Company registration in Latvia
Latvia offers a favourable business climate, with no restrictions on foreign ownership or types of companies that can be registered by non-residents. Company registration in Latvia is a fairly simple process. Moderate taxes and the introduction of various economic zones provide an opportunity to increase income.
The Latvian laws are friendly and provide standing for all types of companies, with different types of ownership. Besides, Latvia has a well-developed infrastructure in line with international standards and lower business costs compared to many European countries.
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Companies that can be registered in Latvia
Before starting a company registration in Latvia, investors need to choose one of the available types of companies. This decision should base on the available capital, the number of shareholders and the desire to expand the company in the future.
In Latvia you can establish a private limited liability company (abbreviated form in Latvian as “SIA”), a private or public joint-stock company (AS), an equity partnership (PS), a limited liability company (KS), or a branch or representative office of a foreign company.
Let’s take a closer look at the organizational and legal forms of companies available for Latvia company registration:
1. Limited Liability Company (LLC) (can be divided into private and public)
An LLC, also known as Sabiedrība ar ierobežotu atbildību (SIA) in Latvian, is the most common business entity in Latvia.
Since an LLC is a separate legal entity from its shareholders, they and directors are not liable for any debts or obligations incurred by the business. They are liable only to the extent of the amount of shares they own.
To incorporate an LLC in Latvia, you need to have a least authorized capital of EUR 2,800. Half of it must be deposited into a temporary bank account before the company’s incorporation in Latvia.
This form of company has minimal requirements, including no residency requirement for the director, which makes company incorporation in Latvia easier for foreigners.
Small business owners can also incorporate an LLC with reduced authorized capital requirements. To qualify for reduced authorized capital, the company must consist of 5 or fewer individual shareholders. Important: all directors of the company must be shareholders of the company.
2. Partnership
A partnership is formed when 2 or more co-owners decide to run a business together.
Since a partnership is not a separate legal entity, the liability of the partners is joint and several. It means that each partner may be liable for all debts incurred by the business.
A partnership is also not a separate taxpayer. Each partner is taxed on its share of the partnership’s profits.
There are two main types of partnerships in Latvia: equity and limited.
In an equity partnership, all partners have unlimited liability. This means that they will be liable for all debts and obligations incurred by the business.
A limited liability partnership has both general partners and limited partners. General partners are responsible for the management of the company and are liable for all debts of the company. Meanwhile, limited partners are not allowed to run the company. They will be liable only for the amount of investment they have in the partnership.
There are no minimum capital requirements for incorporating a partnership in Latvia.
Partners of the Latvian partnership do not have to reside in Latvia or be Latvian citizens.
3. Branch and Representative Office
Foreign companies registered outside of Latvia may establish a branch or representative office.
Latvian branches will be subject to the same corporate tax rates and audit requirements as Latvian LLCs.
The Latvian branch is not recognized as a separate legal entity from the parent company. This means that the parent company will be liable for all debts and obligations of the branch.
Like a branch, a representative office is not considered a separate legal entity from a foreign company.
A representative office is not allowed to engage in any business activity that generates income. Business owners can choose a representative office if their main purpose is to conduct market research and promote the activities of their parent company.
There are no requirements for the minimum paid-in authorized capital.
Profits earned by a subsidiary may be repatriated to the parent company without taxation.
4. Joint Stock Company
To register a Latvian joint-stock company, you usually need at least 1 director and 1 shareholder without any restrictions on residence or citizenship.
The minimum amount of capital required is 35,210 Euros, which must be in the form of cash.
Although this entity is often registered as a private company, it can also be registered as public one. Then such a company must have 3 directors.
5. European Commercial Company
An European commercial company (SE) is a commercial company registered in the commercial register that can transfer its registered office from one EU member state to another without liquidating or incorporating a new company in another EU member state.
An SE can be relocated not only from Latvia to the EU and vice versa, but also to Iceland, Norway, and Liechtenstein, which are not EU members.
The minimum authorized capital of an SE cannot be less than 120,000 Euros.
