological innovation in your business.

If you are interested in the leisure aspect and just a high standard of living, you will also not be disappointed and can live here permanently. Cultural heritage, variety of entertainment and beautiful nature make this country attractive for those who are looking for a harmonious combination of work and leisure.

Business forms when registering a company in Latvia

As in other regions, basic options are available here and non-residents can use them for registration without any problems. However, each one has its own peculiarities and rules. Many new entrepreneurs require professional advice at this stage. If you are among them, we suggest contacting us for full support. Now let's take a closer look at business forms in Latvia.

Individual entrepreneur

To become an individual entrepreneur in Latvia, you must be a citizen or resident of the country. Registration of this form of business implies that there are no requirements to the authorised capital and the ability to manage its activities independently. Nevertheless, it is important to take into account that a sole proprietor is not a legal entity and his/her liability is not limited.

Limited Liability Company (SIA)

The registration of a SIA requires at least one director who is a resident of the European Union. The minimum authorised capital is €2,800, with at least 50% of this amount to be contributed upon incorporation and the remainder within the first year. The SIA has relative corporate independence and is responsible for its debts.

Public limited company (AS)

An AS requires at least one European Union resident director and a board of directors. The authorised capital for an AS is much higher at €35,000 and must be fully paid up before incorporation. AS is also subject to stricter control and reporting, which ensures transparency and protects the interests of investors.

General (PS) or limited (KS) partnership

PS and KS require at least two founders. In PS, all founders are jointly and severally liable to creditors, while in KS one or more founders may have limited liability. There are no minimum capital requirements, but it is important to clearly define the shares of the founders and their roles in management.

Civil law partnership

This form does not require authorised capital or registration, but it is advisable to draw up a partnership agreement that sets out the management structure, responsibilities and shares of the participants.

Non-profit association

To register a non-profit association, it is necessary to submit a charter describing the aims and objectives of the organisation, as well as the management structure. This form does not imply a minimum capital, but more detailed reporting is required in the case of activities involving funds

Branch

A branch of a foreign company must have a general director who will operate in Latvia. The branch must also comply with Latvian legislation and report on its activities.

Representative office

A representative office does not have the status of a legal entity and has no right to conclude contracts on behalf of the parent company. For its registration, it is required to provide documents confirming the representative's authorisation and the purpose of his/her activities in Latvia.

Step-by-step instruction

Step 1: Choosing the legal form

Firstly, decide on the form of company you want to open. Above, we have reviewed all the popular options and their requirements. If you can't make up your mind, contact business consultants for advice. They will adapt to your choice, for example, IT company registration or real estate sales.

Step 2: Prepare documents

Gather the necessary papers such as passport copies of the founders and directors (Latvian or EU residents), proof of residence, business plan, articles of association and other required documents depending on the chosen company form.

Step 3: Opening a bank account

Contact your local bank and go through all the necessary procedures. An account is needed for payroll, financial reporting and tax payments.

Step 4: Register

Submit an application for registration to the Register of Economic Activities (Enterprise Register of Latvia). In the application, specify the chosen legal form, authorised capital, details of founders, directors and other necessary details.

Step 5: Payment of the authorised capital

If you are opening a SIA or AS, make sure that the authorised capital is paid into the company's bank account. For other forms such as a partnership or representative office, authorised capital is not always required.

Step 6: Obtaining registration documents

After reviewing the application, the Registry of Economic Activities issues registration documents. These include a certificate of registration, which confirms the legal existence of your company.

Step 7: Tax Registration

Register with the tax office to obtain a VAT payer number (PVN) and other necessary tax numbers depending on the type of activity.

Step 8: Employee paperwork

If you have employees, prepare the necessary documents to formalise their employment relationship in accordance with the law.

Step 9: Compliance with legislation

Be sure to familiarise yourself with Latvian laws and requirements that apply to your type of business. Compliance with local rules and regulations is a key aspect of running a successful company.

Step 10: Starting a business

Once you have completed all the formalities and received the registration documents, you can start your business activities.

Each step of this step-by-step guide is an important part of the process of starting a company in Latvia, ensuring legal transparency, legal operation and a successful start.

Latvia's Tax System: Overview

Latvia offers an attractive tax system for entrepreneurs, providing low tax rates and a variety of business incentives. Here are the main taxes that are important to consider when doing business in Latvia:

Value Added Tax (VAT): The normal VAT rate is 21%, but there is also a reduced rate of 12% on certain goods and services. There are exemptions for small businesses with small turnover.
Income Tax: The standard rate of income tax for companies is 20%. However, if profits are reinvested, full or partial exemption from this tax is possible.
Social contributions: Social contributions include social security and health insurance contributions. They constitute a certain percentage of employees' salaries.
Property tax: Property tax is levied on property owners and depends on the cadastral value of the property.
Excise Taxes: Taxes are levied on certain types of goods, such as tobacco, alcohol, petrol, etc.
Land Tax: Charged from owners of land plots and depends on the area and use of the land.
Dividend tax: The normal rate of dividend tax is 20%, but there is a possibility of exemption from this tax if certain conditions are met.

Here's a table for more convenience:

Tax	Rate
Value Added Tax (VAT)	21%
Corporate Income Tax	20%
Social Contributions	From 35% to 42.5%
Property Tax	Depends on Cadastre
Excise Taxes	Various rates
Land Tax	Depends on Area
Dividend Tax	20%

Please note that the tax system is subject to change, so it is recommended to be regularly updated on the latest changes in Latvian tax legislation.

Free zones in Latvia

Free Economic Zones (FEZ)

in Latvia are certain territories that are created to stimulate investments, attract foreign companies and promote economic development of the region. These zones have certain tax and customs advantages that make them attractive for entrepreneurs.

