One of Latvia’s main attractions for investors is the country’s low corporate income tax rate. In 2018, the standard rate is 20%, while some costs are subject to a 25% effective tax. Real estate taxes, value-added taxes, taxes on natural resources, and other taxes, such as social security payments, are additional taxes that apply to businesses. You should consider the following factors when forming a corporation:
Paperwork
The language of all papers shall be Latvian. Regular document translation and certification are often required because of this.
The need to provide yearly reports
Every firm with registration is required to create and submit yearly reports outlining all of its earnings and costs.
Principle of global taxation for resident businesses
Companies that are residents of Latvia are subject to the global concept of taxation, which requires them to report and pay taxes on worldwide earnings. If a non-resident business generates income in the country or from sources on Latvian territory, it is only required to pay taxes on the income generated on Latvian territory.
Making the permitted capital payment
The minimum share capital for the LLC (SIA), the most common type of business, is 2,800 euros. Before direct registration, SIA founders are required to contribute at least half of the permitted capital; the remaining balance may then be paid during the year.
Company structure and legal structures in Latvia
Selecting a company’s organizational and legal structure is the first step in registering. In Latvia, the following organizational and legal structures are among the most common:
Limited liability company (SIA)
Members of the company are not personally liable for the company’s debts; rather, they are solely accountable for the number of their contributions. This company structure and legal structure are perfect for small and medium-sized enterprises.
Joint-stock business (AS)
A joint stock company’s authorized capital is split up into a certain number of shares. Both open (public) and closed (non-public) joint stock firms exist in Latvia. Most medium-sized and large-sized firms are operated by this kind of corporation.
Process for registering a company in Latvia
The gathering of paperwork is the first step in the registration of a corporation. You will need the following information, as well as identity papers for each firm member, before you may begin the process:
- 1-2 names of the firm in priority order
- Its organizational structure (director, shareholder, beneficiary)
- its primary line of business
The registration process will start right away when all the required paperwork and information are received. The registration procedure entails:
Selecting the right kind of business
The single proprietor, the limited liability company (SIA), the joint stock company (SA), the branch, and the representative office are the four basic forms of business organizations in Latvia. Each of these business structures has distinct qualities and is best suited to a certain kind of company depending on its size.
Creating the articles of incorporation
The Memorandum of Association (Decision to Found the Corporation) and the Articles of Association, which include all the information about the Company, are the constitutive papers needed for a company in Latvia.
Deposit the share capital
This phase also entails creating a bank account in Latvia where the required minimum share capital will be placed, depending on the kind of business.
Register with the Registry of Enterprises
This entails submitting to the Register of Enterprises the required documentation, including the company’s constitutive papers, the founders’ identity documents, forms, etc.
Companies may begin their business operations and take care of any additional tasks, such as employing staff, after they have registered. It may be necessary to get various industry-specific special licenses and licenses, depending on the selected company area. The corporate management requirements, as well as the accounting and auditing requirements, will vary depending on the selected company structure, with joint stock companies being subject to more onerous regulations while simpler business kinds like the sole trader have fewer needs.