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Requirements for the formation of a company in Latvia
Company establishment in Latvia involves registration in the state register (Commercial Register of the Republic of Latvia). Once the company’s information is entered into the register, it has the right to conduct business activities.
Since the most common organizational and legal form is an LLC, let’s look at the requirements for a company using its example.
Authorized Capital
The minimum amount is set at 2,800 EUR. At least 50% of the capital must be paid before the company’s incorporation in Latvia, and the rest within the first year of the company’s operation.
Founder
At least one person, no residency requirements. The founder can be either an individual or a legal entity.
Management Board
A management board is appointed to manage the company, which must consist of at least one person, without reference to residency.
Substance Requirements
To get a VAT number and open a local bank account, you need to have an office, and employees, and conduct business activities in the country.
Legal Address
A local address is required for company establishment in Latvia.
The Company Register is public. The Register contains information on the company’s name, legal address, authorized capital, founders and beneficiaries.
Documents required for company formation in Latvia
For company formation in Latvia, you must prepare and submit the following documents:
- Registration application in the prescribed form, certified by a public notary in Latvia;
- Charter of the legal entity;
- Confirmation of payment of the authorized capital;
- Confirmation of the registered address;
- Confirmation of payment of the stamp duty;
- Confirmation of payment of the publication fee;
- Information about the founders;
- Information about members of the management board;
- Confirmation of the right of members of the management board to represent the company;
- Data on the ultimate beneficial owners.
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Benefits of registering a company in Latvia
There are several advantages to opening a company in Latvia.
Political Factors
Democratic power in Latvia is divided between the parliament, the president, ministers and the judiciary system. Elections in Latvia are held every 4 years and are considered relatively fair and transparent.
The new government formed in 2019 has implemented administrative reforms to fight corruption and provide greater access to public services across the country.
Economic Factors
The Latvian government has traditionally been pro-business, as it is a small and open economy that is heavily dependent on exports and imports.
As Latvia is a member of the European Union, companies incorporated in Latvia can easily access the European market.
Latvia’s economy is one of the fastest growing in the European Union. Latvia’s economy is stable, with low inflation and a relatively small budget deficit.
Latvia’s economy is largely privatized and highly competitive.
Technological Factors
The information and communications technology sector is developing rapidly, and this trend is expected to continue.
Thanks to government policies to encourage new startups in the country, the number of companies operating in the information and communications technology sector has been growing in recent years. This includes companies that provide computer services, hardware, software, and telecommunications services.
E-government initiatives to provide public services online have also created more business opportunities.
Environmental Factors
In 2017, Latvia spent approximately 1.5% of total public expenditure on research and improvement of environmental quality. They were focused on waste management facilities, recycling methods, and water resource protection.
The government has developed the Latvian Sustainable Development Strategy to highlight Latvia’s 2030 sustainable development goals and provide solutions for the efficient and sustainable use of cultural, economic, natural, social and human capital.
The main advantages of doing business in this country include:
- access to the European Union market on the same terms as companies in the old European countries;
- ease of registration and doing business;
- relatively low tax burden.
Our assistance in registering a company in Latvia
Company formation in Latvia requires proper planning and the involvement of experienced lawyers. Fintech Harbor Consulting offers a wide range of company incorporation services, as accounting and assistance with opening bank accounts. Regardless of the legal form of legal entity you choose, we offer comprehensive business support.
FHC is a one-stop solution for beginners and experienced entrepreneurs who are wondering where to register a business.
Here are a few reasons why Fintecharbor:
Our specialists regularly improve their skills in various sectors of the economy.
FHC offers full-cycle services, from name registration to registration of a physical office.
We have extensive experience in registering private companies, holding structures, representative offices, and subsidiaries.
We are always on the client’s side and will help you choose the optimal taxation regime and obtain the necessary licenses.
Every step we take is done only with your consent.
After a company formation in Latvia, we will be happy to support you in your further business activities.
