Latvia

Key benefits

The Republic of Latvia is located in the Baltic Region of Northern Europe and is bordered by Lithuania, Estonia, Belarus and the Russian Federation. Latvia is a full member of the EU, United Nations, NATO, the World Trade Organisation and is part of the Schengen area.

After the economic stagnation of the early 1990’s Latvia posted high GDP growth figures during 1998-2006. During the global financial crisis of 2008-2010 Latvia was one of the hardest hit of the EU member states with a GDP decline of 26.54% during the period. By 2011 Latvia had started to recover and continues to show signs of growth.

Key benefits of Latvia:

  • Latvia is a full member of the European Union
  • Latvian legislation is liberal than other EU Member countries and the process of incorporating is relatively cheap and quick in comparison with other member states.
  • If structured correctly a Latvian company can act as a tax efficient subsidiary for an EU parent company under the EU Parent/Subsidiary Directive. 100% foreign ownership is permitted with Latvia company formation.
  • Only 1 director and shareholder is required, there is no requirement for a local director.
  • Latvia is has a highly educated, multi-lingual and motivated workforce
  • According to the World Banks 2011 Doing Business Survey Latvia is ranked as the 24th easiest place to do business
  • The 2012 Index of Economic Freedom by the Heritage Foundation ranks Latvia as the 50th freest economy in terms of investment freedom and capital flow.

Tax and accounting regulations

Summary of Requirements for a Limited Liability Company (SIA):

General Information
Type of CompanyLimited Liability Company
Timescale to incorporateApprox. 14 working days
TaxationThe rate of corporate income tax is 15%. Corporate income tax is imposed on the annual accounting profits
Double Tax Treaty AccessLatvia has over 51 tax treaties
Directors
Minimum No. Required1,Corporate Directors are not permitted
Local Director RequiredNo
Publicly accessible informationYes, directors details are available on a public register
Location of MeetingsAnywhere
Shareholders
Minimum No. Required1, Corporate Shareholders are permitted
Publicly accessible informationYes
Location of Meetings Anywhere
Company Secretary
RequiredNo
Local Secretary RequiredNo
Registered Office RequiredYes
Share Capital
Standard CurrencyEuro
Minimum Authorised€3,090.00
Minimum Paid Up CapitalShare Capital to be paid up during the incorporation of the company.
Accounting & Compliance
Requirements to prepare AccountsYes
Requirement for AuditAudit is required if the following criteria are exceeded:

 

  1. Total Assets of at least 350,000 Euro
  2. Net sales of at least 720,000 Euro
  3. More than 25 employees
Local Auditor RequiredYes
Requirement to File AccountsYes
Requirement to file Annual Return
  • Yes
  • A limited company may submit its annual return up to 4 months from the end of the tax year
  • Tax must be paid within 15 days of the submission of the annual return
Additional Information
VATThe standard VAT rate is 21%
Bank Account OpeningEltoma Corporate Services can assist with bank account opening in the following banks; Rietumu Banka, Baltikums Banka, AB L.V.

Taxation:

Individual Tax Rate:
  • Resident individuals are taxed on annual income, non-residents are taxed only on income sourced in Latvia.
Corporate Income Tax Rate:
  • 20%.
  • Taxable income includes trading income, passive income and capital gains.
  • Dividends derived from local or EU entities are
  • Losses can be carried forward for 8 years
Taxation of Dividends
  • Dividends are exempt from tax if received from domestic subsidiaries or subsidiaries in EU countries
  • Dividends received from non-residents in third countries are exempt if the Latvian recipient holds more than 25% of the capital and the payer is not located in a black list country
  • Other dividends are taxed at 15% with a credit for foreign tax withheld.
Capital Gains Tax Rate:
  • Capital gains are taxed as general business income and taxed at the normal corporate rate
Withholding Tax:Dividends:

 

  • Dividends paid to a non-resident company are subjected to a 10% withholding tax unless the rate is reduced under a tax treaty or the recipient company is located in an EU member state in which case no tax is withheld.

Interest:

  • A 10% withholding tax is imposed on interest paid to non-resident related parties and 5% on interest paid by commercial banks to non-resident related parties.

Royalties:

  • The withholding tax on Royalties paid to non-residents is 5% on license fees, 15% on royalties paid for artistic works.
Losses:
  • Losses may be carried forward indefinitely
  • The carryback of losses is not permitted
Capital Gains:
  • Capital gains are taxed as taxed as general business income and taxed at the normal corporate rate.