Latvia Company Formation

Why Latvia?

A Latvian company is an ideal structure for conducting international business tax-efficiently. This guide highlights the benefits of establishing a company in Latvia, recommended business activities, the registration process, and other essential information. We hope this article helps you assess whether a Latvian company can add value to your business and guide you through the formation process. More information regarding the Latvian tax system you can find here.

What are the advantages?

Strategic Location. Company formation in Latvia offers opportunities to trade with both European and Eastern markets. As a European Union member, Latvian companies can access the EU markets. Latvia’s strategic location and familiarity with the Russian language and market also facilitate entry into Eastern markets.

Developed Infrastructure. Latvia boasts numerous business development centers, including five Free Ports, Special Economic Zones, and over 10 business parks. The country offers excellent transportation options by sea, road, and air, and has one of the fastest internet speeds globally, ensuring robust international connectivity.

Tax Incentives. Latvia offers significant tax incentives, making it competitive in Europe. Corporate income tax is only payable on distributed profits, not on retained earnings, which are taxed at 20% on gross dividends. Latvian tax residents also pay no tax on incoming dividends from foreign sources.

Ease of Doing Business. The company formation process in Latvia is straightforward, with laws that equally favour foreign and local investments. Latvia provides a supportive business environment, a skilled workforce, and lower business expenses compared to many European countries. The World Bank’s Doing Business Survey 2020 ranked Latvia as the 21st easiest place to do business globally.

Simple Management. A Latvian company can be fully foreign-owned and managed by a board with at least one member, who can be a non-resident.

Cost Savings. Forming a company in Latvia can reduce administrative costs and streamline business processes. The favourable tax regime and holding company structures provide opportunities for tax savings and efficient profit repatriation.

Immigration Benefits. Operating a Latvian company allows for obtaining a residence permit in Latvia, enabling business activities throughout the EU. 

What business activities to do in Latvia

1. Trading Company. Ideal for trading within the EU and CIS countries. Latvia’s geographical position and transport capabilities make it a hub for East-West trade. Latvian companies can be registered as VAT payers for intra-community supplies, with zero-rated VAT on European sales and recoverable input VAT.
2. Contract Manufacturer. Foreign groups often set up entities in Latvia for contract or toll manufacturing due to the motivated workforce, low costs, and favourable tax regime—0% corporate income tax on reinvested profits.
3. Holding Company. Latvia’s holding company regime is attractive with a participation exemption for holdings over three years. Capital and profit repatriation are generally free from withholding taxes, except for payments to offshore jurisdictions.
4. Shared Service Centers. Latvia’s developed infrastructure, skilled workforce, and low costs support the creation of service centers for logistics, IT, etc.
5. Stock Trading or Investment. Income from the sale of stocks traded on the stock exchange is tax-exempt until distributed as dividends, making Latvia suitable for trading listed securities.
6. Cryptocurrency Trading. Gains from cryptocurrency sales are not taxed until distributed as dividends, allowing for tax-free trading within the company.
7. Micro-business. Companies with annual turnover under EUR 40,000 can opt for a micro-tax regime, reducing the tax burden to 15% of revenues instead of paying corporate income and payroll taxes. This option suits service companies with low costs and high-profit margins, though changes were made as of January 1, 2021.
8. Branch of a Foreign Company. A foreign company can establish a Latvian branch for trading within the EU and third countries. This branch offers transparency, meeting bank requirements for account opening and compliance with tax information exchange.
9. Representative Office. A foreign company can set up a representative office in Latvia for marketing and support operations. It is not subject to corporate income tax and pays only payroll taxes, often used to obtain temporary residence permits.

How we can help

We supply the complete scope of services required for company formation in Latvia and ensure additional services, including accounting and legal services, as follows:

1. The foreign company branch registration with the Registry of Enterprises
2. Registration of a Latvian company with the Registry of Enterprises of Latvia
3. Registration of a permanent establishment of the foreign company with the State Revenue Service
4. Registration of a representative office of a foreign company with the Registry of Enterprises
5. VAT registration with the State Revenue Service. 
6. Accounting services.
7. Legal address

Please contact us at info@taxwise.lv or call +371 29274911.