How to start a company in Latvia
The process of opening a company in Latvia is quite simple if you follow these steps:
Step 1. Choose the best business structure for company registration in Latvia
It is important to choose the right type of company based on your business structure and long-term goals.
The most common business entity in Latvia is an LLC, which is subject to the minimum requirements of the substance.
Step 2: Choose a company name
The name of your future company must comply with the requirements of the law, in particular, does not coincide with any trademarks registered with the Patent Office.
It is forbidden to use obscene words or ambiguous concepts, as well as the name of government agencies. At the same time, the name must indicate the legal form of the company.
Step 3: Payment of the company's authorized capital and official fees
It is very easy and quick to pay for the share capital of a company in Latvia at any bank. The bank will set up a temporary bank account for this purpose. Then the founder can immediately deposit capital into it, after which the bank will issue a certificate of the amount deposited.
Step 4: Certifying and submitting documents to the Latvian Companies Register
The following package of documents must be submitted to the Company Register:
- Application for registration in the prescribed form (including information on the members of the Board of Directors and the company’s share capital).
- Company’s Charter.
- Memorandum of association (decision on incorporation in case of a single founder).
- Register of shareholders.
- Confirmation of the contribution of the authorized capital (in case of property investment, documents confirming the value of such an investment).
- Consent from each member to be elected to the Board of Directors.
- Signature samples of the members of the Board of Directors.
- Notification of the company’s legal address.
- Document confirming payment of the stamp duty.
- Consent of the immovable property owner to register the legal address of the incorporated company (a lease agreement may be required).
- Document confirming the payment of the fee for publishing information in the official print media of Latvia.
All documents must be in Latvian.
After registration, the customer receives the following documents:
- The decision of the state notary on registration;
- Registration certificate (for an additional fee);
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FAQ
How to open a holding in Latvia?
Opening a holding company in Latvia is a relatively simple process. There are no requirements for the number of founders or the amount of authorized capital.
The director of the company can be a non-resident, which makes this structure suitable for foreign investors interested in incorporating their holding company in the country due to tax advantages.
Another advantage is that a company can be registered in about a week.
Most holding companies are organized as corporations.
Such entities enjoy 0% tax on dividends from non-resident companies and do not pay capital gains tax on the sale of shares.
How much does it cost to start a business in Latvia?
The registration process takes from 1 to 3 business days after the local authorities receive the necessary documents. The amount of the stamp duty paid will depend on the time required to open the company in Latvia.
Payment of the national fee is made on the service portal after the application is completed by the calculated service fee. In cases where it is not possible to submit documents via the service portal, the stamp duty must be paid before submitting the registration application.
The company registration in Latvia is carried out only after the Company Register can verify that the stamp duty has been credited to the Treasury account.
The stamp duty may be paid by transfer to any bank 2 days before the submission of documents electronically or by mail.
Registration within 1-3 business days
Stamp duty for registration – 75,00 Euros
Registration within 1 business day
Stamp duty for registration – 225,00 Euros
Stamp duty does not include notary fees, which can range from 26 to 100 Euros.
There is no stamp duty for registering VAT payers in Latvia.
Do companies in Latvia need to file an annual report?
Companies are classified into 4 categories for accounting purposes, and if 2 of the 3 existing criteria are met for 2 consecutive years, the company may be reclassified accordingly.
Classification criteria include net income, total balance sheet, and average number of employees for a given financial year.
The company must submit its annual report to the Company Register and the Tax Service by April 31 of each year.
The annual report is subject to certification by a licensed auditor if the company meets 2 out of 3 criteria:
- The balance sheet amount is more than 36,600 Euros;
- The annual turnover is over 711,500
- The average number of employees per year is more than 25
What documents are required to register a company in Latvia?
For Latvia company registration in the Commercial Register, you must submit the following documents:
- Application for registration
- Notarized signatures of the co-founders
- Certified charter of the company
- Founders’ agreement
- Document authorizing the election of board members
- Confirmation of convocation of founders to the legal address of the company
- Receipt of payment of stamp duty
- Confirmation of payment for publication in a state newspaper
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