Latvia has a population of only 2 million people, the majority of whom live in the capital, Riga. Latvia’s position and easy access to neighboring countries are one of its main assets. The country is located on the Baltic Sea’s east coast, at a crossroads between Northern and Eastern Europe. Latvia’s strategic location on the Baltic Sea coast connects it to almost 300 million people in neighboring Scandinavian and Baltic countries, as well as Eastern Europe.
Latvia is noted for its competent and multilingual labor force, precious natural resources, stable economic condition, and considerable business potential for both foreign and domestic enterprises. Latvia has the capability of providing a stable business environment for businesses of all sizes. The presence of a diverse range of well-known worldwide corporations in Latvia demonstrates this.
Latvian businesses profit from EU membership, which allows for the free flow of goods, services, capital, and labor. Latvia is a member of the Eurozone as well.
The Latvian Commercial Law governs all commercial operations. Limited liability corporations, foreign business branches, and permanent establishments are the three most prevalent types of firms that enter the Latvian market. In terms of reporting, auditing, and taxation, they all have advantages and downsides. Before settling on a business structure, you should consult with a few companies.
There are no limits on company representatives’ citizenship.
Doing business in Latvia necessitates registration with the state registry (Commercial Registry of the Republic of Latvia). Only when the Company has been registered with the Commercial Registry is it deemed a legal entity. The procedure of forming a corporation is quite simple. After providing all required paperwork, it normally takes 3-10 days.
Only when a firm pays dividends or other payments with the goal of true profit distribution will it pay a 0% corporate income tax rate starting in 2018. (conditionally distributed profit). Only the profit share, which will be given or disbursed as dividends or utilized for purposes not directly related to business expansion, will be subject to corporate income tax at a rate of 20%. It should be noted that the tax base should be divided by 0,8 before applying the 20% corporate income tax. As a result, the effective tax rate will be 25 percent.
Personal income tax rates are as follows: 20% of yearly income up to EUR 20,004; 20% of annual income above EUR 20,004; 20% of annual income over EUR 20,004; 20% of For annual incomes of EUR 20,005 to EUR 55,000, the tax rate is 23%. For annual incomes of more than EUR 55,000, the tax rate is 31.4 percent. Individual income tax rates on capital and capital gain income are both 20%.
Food for infants, pharmaceuticals, medical products for disabled people, domestic passenger transport, books (except e-books), newspapers and magazines, hotel accommodation, and district heating are all subject to a reduced VAT rate of 12 percent.
The Labor Code governs employment regulation in Latvia, and employment legislation is aligned with EU regulations, albeit some features are slightly more employee-protective. At the time, Latvia’s unemployment rate is quite low, and the country is experiencing an exodus of inhabitants.
Expats are only required to pay resident taxes in Latvia if they spend at least 183 days in the nation during a 12-months period commencing or ending in a tax year. Self-employed people have control over their taxation, including social contributions, and are responsible for their workplace safety. They are not covered by social insurance in the event of a workplace accident.
Unless the collective agreement or the employment contract stipulates a longer period, an employer must give a month’s notice of termination of an employment contract to an employee if the number of employees is being reduced or the firm (legal person or partnership) is being liquidated.
Being an Ex-pat
Because Latvia is a member of the European Union, EU citizens are free to move and work there. However, if a foreign citizen wishes to stay in Latvia for more than 90 days in a half-year period starting on the first day of entry, a residency permit is required. Latvia is one of the easiest countries for non-EU citizens to obtain work and residency visas.
There are many furnished and unfurnished flats available, particularly in the Riga area. In comparison to other European cities, the cost of living is quite low, and public transit is excellent. We strongly advise calling a real estate professional while looking for a beautiful neighborhood to live in.