Registration of a company in Latvia

1. Economy and Legislation of Latvia: Excellent For Starting a Company

Important economic changes are underway in Latvia following the country’s independence in 1991 and a transition to a free-market economy. Privatization is mostly complete, except for some of the large state-owned utilities. Latvia’s favorable geographic location and moderate climate allow for year-round freight transport. Nation’s exports include textiles, wood, metal products. Latvia imports oil, chemical products, machinery. The government’s radical monetary policy has ended Latvia’s mid-2000s crisis and returned the country to economic growth. The IMF program successfully concluded in 2011. Since then the economic situation has improved showing strong growth forecasts.

About one-third of the national GDP is comprised of foreign direct investment. American companies represent approx. 10% of Latvia's total foreign direct investment. However, foreign investment in Latvia is still modest compared to the levels in Northern and Central Europe.

Prifinance lawyers and company formation agents with vast expertise in company formation in Latvia will assist you with company registration by directing how to follow some mandatory steps.

2. General Requirements for Company Formation in Latvia. Business and Finance Regulations

Latvia implements a series of EU-directed nontariff trade barriers including technical and product-specific regulations, subsidies, and quotas. Regulations on money laundering have been solidified. Property rights are honored in Latvia. Judicial independence is overall respected.

Below are the main steps you’ll need to follow in order to start a company in Latvia:

• Choose a legal form appropriate for your business.
• Pick a name and register the legal address of your company.
• Prepare the company’s by-laws: Decision of Foundation and the Articles of Association.
• Sign the company’s by-laws and certify signatures before a notary public (there is an option to submit and sign documents electronically).
• Open a business bank account in Latvia.
• Get registered with the Register of Enterprises by submitting all the documents required.
• Make all required payments.

3. Advantages of Latvian law for a new Company Formation. Types of Companies in Latvia

The overall legal framework is relatively effective and the rule of law is honored in Latvia. Rules and procedures regarding the formation and operation of businesses are generally not burdensome. The Commercial Law governs the company formation.

Any business intending to operate in Latvia must apply for registration with the Commercial Register and proceed afterwards to incorporation in one of the following forms:

• an LLC (SIA) - the most common legal form in Latvia with 72% of all businesses incorporated as LLCs. One or more physical or legal entities can establish an LLC.
• a JSC (SA) - the company's capital consists of the total shares in the fixed capital invested by the shareholders. The JSC shares can be exchanged and traded on stock markets.
• A branch or a representative office - typically foreign companies establish their presence in Latvia through a representative office or a branch, and
• A sole trader is a private entrepreneur/freelance professional.

4. Specifics of Taxation in Latvia

The corporate income tax (CIT) rate in Latvia is 20%. As of 2018, the corporate tax rate on reinvested profit is 0%. In other words, all undistributed corporate profits are tax-exempt. This exemption includes both active (trading) and passive (sales of dividends, interest, royalties) profits. Both Latvian resident and non-resident businesses incorporated in Latvia are subject to this tax regime.

In Latvia, the standard VAT at 21% rate is applicable to all goods and services, with the reduced rates of 12% for baby food, pharmaceutical products, medications for disabled, passenger transport, books, newspapers, accommodation services, district heating and 0% for export operations.

5. List of Required Documents For Company Formation in Latvia

Your filing for incorporation in Latvia should include a set of the following documents:

• A Decision on Foundation (equivalent to Memorandum of Association in the West European countries),
• Legal address and office lease contract,
• Articles of Association and partnership agreement (if a business has more than one founder),
• Any documents you need to open a business bank account,
• Founders’ passports or IDs,
• An application for entering a company in the Register,
• State duty payment confirmation.

The above set of documents for filing is generic, it varies case by case.

6. Starting up a Business in Latvia with the Support of Prifinance

For support with business incorporation in Latvia, please contact Prifinance lawyers and we would be delighted to assist you.