Opening and running a business in Latvia

Opening and running a business in Latvia

Latvia is a member of the European Union, the WTO and located in the euro area and Schengen. Thanks to this, the company’s opening in Latvia provides an entrepreneur with the status of a European entrepreneur and the opportunity to enter European markets. In addition, the state actively supports foreign trade. Below we consider the existing advantages and disadvantages of opening a business in Latvia.

Advantages of starting a business in Latvia

– Access to the EU market

– The same currency as in most EU countries

– Relatively low tax rate

– Developed infrastructure

– Affordable loans for business development. In Latvia, the banking industry is effectively developed, enabling entrepreneurs to use financial services at the highest level.

– Simple accounting system

– Foreigner running a business in Latvia has the right to obtain a residence permit for himself and his family

– Possibility to obtain a residence permit through the purchase of real estate

– Education at European universities

– Large percentage of the Russian-speaking and English-speaking population

What is needed to open a company in Latvia

To open and register a company in Latvia, you must first obtain a business visa. It is issued to the entrepreneur visiting the country for business travel and business. To obtain a business visa, the applicant must obtain a permit approved by the Latvian Council for Migration.

Then choose the form of ownership. Latvia provides several opportunities for foreign entrepreneurs, here are the most important of them:

1. An individual entrepreneur is a person registered in the commercial register as an entrepreneur. A single merchant may enter into transactions related to commercial activities. This form of ownership does not mean the status of a legal person. Transactions are concluded by the natural person himself.

2. A limited liability company or LLC is a legal entity with share capital. The share capital consists of contributions from share owners. The owner of the shares can be both a natural person and a legal person.

3. A joint-stock company is an open commercial company. Share capital consists of the nominal value of shares (shareholder contributions). It is a legal person.

Company registration in Latvia

The company’s registration in Latvia requires the presence of a specific set of documents and the completion of the company establishment procedure.

List of required documents:

– The founder’s passport

– Decision to set up a company

– Business Visa

– Document confirming the payment of share capital to a bank account

– Legal address information

– Consent from the legal owner of the company’s registration address

– Participant register section

– Application for company registration (KR4 form)

Registration procedure. It usually takes up to two weeks and includes the following steps:

– Preparation of registration documents. Collecting all necessary documents and certifying them notarially.

– Payment of authorized capital. For this purpose, it is necessary to open a temporary bank account and include the amount of the authorized capital.

– Submission of documents to the Register of Enterprises (a state administration body in which all information about legal persons and individual entrepreneurs are stored) means payment of the state duty, direct submission of documents and obtaining a decision on registration.

– Opening a bank account. Choose a bank, fill in the necessary documents, provide additional information at the bank’s request.

– Receipt of VAT number. To this end, all documents regarding the future company should be provided at the tax office.

Possible difficulties with registering a company in Latvia may appear and rely on that, the company must have an absolutely unique and non-repetitive name in Latvian with the content of the form of ownership. In addition, all documentation in Latvia is kept in the Latvian language, and national legislation has certain special features, the understanding of which is not easy for a foreigner. Therefore, when registering a company, many strongly recommend contact with specialists.

The cost of these services varies from 1000 to 2500 euros, depending on what they include.

Taxes in Latvia

The tax system in Latvia is quite attractive for many entrepreneurs.

1. VAT is a standard rate of 21%, a reduced rate is applied to certain types of goods.

2. Income tax – 20%, the rate has been increasing since 2018.

3. The rate of progressive income tax is 20-31.4%

4. Social tax – 35.09%, monthly – 11% of the taxpayer’s pay and 24.09% transferred by the employer.

5. Real estate tax – 0.2-3% of the cadastral value of the property.

6. Dividend tax – dividends and similar income are not subject to income tax if the enterprise income tax of 20% has already been applied to them in accordance with the new law “On corporation tax” or corporate income tax or when the tax was paid abroad. Dividends paid from profits taxed on the enterprise’s income until December 31 2017 in 2018 and 2019 will be subject to income tax of 10%.