Latvia

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Latvia, officially known as the Republic of Latvia is a country located in the historically significant Baltic region on the Northern part of Europe. The country is a landlocked country, it is bordered by Estonia in the north and on the southeast Latvia shares its border with Belarus, on the east lies the Russian Federation and on the west it shares its border with Sweden along the coast of Baltic Sea. Latvia being located on the eastern sides of the European plain it has a very pleasant climate and also boasts of fertile soil which is suitable for growing a large variety of crops. Latvia also has a big forest cover that is home to some of the most exotic plants an animal species.

Population: 1.997 million (2015)
Official languages: Latvia
Other spoken languages: Russia (34%)
Currency: Euro (€)
Country code: +371
Time zone: UTC +2, Daylight saving time UTC +3
GDP (PPP): $42.471 billion (2014)
GDP (PPP)/per capita: $25.195 (2014)
Public debt: 35% GDP
Employment to population ratio: Unemployed 9.1%,  0.88 citizens between 15-65 years of age (2014)
Average salary: 820€/ month
Major trading partners: Russia, Lithuania, Estonia, Germany, Poland, Sweden

 

Advantages

  • Low company tax (15%)
  • Latvian based holding company don’t have to pay taxes from dissidents or capital gains
  • Cheap rents
  • Cheap workforce available; Minimum salary 320€/month, average salary 544€/month
  • Multilingual workforce easily available; over 70%  under 40 years of age people speaks also Russian and English

Disadvantages

  • Official language is Latvia and therefore all documents must translated in Latvian
  • Small home market
  • High corruption rate
  • High consumption of Alcohol and extremely low threshold for staying home when sick causes reduction of productivity.
  • Poor roads

Business Friendliness Environment Index (EUROPE) by Novasigma – 2017

Novasigma has published an annual BFEE (Business Friendliness Environment – Europe) -index for 2017. European economies are ranked from 1-51 based on their business friendliness. The rankings are determined by sorting the aggregate distance to frontier scores on 20 topics each consisting of several indicators, giving equal weight to each topic. The rankings for all countries and economies are bench-marked to January 2017

LATVIA – OVERALL RANK 2017: 9th (Europe) 53/100 points
1. Ease of incorporation process (bureaucracy, costs, time frame) 2/5 points
2. Privacy level of shareholders and investors 2/5 points
3. Privacy level of company directors and signatories 1/5 points
4. Availability of the private equity funding 2/5 points
5. Availability of the public and / or bank sector financing instruments 2/5 points
6. Reputation of the country (trading across borders with a company registered in this country) 2/5 points
7. Easiness of recruiting professional staff (professionalism, average pay, protection against dismissal) 3/5 points
8. Easiness of getting business premises (price, availability) 4/5 points
9. Suitability for production of physical products 3/5 points
10. Suitability for producing services 3/5 points
11. Size of the home market B2C (population and purchasing power) 1/5 points
12. Size of the home market B2B and public sector purchasing services from local businesses 2/5 points
13. Exporting physical products (markets nearby, logistics and toll) 3/5 points
14. Exporting services 4/5 points
15. Immaterial rights (compared to other countries) 4/5 points
16. The level bureaucracy or corruption during business operations 5/5 points
17. Company taxation 4/5 points
18. Dividend taxation, withholding taxes and tax treaties 2/5 points
19. Easiness of selling a business 2/5 points
20. Easiness of closing down a company 2/5 points

The World Banks “Ease of doing business ranking”

Overall rank: rank 23 (-2 since 2014)
- Starting a business:rank 36 (Average processing time 12.5 days)
- Dealing with construction permits:rank 47 (Average processing time 149 days)
- Getting electricity:rank 89 (Average installation time 108 days)
- Registering property:rank 32 (Average registration time 18 days)
- Getting credit:rank 23
- Protecting minority investors:rank 49
- Paying taxes:rank 24 (Average company tax from profits 35%,  Average time used for taxation 193 hours / year)
- Trading across borders:rank 28 (Average export cost / container: $600, Average processing time 10 days. Average import cost / container: $801, average processing time 11 days)
- Enforcing contracts:rank16 (Average 469 days, average cost from standing amount 23.1%)
- Resolving insolvency:rank40 (Average time processing bankcruptcy: 1.5 years)

New businesses registered in  v. 2012: 15.760

Doing business in Latvia

Who can start business in Latvia:

  • Any person or legal entity who can provide documentation required by the law for incorporation
  • Person who has been banned from business operations cannot incorporate or be involved with incorporation through any middlemen.