The main purpose of creating FEZs is to create a favourable environment for business, facilitating the growth of production, innovation and job creation. Often, FEZs are located close to the border with access to important transport routes, which facilitates the import and export of goods. There are several FEZs, including:

Ventspils Free Port: This FEZ is located in the city of Ventspils, on the Baltic Sea coast. It specialises in handling oil, gas, containers and other cargo. The free port has favourable tax incentives and customs controls.
Liepājas Metalurgies: This FEZ, located in the city of Liepāja, specialises in the metallurgical industry. Tax incentives and simplified import and export procedures are available here.
Rezekne FEZ: Rezekne, located in the east of Latvia, specialises in light industry and logistics. It’s worth choosing company registration in FEZ for small and medium-sized enterprises.

Benefits of FEZs in Latvia include corporate and property tax exemptions, VAT exemption on imported goods, simplified customs procedures and other investment incentives. These zones promote job creation, technological innovation and stimulate regional economic development.

Peculiarities of the financial aspect

Choosing the right bank and type of corporate account is an important step when opening a company. It can affect the level of service, the availability of financial instruments and the level of fees. It is important to consider the following factors:

Reputation and reliability: Choose a bank with a good reputation and stability in the market. Research customer reviews and bank ratings.
Level of fees and terms of service: Evaluate fees for account maintenance, transfer transactions, card maintenance, and minimum balances.
Online banking availability and technical support: Make sure the bank provides convenient online banking and reliable technical support.

Types of Corporate Accounts:

Current Account: A regular account for day-to-day financial transactions. Suitable for most companies.
Deposit Account: An account for holding funds with the possibility of receiving interest on the deposit.
International Account: If your business involves international transactions, this account can be useful for easy currency transfers.
Trade Account: For businesses engaged in international trade, this account facilitates the processing of documents and financial transactions.
Specialised Accounts: For example, for non-profit organisations, charitable foundations, etc.

Documents for opening a corporate account:

Copies of the company's founding documents (articles of association, certificate of incorporation, etc.).
Copies of passports of the founders and directors of the company.
Documents confirming the addresses of the founders and directors (utility bills, lease agreements, etc.).
Documents confirming the source of funds, if required by the bank.
Documents confirming the company's business activities (business plan, contracts, etc.).
Completed bank questionnaire.
If necessary, additional documents following the requirements of a particular bank.

Before opening a corporate account, it is recommended to discuss details and conditions with several banks to choose the best option for your company.

How to get a residence permit in Latvia?

In most circumstances, you do not need a residence permit (Permit to Stay) to establish a business. Having a resident permit, on the other hand, might ease some parts of doing business and give a more solid position in the nation. You may acquire a residence permit in Latvia by following these general steps:

Choosing a sort of residency permit: Latvia offers a variety of resident licenses, including those for job, business, study, and investment. You must select the type of residence permit for which you wish to apply. You should select the sort of residence permit that best meets your needs.
Document preparation: Gather the necessary documents depending on the type of residence permit. This may include an application form, passport, photographs, documentation of your finances, health insurance and others.
Applying: Apply for a residence permit at the relevant authority or Latvian embassy in your country. Seek counselling for specific requirements.
Medical examination: Depending on the type of residence permit, you may be required to undergo a medical examination to confirm the absence of certain diseases.
Application review: Your application will be reviewed by the relevant authorities. In some cases, a personal interview may be required.
Residence permit: If your application is approved, you will be granted a residence permit. This will allow you to legally reside and work in Latvia according to your status.
Extension of Status: A residence permit may have a limited validity period. You may need to extend your status if you plan to stay in Latvia for a longer time.

Obtaining a residence permit in Latvia can be useful if you plan to actively participate in the management of your company, do business on a long-term basis, and if you want to have a stable tax and legal position. However, a residence permit is not a prerequisite for starting a company in Latvia, and you can run a business while in the country temporarily.

Conclusion

It can be summed up that Latvia is an ideal place for those who seek a successful business in a country with a favourable investment climate and diverse advantages. Starting a company here is not only a legal act, but also a step into the future, where the potential for growth and innovation is intertwined with cultural richness and attractive economic prospects.

The rich variety of company forms allows you to choose the best strategy to realise your business goals, while the tax system, with its reasonable rates and exemptions, facilitates more efficient financial operations. At the same time, it is important to realise that running a successful business requires not only legal support but also a deep understanding of local realities.

Setting up a company in Latvia means interacting with the culture, business community and introducing innovative ideas at the crossroads of East and West. Proper planning, professional advice and compliance with all legal formalities will provide your company with a solid foundation for successful development in this country, opening doors to new opportunities and prospects.

FAQ

What are the main tax advantages of starting a company in Latvia?

The country offers a favourable tax system, including a 20% corporate tax rate, VAT exemptions for small businesses, and the possibility of income tax exemption on reinvestment.

Do I need to have a residence permit?

No, a residence permit is not mandatory to start a company in Latvia. However, having a residence permit may simplify some aspects of business and provide a stable status in the country. You can also consider company registration in FEZ for more benefits.

What company forms are presented?

In Latvia you can register a sole proprietor, limited liability company (SIA), public limited company (AS), partnership (PS or KS), civil partnership, non-profit association, branch or representative office.

What documents are required to open a corporate account in a bank?

Usually, copies of the company's incorporation documents, passports of the founders and directors, proof of addresses, documents on financial resources and a completed bank questionnaire are required.

What are the advantages of free economic zones (FEZ) in Latvia?

FEZs in Latvia provide tax and customs incentives that facilitate business activities. They promote investment, production development and job creation, making Latvia attractive for entrepreneurs.