DOING BUSINESS IN LATVIA IN 2020
Since 2003, Healy Consultants Group PLC has assisted our Clients with business registration in Latvia. Our services include i) Latvia company formation ii) government license registration iii) corporate bank account opening services in Latvia and abroad iv) employee recruitment v) visa strategies and vi) office rental solutions in Latvia.
Summary table of Latvia company registration
|Summary||LLC||Free zone LLC||Joint stock company||Representative office||Foundation|
|Also known as||SIA||Special license company||AS||Representative office||Nodibinājums|
|Best use of company?||All products and services||Manufacturing and export trading||To secure public funding||Marketing & research||Investment and wealth management|
|How soon can you invoice Clients/sign sales contracts?||2 weeks||6 weeks||4 weeks||Cannot trade||4 weeks|
|How soon can you hire staff?||2 weeks||6 weeks||4 weeks||3 weeks||4 weeks|
|How soon can you sign a lease agreement?||1 week||1 week||1 week||1 week||1 week|
|How long to supply corporate bank account numbers?||4 weeks||4 weeks||4 weeks||4 weeks||4 weeks|
|How long to supply company registration / tax numbers?||2 weeks||6 weeks||4 weeks||3 weeks||4 weeks|
|Corporate tax rate on annual net profits?||20%||4%||20%||Cannot trade||0%|
|Limited liability entity?||Yes||Yes||Yes||No||Yes|
|Government grants available?||Yes||Yes||Yes||No||No|
|Government approval required for foreign owners?||No||No||No||No||No|
|Resident director/partner/manager/ legal||No||No||No||No||No|
|Minimum paid up share capital?||€ 2,800||€ 200,000||€ 35,000||None||€ 1|
|Can bid for Government contracts?||Yes||Yes||Yes||No||Yes|
|Corporate bank account location?||Swedbank||Blue Orange Bank||Rietumu||Citadele||SEB|
|Can secure trade finance?||Yes||Yes||Yes||No||No|
|VAT payable on sales to local customers?||21%||21%||21%||Cannot trade||21%|
|Average total business set up engagement costs?||€ 8,990||€ 12,790||€ 10,500||€ 8,730||€ 8,990|
|Average total engagement period?||3 months||3 months||3 months||3 months||3 months|
Latvia business setup summary
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Advantages and disadvantages
Advantages of Latvia company registration
- A Latvian limited liability company can be incorporated with only 1 director and 1 shareholder, who can be of any nationality. The minimum paid-up share capital required is €2,800 and our Clients do not need to travel to complete engagement;
- Latvia is an attractive location for the formation of a holding company because:
- Latvia is one of the best places in Europe to avoid taxation on capital gains. All capital gains derived from sale of both EU and non-EU shares (excluding those from black listed jurisdictions) are tax exempt, without i) duration and ii) ownership threshold requirements;
- Dividends received from Latvian and EU subsidiaries are tax exempt. Dividends from non-EU subsidiaries are also tax-exempt if the holding company holds at least 25% of the capital and voting rights;
- There are no withholding taxes imposed on payments of i) dividends ii) royalties and iii) interests to non-residents, unless the receiving entity is based in one of the 63 black listed jurisdictions which includes Bermuda, Hong Kong, Jersey and UAE;
- Our foreign Clients can easily repatriate income generated by their holding company abroad, as Latvia does not impose any exchange controls;
- Latvia has an excellent reputation as part of the Eurozone and has a broad network of 57 double tax treaties with countries including Canada, China, Singapore, UK and the United States;
- Because of its good reputation and tax incentives, an increasing number of businessmen are choosing Latvia over other European tax haves such as Cyprus.
- Our Clients will find Latvia a good base for opening a manufacturing company because:
- Companies based in the four Latvian Special Economic Zones enjoy i) up to 80% rebate on corporate income tax ii) up to 80% rebate on real estate tax iii) exemption from withholding taxes and custom duties iv) and VAT exemptions on certain products;
- Our Clients who intend to invest more than €4.3 million can benefit from tax rebates of i) 25% of initial investments up to €50 million and ii) 15% of initial investments exceeding €50 million;
- Industrial rental price can be as cheap as €2 per sq.m./month, one of the lowest figures in the EU;
- Labor costs are low at i) a minimum wage of €320 per month and ii) average wage of €544 per month;
- Negotiating employment contracts in Latvia is convenient since i) Latvian employment contracts are the 24th most flexible in the world and ii) only 13% of employees are union members iii) average severance pay is only 10 weeks of salary;
- Communicating with employees will be easy because close to two thirds of the Latvians under 40 speak both Russian and English;
- Employers are allowed to pay overtime work at the regular pay rate;
- Our Clients can benefit from several labor related incentives including i) free of charge vacancy registration ii) grants of up to €213 per month to employers hiring young unemployed persons and iii) information technology training for micro enterprises.
