Latvia

SETTING UP IN BUSINESS

Introduction

Positioned at the crossroads of northern and eastern Europe, the Baltic state of Latvia is rapidly making the most of its recently-acquired status as a member of the EU. Foreign investment is rising strongly and Latvian authorities have taken steps to streamline the regulations governing company formation. The range of possible business entities has been reduced from thirteen to five, bringing the commercial landscape more into line with established EU standards.

What are the main types of company in Latvia?

There are four main kinds of business entity for foreign investors, and they are as follows:

• limited liability company (SIA)
• joint stock company (A/S)
• branch office
• representative office

What are the main features of an SIA private limited liability company?

• the most common business vehicle in Latvia
• minimum share capital is €3,090, at least half to be paid up
• minimum number of directors is one
• no restrictions on foreign shareholders
• accounts to be maintained in line with statutory requirements

What are the main features of an A/S joint stock company?

• popular format for larger companies that wish to raise public capital
• minimum share capital is €35,572 which must be fully paid up before registration
• two-tier system comprising management and supervisory boards
• accounts to be audited and filed with authorities

What are the main features of a branch office?

• foreign-owned branch taxed at same rate as Latvian company
• reporting and audit requirements are same as for Latvian companies
• profits can be repatriated without withholding tax
• dividends transferred abroad are subject to 10% withholding tax

What are the main features of a representative office?

• representative offices are not allowed to trade or do business
• they are only permitted to advertise and promote their company
• regarded as an effective low-cost means of establishing a presence

How easy is it to recruit staff in Latvia?

Latvia’s economic success since the end of the Soviet era owes much to the motivation of its young, go-ahead workforce. Latvians have enthusiastically embraced free-market reforms and labor costs, although on the rise, remain generally low. There are a number of recommended recruitment agencies in the capital, Riga, and we would be happy to put you in touch with them, please – contact us.

What is the regulatory environment like?

• government committed to free-market economy liberal business environment
• member of the WTO and has ratified most international treaties
• foreigners can buy Latvian companies and property with few restrictions
• resident companies taxed on worldwide income; non-residents on Latvian-earned income only

Are there financial incentives available?

Latvia offers a range of investment incentives, many with EU backing. The types of incentives on offer include the following:

• tax credits for capital investment projects
• free ports and special economic zones
• tax relief for small enterprises

And what about banking facilities?

Latvia’s banking system is well advanced, certainly by Baltic standards and offers all the facilities that are likely to be required by international investors. Few of the local banks are well established internationally, however, and we recommend that you take specialist advice on opening a bank account. We will be happy to help you with this.