Latvia is a highly sought destination by foreign investors. Apart from its excellent infrastructure and logistics instruments, Latvia stands out from other European countries due to its legislation and business-friendly environment for foreign investments. Hence, there are many benefits of registering company in Latvia. In this article, our team at Tetra Consultants has highlighted an ultimate guide on registration of a limited liability company in Latvia before you register company in Latvia.
Limited Liability Company (SIA):
Limited Liability Company (SIA) is the most popular incorporation in Latvia
There is a requirement of minimally 1 shareholder and 1 director of any nationality.
The minimum share capital required is 2,800 euros with an initial deposit of at least 50%.
Apart from this, there is a special type of LLC called the micro-enterprise where all individuals are shareholders, the annual turnover is less than 100,000 euros, there is less than 5 employees and the employees’ income is less than 720 euros per month. This type of LLC has a lower minimum share capital requirement of 1 euro.
Both types of LLC are separate legal entities where the shareholders are not liable for debts, losses or legal action taken against the business.
How long does it take to set up a company:
According to the commercial law part 3, article 10, the notary Register of enterprises takes up to 3 days to approve the application
Requirement of a Registered Agent and Registered Office
There is the requirement of a registered agent and registered office in setting up a Latvia company. A registered agent is a third party who is assigned to handle the management of the business located in Latvia. Furthermore, a registered office is required with the registered agent physically present on Latvia.
The requirement in the naming of the company:
The name of the company is required to contain Latin and Latvian letters. Furthermore, the company name cannot be the same as existing companies. You can check for the availability of a company name through the Register of enterprises.
What is the cost to register an LLC:
For micro-enterprises, the state duty is 20 euro and the publication fee is 14.23 euro. Whereas for LLC, the state duty is 150 euro and the publication fee is 27.03 euro.
On top of that, there may be additional charges such as the fees for certification of signature and administration fee for filing documents in paper form.
Other than the registration charges, you must also take into account the fees to start a corporate bank account, preparation of documents and registered office.
Accounting is required in Latvian. In addition, the sources of the documents must be from Latvia. It is also required to file annual returns.
An audit is required under the 3 conditions namely – the company has an annual turnover of over 800,000, assets of 400,000, and an average employees of 25 in a year.
Taxes in Latvia:
The company’s net profit is subjected to a corporate tax rate of 20%. However, the taxable income will have to be divided by 0.8. Thereafter, the effective corporate tax rate will typically be 25%.
All Latvia resident companies are required to pay the corporate tax income even if they are generating income outside of Latvia. Whereas for Latvia non-resident companies, they are not required to pay corporate income tax for income generated outside of Latvia.
Micro-enterprise could previously enjoy a lower corporate tax rate. However, it is no longer available as of January 2021. Hence, both types of LLC are now subjected to an effective corporate tax rate of 25%.
Withholding tax and Value-added tax (VAT) obligations:
There is no withholding tax on dividends, interest or royalties in Latvia. However, it is levied if they are paid to a resident in the European tax-haven blacklist. In this case, the withholding tax would be 20%.
The value-added tax (VAT) in Latvia is at the rate of 21% with exception of certain goods and services. In this case, there will be a reduced VAT rate of 12% or 5%. It is required for companies with taxable supplies above 40,000 euros to register for VAT.
The business registration process in Latvia:
If you have decided to set up business in Latvia, you may proceed with the registration of a limited liability company in Latvia:
Step 1: Planning of your business idea
Step 2: Choosing a suitable corporate entity
- After accessing your business goals and activities, you can choose the most suitable corporate entity for your business.
- The most popular incorporation would be Limited Liability Company (SIA) as mentioned above.
Step 3: Reserving of the company name
- After you have decided on a suitable corporate entity, you may proceed to the next step which is reserving a business name in the Latvia. In order to register a company name, you will have to change the availability of the company name on the Register of enterprises before registering it on Latvia Commercial Register.
Step 4: Registration of the company
- Before proceeding to register company in Latvia, you will have to prepare the necessary incorporation documents such as the Memorandum and Articles of Association (MOA/AOA).
Step 5: Registration for tax
- You will have to register your company for Value-Added Tax (VAT) through the SRS Electronic Declaration System.
Step 6: Corporate bank account opening
- A corporate bank account is required where the equity capital will be deposited. After which, a confirmation representing the capital paid up will be issued by the bank. This will have to be submitted to the Register of Enterprise.
Step 7: Staying compliant
- This includes the annual filings and tax obligations.
The registration of a limited liability company in Latvia may seem intimidating. With Tetra Consultants by your side, the registration process of your business in Latvia will be smooth and hassle-free. Our comprehensive service package includes planning and strategizing with our clients to select a suitable business entity, completing the registration process, obtaining required licenses, opening a corporate bank account, and ensuring your compliance with the government regulations.
Contact us to find out more about how to register company in latvia and our dedicated and experienced team will revert within the next 24 hours.