In the most recent World Bank assessment of the nations with the best business climates, Latvia comes in at number 19 out of 190, trailing 171 economies. Since entering the EU in 2004 and the Eurozone in 2014, Latvia has prospered thanks to its educated and intelligent labor force, thriving startup scene, and affordable cost of doing business. With little under 19 million people, the country has gathered 400+ firms in high-demand sectors like SaaS, FinTech, and DeepTech.
There is a purpose to all of this, though, which is why businesspeople are choosing to locate in Latvia.
Three primary advantages of establishing a Latvian business
Here are the benefits:
There are various ways for companies in Latvia to lower their tax obligations when hiring employees. Here are a few instances:
- No individual income tax and no corporate income tax on reinvested firm funds
- Stable social tax (saves the company money for salaries above 1000 euros, gross)
- Co-financing of 45% for highly qualified workers
- Since dividend tax is no longer required, business owners simply owe tax on earnings
- Instead of 15%, the new corporate income tax rate is 20% on gross dividends
- Any dividends Latvians get from foreign countries are tax-free
Additionally, these incentives are now easier to obtain for foreign firms according to the most recent revisions to Latvia’s Startup Law, which makes incorporation more appealing.
In particular, startups that were established abroad to attract foreign capital or to better develop or promote their goods abroad will now be eligible to qualify for tax benefits.
Ease of access for foreign founders
It has also been simpler for overseas entrepreneurs to immigrate to Latvia and do business thanks to the Startup Visa (under the startup statute). This was a purposeful government move that was made to attract more imaginative people to the area and boost the economy.
The following are the benefits of the startup visa:
- A fast-track application for a residence permit (1 month)
- Your family may accompany you.
- Cofounders may number up to five
To be eligible for the Visa, immigrant-directed firms must also show that their concepts are novel and that they have detailed development plans.
Did you know that a Latvian corporation can be founded with 100% foreign ownership? That’s accurate. Without ever having been to Latvia, you can establish a business there. All you have to do is make sure your management board includes at least one member who is eligible to represent a non-Latvian resident.
How To incorporate your business Latvia
There are numerous options for forming a company in Latvia. Which choice to pursue depends on a variety of circumstances, including the sort of business chosen, the number of employees, whether or not it is meant to be private or public, and others. The following list of standard business forms:
- Sole trader
- Limited liability company (SIA)
- Micro company (limited liability company – SIA)
- Public stock company (AS)
- Nonprofit association
The most common way for both citizens and non-residents to launch a business in Latvia is to establish a limited liability corporation (sabiedriba ar ierobezotu atbildibu, or SIA in Latvian), which may be run by one or more individuals or legal organizations.
The SIA requires a minimum share capital of EUR 2800, while a business can be founded with less.
Your business is set up; now onto the legal components
Regardless of the business structure you choose, there are certain legal requirements you must meet to properly run your business, including selecting a legal business name, address, management board, and registering with the Latvian business register.