Globe Capitalist / Company formation / Latvia
Find out the steps for setting up a company in Latvia a strategic gateway to the European market. The tax advantages, and the most popular business sectors and essential information for entrepreneurs in this comprehensive guide.
Starting at
$ 1308
Latvia, a country with a thriving business landscape, beckons entrepreneurs with its enticing opportunities. As you set your sights on doing business in this Baltic gem, let us guide you through the essential details you need to know.
PopulationApproximately 1.9 million (Source: World Bank, 2023)
| Country | Latvia |
| Language | Latvian (62.3%), Russian (37.2%), Other (0.5%) |
| Time in Latvia | GMT+2 |
| Currency | (€, EUR) |
| Religion | Christianity (78.3%), No Religion (18.3%), Other (3.4%) |
| Tax regime | The tax rate in Latvia varies from 20% to 31.4% |
| VAT | Value Added Tax (VAT) is levied at a standard rate of 21% |
| Overage salary | The average salary in Latvia is €1,240 per month (Source: Central Statistical Bureau of Latvia, 2023) |
| Types of incorporations | Limited Liability Company (SIA), Joint Stock Company (AS), General Partnership (PS), Limited Partnership (KS), European Company (SE), European Cooperative Society (SCE) |
Opening a company in Latvia offers numerous advantages for the discerning entrepreneur. The country boasts a strategic location in the European Union, providing easy access to a vast consumer market and an efficient transportation network. Latvia’s favorable tax regime encourages business growth and attracts investors looking for tax optimization opportunities.
Additionally, the country’s business-friendly policies and competitive labor costs make it an ideal destination for startups and companies seeking expansion. The local government’s focus on innovation and technology further bolsters its appeal for tech entrepreneurs seeking to tap into a skilled talent pool. Furthermore, Latvia’s strategic location in the heart of the Baltics offers a gateway to both Eastern and Western markets, making it an excellent choice for entrepreneurs with global ambitions.
Latvia’s geographic position at the crossroads of Northern and Eastern Europe provides businesses with a gateway to both EU and non-EU markets. This strategic advantage enables seamless trade and access to a vast consumer base.
Latvia offers an attractive tax system, including a competitive corporate income tax rate of 20% on distributed profits and 0% on reinvested profits. Additionally, the progressive personal income tax encourages entrepreneurship and investment.
Latvia’s business-friendly policies and streamlined bureaucracy facilitate easy company formation and operational efficiency. The country also offers various incentives and grants to support startups and foreign investments.
With a skilled and multilingual workforce, Latvia provides a cost-effective labor pool. The combination of talent and competitive wages makes it an ideal destination for companies seeking to optimize costs.
As an EU member state, Latvia offers access to various funding programs and grants, supporting research, innovation, and business development initiatives.
Growing Economy: Latvia’s economy has been steadily growing, presenting ample opportunities for entrepreneurs to tap into emerging sectors and expand their business ventures.
While English is widely spoken in the business community, Latvian is the official language for legal documentation and government interactions. Foreign entrepreneurs may face challenges in navigating legal procedures and contracts in the local language.
With a relatively small population, Latvia’s domestic market may be insufficient for businesses focused solely on local consumers. Companies aiming for rapid growth may need to explore international markets to expand their customer base.
Certain industries, such as tourism and agriculture, may experience seasonal fluctuations due to Latvia’s climate. Entrepreneurs in these sectors need to devise strategies to manage seasonal demand and revenue fluctuations.
Despite efforts to streamline procedures, some bureaucratic processes may still exist, which could prolong the time it takes to establish a company or obtain necessary permits.
In some sectors, such as media and defense, foreign ownership may be subject to restrictions. Entrepreneurs looking to invest in these industries should carefully review the relevant regulations.
Latvia’s open labor market and its citizens’ willingness to seek work abroad can lead to occasional labor shortages in certain industries.
| Type | Cost of Incorporation | Minimum Share Capital | Taxes |
|---|---|---|---|
| SIA | Low | €2 | 20% on distributed profits, 0% on reinvested profits |
The Limited Liability Company (SIA) is the most popular and widely used business structure in Latvia. It offers limited liability protection to shareholders, safeguarding their personal assets from business-related risks. The incorporation process is relatively simple and cost-effective, with a minimum share capital requirement of just €2. The SIA is an ideal choice for small to medium-sized businesses, startups, and foreign investors exploring the Latvian market. It provides flexibility in management and allows for smooth decision-making.
| Type | Cost of Incorporation | Minimum Share Capital | Taxes |
|---|---|---|---|
| AS | Medium | €25,000 | 20% on distributed profits, 0% on reinvested profits |
The Joint Stock Company (AS) is a suitable choice for businesses planning significant growth and seeking to raise capital through public offerings. The AS requires a higher minimum share capital of €25,000, making it a preferred option for larger enterprises and joint ventures. It offers limited liability protection to shareholders and follows more stringent reporting and disclosure requirements compared to the SIA. The AS is well-suited for companies with a long-term vision for expansion and larger-scale operations.