- Like Portugal, the Latvian government seeks to attract foreign entrepreneurs by issuing Latvian Golden Visas, ideal for those planning for long term migration to Latvia. Compared to other European countries, the minimum investment required (€150,000) to obtain the visa is the lowest in Latvia. See also this page for more information on the different ways to secure residency in Europe;
- The Latvian economy has earned a world-wide recognition and reputation due to its membership in the NATO and the European Union (EU) which further benefits the companies with:
- An access to a huge and diverse consumers market covering more than 100 million consumers in the dynamic markets of the Baltic Sea Region;
- Latvia is now subjected to the Euro Transition Law; therefore, all Latvian entities can now directly transact in Euros. Being a more stable and predictable currency that is highly integrated with the international financial markets, direct dealing in Euros has significantly improved Latvia’s credit ratings. As a result, the country is increasingly witnessing an inflow of foreign investments;
- An internationally secure environment to conduct business which is a result of i) participation in overseas operations; ii) enhancement of crisis management methodologies for civilians; and iii) cooperation with EU partners in all possible ways.
Disadvantages of Latvia company registration
- Resident companies in Latvia suffer unfavorable compliance requirements including:
- All documents required and issued by the Latvian government are in Latvian, and thus require translation;
- Businesses must be audited if they fall under two of the following three criteria i) over €800,000 in annual turnover ii) over €400,000 in assets iii) more than 25 employees;
- Directors’ details are available for public viewing after business incorporation.
- Companies in Latvia suffer from lack of business opportunities because:
- Our Clients’ sales in Latvia will suffer due to i) a population of only 2 million ii) a purchasing power of only €13,900 per person per year iii) a high unemployment rate of close to 10%;
- Our Clients will face tough competition from multinational corporations as almost 70% of goods sold in the country are imports;
- Latvian businesses that rely on road transportation for delivery of goods suffer greatly, due to i) the 4th worst quality of roads in the EU and ii) at least 17 hours of driving required to reach Germany – the closest large market in the EU.
- Latvia based companies have trouble finding performing employees because the Latvian workforce is inefficient compared to other EU countries. Latvians are ranked 25th out of 27 EU countries for their productivity per hour worked;
- Foreign entrepreneurs should be aware of the risks associated with doing business in Latvia because:
- Latvia is the 10th worst country in the EU for corruption. Businessmen will additionally find that inefficient government bureaucracy is the most problematic factor for doing business in Latvia;
- Our Clients should be careful about maintaining a large amount of assets in their corporate account in Latvian banks, as they can be more susceptible than other EU banks to bankruptcies. Latvia’s second largest bank Parex filed for bankruptcy in 2008 and Latvijas Krajbanka filed for bankruptcy in 2011;
- Clients remitting their incomes abroad will find their transactions closely scrutinized, as Latvian banks have come under fire for engaging in money laundering.
- Our Clients’ earnings in Latvia will be greatly damaged by the ongoing Ukraine crisis because:
- Their business will face skyrocketing energy costs if Russia, the sole supplier of natural gas in Latvia, decides to cut gas supplies following additional sanctions by the EU;
- Our Clients’ businesses in Latvia are unable to sell food products to Russia because of the food embargo Russia has imposed on the EU. Future embargos on other products are also highly likely;
- Latvian based businesses are concerned about the risk of Russian intervention similar to the one in Ukraine, because 26% of the Latvian population is of Russian origin.
- Latvia is an unattractive destination for Research & Development (R&D) based companies as there seems to be an absence of networking between academic research and the commercial institutions due to lack of/ no provision of funding by the latter to the former. As a result, researchers in academic institutions are not likely to share their novelty and innovation with the commercial companies to develop upon in Latvia.
Best uses for a Latvia company
- A Latvian entity is a good vehicle to trade with European customers, thanks to a low corporate tax rate of only 15% and inexpensive business setup costs;
- Our Clients willing to open a SEPA corporate bank account often choose Latvia for the location of the same, as the local banks tend to have very attractive bank account setup and maintenance fees and are experienced with offshore customers.
- Time to incorporate: Four weeks
- Cost to set up: €8,990
- Minimum capital: €2,800
- Physical office required: No
- Shareholders: 1
- Directors: 1
- Company secretary: No
- Resident director: No
- Corporate tax rate: 15%
- Corporate tax base: Worldwide
- Shelf companies: Available
- Main company type: SIA company
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Useful links for Latvia
Government and public authority websites:
- Latvia Government
- Ministry of Finance
- Investment and development agency of Latvia
- Register of Enterprises
- Central Bank of Latvia
- Latvia Stock Exchange
- Latvia Statistical Institute
- Latvia yellow pages
- Latvia airports
- Doing business 2020 by the World Bank – Latvia Economy profile
- Taxation and Investment in Latvia
- Corporate Governance in Latvia