Doing business in Latvia, an EU member state, is generally considered straightforward, with no restrictions on foreign ownership in most sectors. Latvia’s key advantages include its strategic location in the Baltic region, a favorable corporate tax system, and a competitive environment for startups and technology.
Here is a comprehensive guide on how to establish a business in Latvia:
1. Choose a Business Structure
The most common legal entity for foreign investors is the Limited Liability Company.
| Entity Type | Latvian Name | Minimum Share Capital | Key Features |
| Limited Liability Company | Sabiedrība ar ierobežotu atbildību (SIA) | €2,800 (at least 50% must be deposited before registration) | Most common. Shareholders’ liability is limited to their capital contribution. No nationality restrictions for shareholders or directors. |
| Micro-Capital SIA | Mazkapitāla SIA | €1 to €2,799 | A simplified, lower-cost option for small businesses, subject to restrictions on shareholders (must be individuals) and turnover. |
| Joint Stock Company | Akciju sabiedrība (AS) | €35,000 (must be paid in cash) | Suitable for larger enterprises or those planning to go public; corporate governance is more complex. |
| Branch Office | Filiāle | None | Not a separate legal entity; the foreign parent company is fully liable for its obligations. |
| Representative Office | Pārstāvniecība | None | Limited to market research and promotion; cannot conduct commercial activities or issue sales invoices. |
2. Company Registration Steps
The registration process is managed by the Commercial Register of Enterprises (UR) and can often be completed in a few business days once all documents are prepared.
- Choose a Company Name and Legal Address: The name must include the entity designation (e.g., “SIA”). You must secure a legal address in Latvia and obtain written consent from the property owner.
- Prepare Incorporation Documents: This typically includes the Memorandum of Association, Articles of Association, and the Shareholders’ Register. These documents must often be notarized.
- Deposit Share Capital: Open a temporary bank account and deposit the minimum required share capital (€2,800 for a standard SIA).
- Submit Registration Application (KR4): Submit the application and all supporting documents (proof of address, proof of capital payment, proof of state fees, etc.) to the Commercial Register. This can be done in-person or online with a Qualified Electronic Signature (QES).
- Register for Taxes: Once the company is officially registered, apply for a Taxpayer Identification Number (TIN) and register for VAT with the State Revenue Service (SRS). VAT registration is mandatory if annual turnover exceeds €50,000 (though voluntary registration is often advisable and permitted sooner).
- Convert Bank Account: Convert the temporary share capital account into a permanent corporate bank account.
- Register Employees and Payroll: If hiring staff, register employment contracts and payroll with the SRS for Mandatory State Social Insurance Contributions (MSSIC).
3. Corporate Tax System
Latvia has a highly competitive and distinct Corporate Income Tax (CIT) system:
- Undistributed Profits: The effective CIT rate on profits that are retained in the company or reinvested is 0%.
- Distributed Profits: CIT is only charged when profits are distributed (e.g., as dividends) or treated as “deemed distributions” (e.g., non-business expenses, transfer pricing adjustments, loans to shareholders).
- CIT Rate on Distribution: The tax is 20% on the gross distributed amount, which effectively means a rate of 20/80 (or 25% of the net dividend amount). Once this corporate tax is paid, the dividend is generally exempt from further personal income tax for Latvian residents.
- VAT Rate: The standard VAT rate is 21%. Reduced rates of 12% and 5% apply to specific goods and services.
4. Key Investment Sectors
The Latvian government actively encourages Foreign Direct Investment (FDI) in several priority sectors, often providing incentives and support:
- Information and Communications Technologies (ICT): Known for its strong digital infrastructure and a high number of ICT graduates. This includes software development, FinTech, and cybersecurity.
- Knowledge-Intensive Bioeconomy: Investment in forestry, wood processing, and sustainable resource management.
- Biomedicine, Medical Technologies, and Pharmacy: R&D and manufacturing in the life sciences sector.
- Smart Energy & Mobility: Development in renewable energy, energy efficiency, and logistics/transportation hubs.
- Global Business Services and Financial Services: For activities such as shared service centers.
- High Value–Added Manufacturing: Precision engineering, photonics, and smart materials.
5. Special Economic Zones (SEZs) and Incentives
Latvia has several Special Economic Zones (SEZs) and Free Ports (e.g., Riga, Ventspils, Liepaja) that offer significant tax benefits, including:
- CIT reduction: Up to 80% or 100% reduction in CIT.
- Real Estate Tax relief: Up to 80% to 100% reduction.
- Dividend Withholding Tax exemption for non-resident investors.
6. Visa and Residence Permit
For non-EU/EEA citizens, a Start-up Visa is available for innovative companies, which grants a temporary residence permit. Other options include applying for a residence permit as a board member or an employee of a registered company.