| Type | Cost of Incorporation | Minimum Share Capital | Taxes |
|---|---|---|---|
| PS | Low | Not applicable | Partners are taxed individually |
The General Partnership (PS) is a simple and affordable business structure suitable for small businesses and startups with multiple owners. In a PS, two or more partners join forces to carry out a business together, sharing both profits and liabilities. The partners are personally liable for the partnership’s debts and obligations. The PS does not require a minimum share capital, offering flexibility and ease of setup. However, partners should carefully consider the legal and financial implications of unlimited liability before choosing this option.
| Type | Cost of Incorporation | Minimum Share Capital | Taxes |
|---|---|---|---|
| KS | Medium | Not applicable | General partners are taxed individually, limited partners are taxed on profits received |
The Limited Partnership (KS) is a specialized business structure that combines general partners, who have unlimited liability for the company’s debts, with limited partners, whose liability is limited to their contributions to the partnership. KS is often used for investment funds, real estate ventures, and other projects where investors seek limited involvement and risk. The general partners manage the business, while the limited partners provide capital without participating in day-to-day operations. This structure offers a unique balance of risk and return for different types of investors.
| Type | Cost of Incorporation | Minimum Share Capital | Taxes |
|---|---|---|---|
| SE | High | €120,000 | 20% on distributed profits, 0% on reinvested profits |
The European Company (SE) is a prestigious and versatile business structure that allows companies to operate across multiple EU member states with a single legal entity. The SE is subject to EU regulations and requires a higher minimum share capital of €120,000. It is suitable for large multinational corporations seeking to establish a pan-European presence. The SE structure facilitates streamlined corporate governance and allows businesses to benefit from economies of scale while adhering to European standards and regulations.
| Type | Cost of Incorporation | Minimum Share Capital | Taxes |
|---|---|---|---|
| SCE | High | €30,000 | 20% on distributed profits, 0% on reinvested profits |
The European Cooperative Society (SCE) is a specialized form of incorporation designed for cooperative businesses with a cross-border presence within the EU. It requires a minimum share capital of €30,000 and follows EU regulations for cooperatives. The SCE structure allows cooperatives to operate efficiently across borders, promoting cooperation and mutual benefits among members. This business form is well-suited for cooperative enterprises with international operations, encouraging collective ownership and decision-making.
These documents need to be notarized and submitted to the Register of Enterprises of Latvia. Upon successful registration, the company will receive a registration number and become a legal entity. Additionally, entrepreneurs may need to open a bank account, obtain necessary permits, and fulfill any industry-specific requirements. Engaging a legal advisor or a professional service provider can simplify the incorporation process and ensure compliance with all legal obligations.
It is advisable to research different banking institutions and compare their service fees, transaction costs, and suitability for specific business requirements. Additionally, many banks offer personalized support and guidance for foreign entrepreneurs seeking to set up businesses in Latvia, making the banking process smoother and more accessible.
Companies are also required to file tax returns and comply with tax reporting obligations, including Value Added Tax (VAT) returns. Entrepreneurs should engage qualified accountants or accounting firms familiar with Latvian regulations to ensure accurate and timely compliance with accounting and reporting requirements.
Latvia’s labor market is known for its flexibility and relatively low labor costs compared to other European countries. However, employers must ensure compliance with labor laws and stay updated on any changes to regulations to maintain a productive and legally compliant workforce.
Latvia also offers various tax incentives and deductions for specific industries and investments. Entrepreneurs should consult tax advisors to optimize their tax planning and benefit from available incentives.
Additionally, they are responsible for convening and conducting shareholder meetings, ensuring timely filing of statutory documents, and upholding corporate governance standards. Understanding and fulfilling these legal obligations are essential for directors to protect the company’s interests and avoid potential liabilities.
Having full control over the company’s management and decision-making process enables foreign investors to implement their business strategies effectively. However, it is essential to comply with all legal requirements and tax regulations applicable to foreign-owned companies in Latvia.
They can assist in identifying available incentives and opportunities tailored to the business’s needs. Entrepreneurs should explore the options and incentives provided by LIAA to make informed investment decisions and maximize the benefits of setting up a business in Latvia.
Additionally, EU funding programs and grants are available to eligible businesses for research, innovation, and expansion projects. Entrepreneurs should carefully evaluate their financing needs and explore different funding sources to secure the most suitable and cost-effective financing for their business ventures.
The country’s efficient transport infrastructure and logistics capabilities make it an ideal distribution hub. Furthermore, the renewable energy sector is gaining momentum, offering prospects for green investments. Entrepreneurs should conduct market research and consider sectors aligned with their expertise and long-term goals.
ALTUM provides financial support, such as seed funding and business loans, to innovative startups and SMEs. Additionally, various events, conferences, and hackathons are organized to promote innovation and connect entrepreneurs with potential investors and partners.
Additionally, Latvia promotes eco-friendly practices, waste reduction, and resource efficiency. Sustainable business practices are increasingly recognized and appreciated by consumers, leading to greater market appeal and reputation for environmentally responsible companies. Entrepreneurs keen on incorporating sustainability into their business strategies can benefit from the country’s growing focus on green initiatives.
LIAA helps connect foreign entrepreneurs with local partners, suppliers, and customers, facilitating market entry and expansion. Moreover, the agency actively promotes Latvia’s investment potential through international events, trade missions, and marketing initiatives, attracting global investors to explore the country’s business prospects.
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