Company Formation in Latvia

Advantages of Company Formation in Latvia

1. Latvia is an EU member state;
   As a member of the European Union, Latvia provides entrepreneurs with direct access to the European market.
2. Low tax rates;
   The tax rate in Latvia depends on the company’s business activity and certain other factors, but in most cases it is 20%, which is relatively low by European standards.
3. Very simple company registration procedure;
   A company in Latvia can be registered in just two days by submitting only two identification documents in advance.
4. No residency requirements for shareholders;
   Company formation in Latvia is available to both residents and non-residents. This means that a Latvian company can be established with 100% foreign ownership, which is convenient and helps save time and costs associated with finding a local partner.
5. Possibility to obtain a residence permit based on company registration.
   Business immigration is popular in Latvia, allowing entrepreneurs and their family members to apply for a residence permit after establishing a company.

Key Considerations When Registering a Company in Latvia

Before registering a company in Latvia, it is important to take into account the following aspects:

• Latvian language;
  All documents will be prepared in Latvian, which often requires regular translation and notarization of documents.
• Annual reporting requirements;
  Every company registered in Latvia is required to prepare and submit annual financial statements that reflect all income and expenses.
• Global taxation principle for resident companies;
  Resident companies in Latvia are subject to global taxation, meaning they must pay tax on profits earned worldwide.
  Non-resident companies, on the other hand, pay tax only on income derived from sources within Latvia.
• Payment of share capital.
  For the most common legal form — a Limited Liability Company (SIA) — the minimum share capital is EUR 2,800. Founders must pay at least 50% of the share capital before registration, and the remaining amount can be paid within one year after registration.

Legal Forms of Companies in Latvia

Company formation in Latvia requires choosing its legal form. The most common legal forms in Latvia include:

• Limited Liability Company (Sabiedrība ar ierobežotu atbildību, SIA).
  The shareholders of the company are not personally liable for its obligations and are responsible only up to the amount of their contributions. This legal form is best suited for small and medium-sized businesses.
• Joint Stock Company (Akciju sabiedrība).
  The share capital of a joint stock company is divided into a specific number of shares. In Latvia, there are two types of joint stock companies: public and private. This form is typically used for medium and large-scale businesses.

Company Registration Procedure in Latvia

The process of company formation in Latvia begins with the collection of necessary documents. To start the procedure, identification documents for all company participants are required (please check with our specialists), as well as the following information:

• 2–3 proposed company names, listed in order of priority;
• the structure of the future company (indicating the director, shareholder, and beneficial owner);
• the intended business activity of the company.

Once all required documents and information have been received, the registration process can begin immediately. From collecting the necessary documentation to receiving the final set of corporate documents, the procedure includes the following stages:

1. Verification and approval of the company name — this process usually takes no more than one day;
2. Preparation of the forms and documents required for submission to the Latvian Company Register;
3. Opening an escrow account and depositing the share capital amount.

4. Company registration procedure. The average registration period is 2–5 business days from the date of submitting all required forms and documents to the Register;
5. Preparation of the company’s statutory documents and production of a company seal (if required);
6. Notarization and apostille of documents (if required). The notarization process takes approximately 2–3 days, while apostille certification takes about 6–8 days. Latvia is a party to the Hague Apostille Convention.

Company Taxation in Latvia

When it comes to taxation, it is essential to determine whether a company is a Latvian tax resident or not. If a company is considered a Latvian resident (i.e., it is registered in the Latvian Company Register or has its place of effective management in Latvia), its profits are taxed on a worldwide basis. Non-resident companies, on the other hand, are taxed only on profits derived from sources within Latvia.

• Corporate Income Tax in Latvia

The corporate income tax rate in Latvia depends on the nature and specifics of the company’s business. As a general rule, the corporate tax rate is 20%. However, small enterprises may qualify for a reduced rate of 15% if they meet certain turnover-related criteria.

• Value Added Tax (VAT) in Latvia

The standard value added tax (VAT) rate in Latvia is 21%, although reduced rates apply to certain categories of goods and services.

Accounting and Reporting in Latvia

Registering a company in Latvia entails certain obligations, including the mandatory preparation and submission of annual financial statements. All companies registered in Latvia are required to file annual reports containing key information about the company’s financial performance.

As a rule, the financial reporting period coincides with the calendar year, but it may be changed at the company owners’ discretion.

The company’s annual report must be submitted to the Latvian State Revenue Service.

Companies have four months to prepare and submit their reports. Late submission may result in penalties, so it is essential to carefully monitor deadlines.

Conclusion

Registering a company in Latvia can help address key business objectives: optimized taxation, a business-friendly environment, government support for entrepreneurs, simplified company registration, and more. Latvia is increasingly attracting interest from entrepreneurs in the post-Soviet region and could soon become the top choice for doing business.

If you are interested in this jurisdiction or want to learn more about Latvia, please contact us.

How We Can Help

• Advise on the most suitable company form according to your preferences;
• Assist in collecting documents and provide guidance on business activities, company structure, and related matters;
• Submit documents and information to the registration authority;
• Handle communication with the registration authority on your behalf;
• Prepare the set of statutory documents for the registered company;
• Assist with notarization of documents if required;
• Help open a bank account;
• Prepare documents for applying for a residence permit in Latvia;
• Send documents to the address you specify.