Who can own property or shares of Latvian company

  • Any legal entity
  • Any person apart from individuals who has been banned from business operations

Who can act as a director or member of the board:

  • Person over 18 years of age. Legal entities cannot act as director.
  • At least one member of the board / director needs to be an EEA resident.
  • Person who has been banned from business operations cannot act as a director and/or member of the board

Business entities in Latvia:

  • SIA (Sabiedrība ar ierobežotu atbildību) = Ltd.
  • AS (Akciju sabiedrība) = Public listed company PLC)
  • IK (Individuālais komersants) = sole proprietorship
  • PS (Pilnsabiedrība)
  • KS (Komandītsabiedrība) = limited partnership
  • ĀKF (Ārzemju komersanta filiāle) = Branch
  • Representive office of foreign merchant (Rep. office)
  • BO (Bezpeļņas organizācija) = nonprofit organization

Requirements to incorporate in Latvia

  • At least 1 owner
  • At least 1 member of the board and one supplementary member
  • Owner and director may be the same person
  • Must have official registered address in Latvia
  • Minimum paid-up share capital is 2800€. At least half must have been paid on company account before registration. Second half must be paid within a year since starting a company

Opening bank account:

  • Incorporation documents and articles of association
  • Board of Directors meeting minutes
  • Proof of identity of signatories

Public register of shareholders and directors:

  • Directors: yes
  • Shareholders: Yes

Allowed trades:

  • All the legal trades that doesn´t require permit

Accounting and reporting regulations:

  • SIA Companies must file accounts
  • VAT registration is required for companies exceeding 50.000€ in annual revenue. Monthly VAT returns must be filed every month
  • Any changes in the company board or shareholders registry must be notarized
  • Businesses must be audited if they fall under two of the following three criteria; A) over 700.000€ in annual turnover, B) over 350.000€ in assets, C) more than 25 employees

How funds can be withdrawn from company

  • Company may transfer money to another company based on sales of services and goods.
  • Company can lend money to another company and / or person given that loan agreement with minimum interest and payment terms have been made. Owners cannot owe money for the company in the end of the book year.
  • Company can pay dividends from it´s own capital to shareholders after end of the book year
  • Company can pay salary to it´s employees given it has registered in the Tax Administration´s employer register. Employer is obliged to pay tax withheld at source from all wages paid to employees, along with making employer´s social security contributions.
  • Company can pay tax free allowance, such as kilometre allowance for using they own car, per diem and meal money, to owners in order to cover their temporary business travel expenses as defined in the official Decision of the Tax Administration on Allowances for Travel Expenses
  • Company can pay meeting allowances for its directors, members of the board and owners
  • Profits may be transferred (if certain requirements are met) between group companies through group contribution system
  • Company can invest in shares, funds or real property.

Ca you transfer Latvian company to another jurisdiction:

  • No

How to terminate business:

  • Company may be sold
  • Filing bankruptcy

Freedom Index

Overall rank: 32 (64/100 points)
- Property:50/100 points
- taxes:85/100 points
- Speech:94/100 points
- Government:55/100 points
- Guns:45/100 points
- Drugs:30/100 points
- Corruption:53/100 points
- Inflation:80/100 points
- Business:83/100 points

Corporate taxation in Latvia

Taxable income15%
Taxation of dividents4.89%
VAT registrationWhen yearly overturn exceeds EUR 50.000
VAT rates21% / 12% / 0%
Tax at source0% (EU- ad tax treaties / 10% Outside EU)
- Dissidents0%
- Royalties0-10%
- Interest0-10%
- Technical services0-10%
Transfer tax0%
Capital gains taxTreated as normal income
Real property tax0.1% - 2%
Social security33%
Capital duty0%
Stamp duty0%
Tax treatiesOver 57 countries

Personal taxation

National income tax23%
Social security;;30.58% (Employers pays 10.5%)
VAT21%/125%/0%
Capital income tax10%
Capital gains15%
Net wealth / Net worth tax:0%
Real property tax0.2% - 3%
Inheritance tax0%
Transfer tax0%
Vehicle tax0%

Services for corporations interested in Latvia

  • Consultation and advisory (business, tax, legal) services before incorporation / during your business operations in Latvia
  • Assistance in incorporation process: Tailor made company formation or shelf companies available
  • Administration services available for new companies incorporated through Novasigma

For corporations operating in Latvia

  • Banking and financial solutions for a Latvian company
  • Accounting and Audit services for a Latvian company
  • Legal services for a Latvian company

For individuals and families interested in Latvia

  • Consultation and advisory (tax, legal) services before re-located to Latvia
  • Assistance in immigration process when moving to Latvia (residency permanent, work permit, tax residency)
  • Incorporation and administration services for your privately held Latvian holding company

For individuals and families who hold the Latvian residency

  • Banking services in Latvia for private persons
  • Local and international accounting services for Latvian tax residents
  • Local and international legal services for Latvian residents

Interested in Latvia? Please leave us a message and we will come back to you shortly.

In cases KYC or/and Due Diligence process required Novasigma requires a personal meeting with all its new clients before proceeding any assignment

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