The government of Latvia supports Latvia’s pro-business environment by making incentives and facilities easily accessible. The nation has also made outstanding advancements in the building, manufacturing, woodworking, and renewable energy industries, opening a wide range of options. In addition to its growth rate, Latvia got a significant amount of foreign direct investments (FDIs) because of its favorable tax structure, which encourages numerous businesses and foreign investors to establish operations there. Due to Latvia’s flexibility and affordable company registration fees, the nation was also ranked 19th out of 190 nations in the 2020 Ease of Doing Business Index.
Below are some of the advantages of incorporating your company in Latvia:
Low corporate income tax
The attractively low corporate tax rate that Latvia offers is the first advantage of forming a business there. Corporate income tax rates are 0% starting in 2018 for gains that are reinvested. This effectively means that the corporation will only pay corporate income tax rates when it distributes actual profits through dividends or other types of payments. If this is the case, the corporate income tax rate will be applied at a rate of 20% on any dispersed earnings used for dividends or other non-business development-related purposes. In addition, there is no additional state or local tax on corporate income tax; it is only subject to federal taxation. It is also crucial to remember that all Latvian resident businesses are obligated to pay corporate income tax, regardless of whether their earnings originate domestically or abroad. Only the corporate income taxes associated with income derived from Latvia will be paid by non-resident businesses operating in Latvia.
Free trade advantages
The advantages of free trade that running a business in Latvia will give you are the second reason to register a corporation there. Latvia is a nation and a member state of the European Union (EU). In addition, Latvia participates in both the World Trade Organization (WTO) and the Organization for Economic Co-operation and Development (OECD). As a result, participating nations in these international organizations have numerous trade opportunities and incentives for both imports and exports.
Transport and logistical advantage
The logistical and transportation advantage that Latvia offers is the third advantage of forming a business there. Due to its advantageous location between EU countries and significant eastern markets, Latvia places a high priority on having a well-developed logistical network and transportation services to ease trade between the east and the west. The proximity of Latvia to the external border of the EU with Belarus, Russia, and other Schengen members has had a considerable positive impact on its national GDP. In addition, Latvia has established rail links that link the Baltic nations to Poland, providing indirect access to markets like Scandinavia and Russia.
Special economic zones & free ports
The creation of special economic zones (SEZ) and free ports by Latvia to support the development of enterprises is the fourth advantage of establishing a firm there. Three special economic zones—Liepaja SEZ, Rezekne SEZ, and Latgale SEZ—as well as two free ports—Riga free port and Ventspils free port—are all included in Latvia, which support favorable corporate operating circumstances. Depending on a variety of factors, businesses operating in the zones are eligible for direct tax rebates of up to 35%, 45%, and 55%. It is significant to remember that each SEZ or free port has its own unique indirect tax refunds.
Developed IT & Technology
The fact that Latvia is a sophisticated nation in terms of information technology is the fifth advantage of establishing a business there. Among the top few measured countries, Latvia boasts one of the fastest internet speeds. A “Baltic Highway” was created in 2012 to act as a cutting-edge data transmission network. It gave the potential to better connect East and West online service providers and boost the speed at which international web-based material could be accessed. Data-intensive firms can think about establishing a presence in Latvia because of the country’s highly developed internet infrastructure and high capacity. The Latvian government also places a strong emphasis on data protection, as the nation is a signatory to the General Data Protection Regulation (GDPR).
