Latvia Company Formation & Taxation FAQ: Everything You Need to Know
Latvia, strategically located in the heart of the European Union, is a top choice for entrepreneurs and international investors looking to establish a business in one of the EU’s most dynamic economies. With its competitive tax rates, skilled workforce, and favorable business environment, Latvia offers numerous advantages for companies looking to expand within the EU and beyond. Understanding the key steps involved in Latvia company formation is essential to ensure a smooth and compliant setup.
This comprehensive FAQ page addresses the most frequently asked questions about setting up a business in Latvia. Whether you are starting a small enterprise, establishing a subsidiary, or setting up an investment holding company, this guide provides essential information on Latvia’s company structures, legal requirements, and the registration process.
Latvia offers various types of business entities, with the most common being the Private Limited Company (SIA), which is suitable for most types of business activities. The country’s attractive corporate tax rate, business-friendly policies, and access to the European Union market make it an ideal location for both local and foreign entrepreneurs.
In this FAQ, we cover critical topics such as company registration requirements, capital and shareholder structure, director appointments, tax obligations, and annual filing requirements. Latvia’s efficient online registration process makes incorporating a business faster than in many other EU jurisdictions, and there are no restrictions on foreign ownership or management.
Whether you are new to Latvia or expanding your international business presence, this guide will help you navigate the company formation process and ensure that your business complies with Latvian laws and regulations.
Frequently Asked Questions About Latvia Company Setup
Latvia offers a strategic gateway to the European Union with a business-friendly environment, low startup costs, and competitive corporate tax rates. Our Latvia company formation FAQ answers the most common questions about registering a business in Latvia, including company types, legal requirements, tax obligations, and registration procedures. Whether you’re forming a Limited Liability Company (SIA) or expanding your international operations, this guide helps simplify the process. Learn about shareholder and director roles, capital requirements, and compliance essentials. Use this FAQ to confidently start your business in Latvia and benefit from its growing economy and access to EU markets.
🇱🇻 Latvia Company Formation FAQs
1. What is a Latvia company?
A Latvia company is a legal entity incorporated under Latvian Commercial Law, offering businesses and investors access to EU benefits, favorable taxation, and a strategic position in the Baltic region. Learn more on our Latvia company formation page.
2. What types of companies can be formed in Latvia?
The most common entity is the SIA (Sabiedrība ar Ierobežotu Atbildību) — a private limited liability company ideal for local and international businesses. Other forms include AS (Joint Stock Company) and partnerships.
3. Who can incorporate a company in Latvia?
Both residents and non-residents may form a Latvian company. The jurisdiction welcomes foreign ownership with minimal restrictions, encouraging international entrepreneurship.
4. How long does Latvia company registration take?
Incorporation typically takes 5–7 business days, depending on the completion of documentation and registration at the Latvian Enterprise Register.
5. What documents are required for incorporation?
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Passport copies of shareholders and directors
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Proof of residential address
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Company name and Articles of Association
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Bank confirmation of share capital deposit
6. What is the minimum share capital for a Latvian company?
The minimum share capital for an SIA is €2,800, but small businesses can start with as little as €1 if registered as a micro company.
7. Do I need a local director or shareholder?
No. Foreign directors and shareholders are permitted. However, having a local registered address in Latvia is mandatory.
8. Can a Latvia company hold assets abroad?
Yes. Latvian companies can own and manage international assets, making them suitable for cross-border investments and EU market access.
9. Is physical presence required to open a company?
Not necessarily. Remote incorporation is possible with power of attorney and electronic signature, allowing non-resident formation.
10. How private is company ownership in Latvia?
While shareholder details are part of the public register, beneficial ownership information is only accessible to authorities and financial institutions, ensuring confidentiality and compliance.
11. Can I open a corporate bank account in Latvia?
Yes. Companies can open accounts with local banks or EU financial institutions. Many investors also use fintech solutions and multi-currency accounts.
12. What are the annual compliance requirements?
Latvian companies must file annual financial statements, maintain accounting records, and submit tax declarations.
13. Can a company be owned by another legal entity?
Yes. Corporate shareholders are allowed, enabling international holding structures or subsidiary formations.
14. How can I dissolve a Latvia company?
Voluntary dissolution is done through the Enterprise Register, following debt settlement, asset distribution, and public notification procedures.
15. Why choose Latvia for company formation?
Latvia offers EU membership, competitive tax rates, fast incorporation, and investor-friendly policies, making it a strategic base for international business. Discover more on our Latvia company formation page.
💰 Latvia Company Taxation FAQs
1. What is the corporate income tax rate in Latvia?
The corporate tax rate is 20%, applied only on distributed profits. Retained earnings are tax-free, encouraging business reinvestment and growth.
2. How does Latvia’s profit distribution tax system work?
Latvia uses a unique deferred taxation model, meaning companies pay tax only when profits are distributed as dividends or used for non-business purposes.
3. Are dividends taxed in Latvia?
Dividends paid to EU or treaty countries are typically exempt from withholding tax, promoting tax-efficient repatriation.
4. Is there VAT in Latvia?
Yes. The standard VAT rate is 21%, with reduced rates of 12% and 5% applicable to specific goods and services.
5. Are there double taxation agreements (DTAs)?
Latvia has signed over 60 DTAs with countries worldwide to prevent double taxation and promote international investment.
6. Are there capital gains taxes?
Capital gains are treated as ordinary income and taxed at 20%, except for certain share disposals within the EU, which may be exempt.
7. What about personal income tax for company owners?
Residents pay 20% on income up to €20,004, 23% up to €78,100, and 31% on income exceeding that — among the most competitive rates in the EU.
8. Are there payroll or social security contributions?
Yes. Employers contribute 23.59%, while employees pay 10.5% toward social insurance and healthcare funds.
9. Can a Latvia company benefit from EU funding?
Yes. As part of the European Union, Latvian companies may access EU structural funds and business grants for development.
10. Are there tax incentives for foreign investors?
Latvia offers investment incentives in special economic zones (SEZs), where companies enjoy up to 80% reductionson corporate and real estate taxes.
11. Does Latvia have a holding company regime?
Yes. Latvian holding companies benefit from no withholding tax on dividends, interest, or royalties paid to foreign subsidiaries.
12. How are losses treated for tax purposes?
Tax losses can be carried forward indefinitely, allowing future offset against taxable distributed profits.
13. Are transfer pricing rules applicable?
Yes. Latvia follows OECD transfer pricing guidelines, requiring documentation for related-party transactionsexceeding defined thresholds.
14. Can a Latvia company be tax resident elsewhere?
A company is considered tax resident in Latvia if its management and control are exercised within Latvia. However, dual residency may be managed under tax treaties.
15. Why is Latvia attractive for international tax planning?
With its 0% tax on retained profits, EU access, and modern business infrastructure, Latvia stands out as a prime European jurisdiction for corporate optimization. Explore more on our Latvia company formation page.
Interested in setting up a company in Latvia?
Visit our Latvia Company Formation page for detailed guidance, packages, and expert support tailored to your needs.
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