Latvia Entity Set Up

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Latvia Subsidiary Entity Set Up

Setting up an entity in foreign territory can be difficult and comes with many complexities and requirements. In Latvia, foreign subsidiary entities hold the same company standing as any other conventional company in the country and are treated as equals with domestic businesses. They enjoy independence from their parent company and are subject to all national laws of Latvia.

The registration process comes with some variation (depending on the company type), but it is generally straightforward and can be done with little difficulty. Once that is done, however, setting up a subsidiary in Latvia involves a heavy workload. 

You can lighten this load by partnering with us, an Employer of Record (EOR) company. We use our Professional Employer Organization (PEO) international recruitment specialists to obtain your new personnel, and our EOR experts handle all legal and compliance requirements. Use our services and be up-and-running with a presence in your new territory within days, rather than months.

How to set up a Latvia Subsidiary

  1. Decide on the company type that suits the nature of your business, your business goals and matches your own capabilities to meet establishment requirements. Common company types include: The Limited Liability Company (SIA), The Joint Stock Company (AS), a branch office, or a representative office.
  2. Obtain a business address in Latvia and prepare the documents for registration.
  3. Check if your business requires any additional permits or documentation.
  4. Prepare the appropriate registration documents and have them translated to Latvian or English.
  5. Open a local temporary bank account in Latvia and deposit the appropriate share capital.
  6. Notarize and legalize the registration documents at a notary’s office.
  7. Register your company and apply for a company tax number at the Enterprise Register.
  8. Register for a VAT Number at the State Revenue Service (only applicable if certain criteria are met).
  9. Register with State Social Insurance Agency (VSAA).
  10. Receive a Tax Identification Number, a certificate of registration and a unique registration number.
  11. Company registration is publicly announced by the Commercial/Enterprise Register Gazette.
  12. You will also need to check requirements for permits and residencies for foreign employees.

Fees & Registration Times

The registration fees and times are as follows:

  • Open a bank account: 100-250 Euro -  1-5 business days
  • Translate documents: The costs depend on translator and document volume -  At least 3 business days
  • Notarize documents: 80-250 Euro - 3-5 business days
  • Company Registration: 150 Euro (3 days), 450 (1 day) - 1-3 business days
  • Gazette Publication: 27 Euro - N/A

Overall, the company registration process should take no more than 3-4 weeks to complete (if there are no delays). The registration procedures regarding employment will take more time, especially if you are bringing in employees from non-EEA countries.

Application Methods:

Company registration can take place in person or online. To apply online you will need proof of a residence permit or an e-residence signature.

E-signatures can be provided by eParaksts, through an eParaksts card or an eZimogs. These can both be used or an establishment or founders as a digital signature and identity verification. An eZimogs can provide an official seal to company documents.

The application and issuing for the eZimogs are free of charge, but the use of its service is not - they depend on the number of stamps used.

The eParaksts card is issued at the price of EUR 52 and is subject to a general subscription fee, depending on the number of stamps needed.

What you need to set up a Latvia Subsidiary

For foreign companies wishing to expand into Latvia, certain requirements must be met:

1. A Latvian business address – leased or purchased with all relevant documentation.

2. A local bank account with the appropriate share capital deposited (depending on the subsidiary type), and a bank account for normal commercial operation.

3. Completed registration documents:

• Subsidiary Application form KR4.

• The Memorandum of Association.

• The Articles of Association.

• The resolution of the parent company detailing its decision to form the subsidiary.

• Legal status of the parent company

• Local bank account statement confirming payment of the appropriate share capital.

• Document of the shareholders’ records with a full composition of shareholders and division of the shares.

• Consent of the members of the board of directors to hold their positions.

• Business address documentation and announcement of the board.

• Consent of real estate property owner for registration of the property’s legal address (but is not required is owner is among signatories of the application).

• Confirmation of the payment of statutory fees.

• Founders’ information (for both private individuals and legal persons/entities).

4. Notarized and legalized registration documents in their Latvian or English translations.

5. A company incorporation certificate.

6. A Tax Identifier Number.

7. A VAT Number.

8. Special permits and licenses with the city municipality, certain ministries, or special authorities (depending on type of business).

Benefits of Setting up a Latvia Subsidiary

Latvia is a compelling destination in Baltics for subsidiary establishment and growing a business’ influence. There are also other significant benefits to establishing an entity in Latvia:

• Subsidiaries in Latvia are taxed the same as any other resident company.

• Subsidiary entities in Latvia also benefit from double tax treaties, in which there are significant reductions in tax payments on dividends, interests or royalties paid to the foreign country.

• Latvia ranks high at 19th place in the Ease of Doing Business report by The World Bank (2020).

• Latvia boasts a strong industrial sector, and offers support to the IT, energy, agricultural, creative, and green industries.

• Latvian entities also benefit from low tax rates and workforce costs.

• Latvia also boasts a highly educated workforce, with many being multilingual and possessing higher education certification.

• Latvia’s infrastructure gives entities high-quality logistics options to access markets easily and affordably in Europe, Russia, and Asia.

Latvia Subsidiary Laws

In Latvia, subsidiary laws may vary depending on the subsidiary entity type you wish to establish – but all are regulated under The Company Act, or the Commercial Law. Compliance entails meeting these requirements:

Registration & Documentation

A Limited Liability Company (SIA) requires at least 1 director and 1 shareholder, who can be of any nationality, as well as a minimum share capital of EUR 2,800 (with at least 50% deposited at registration).

A Joint Stock Company (AS) requires at least 1 director and 1 shareholder of any nationality, as well as minimum share capital of EUR 35,000, which must be paid in full upon registration. If the company is being publicly listed on the stock exchange, 3 directors will have to be appointed at the time of the registration.

These company types can either be registered privately, or they can be publicly listed on the local stock exchange, as well as other stock exchanges in the EU.

• All entities must be registered and regulated by The Commercial Register.

• Entities must also be registered for VAT with the State Revenue Service, as well register with the Social Insurance Agency (VSAA).

• Entity Founders Documentation – foreign founders must submit certain documents that confirm their identities, for both private individuals and legal persons/entities, including parent company information, information on beneficiaries and shareholders, etc.

Accounts and Taxation

• All subsidiary companies must pay a corporate income tax rate of 20% on distributable profits until 2022. Taxation on corporate profits, however, can be postponed until they are deemed to be distributed.

• All entities must file an annual tax return for the last month of the financial year, as well as monthly tax returns by the 20th of the following month, or annually (depending on the nature of the products or services being sold.

• Entities in Latvia must also apply for VAT if their VAT-taxable transactions exceeded EUR 50,000 in the last year. Monthly VAT returns must be filed by the 15th of the following month.

• Annual financial statements must be filed for all company types.

An annual statutory audit must also be filed for an entity if it falls under two of the following criteria – over EUR 800,000 in annual turnover, EUR 40,000 in assets, or an average of 25 employees during the year.

• Latvia also benefits from a Double Taxation Treaty on with-holding payments.

• With-holding payments by companies in tax havens are taxed at 20%, and payments to residents of Double Taxation Treaty countries are not subject to this tax unless they do not have a permanent establishment in Latvia and a residence certificate is available.

• Company payments to non-residents must be notified to The State Revenue, regardless of possible subjection to withholding tax.

• Entities (other than the limited liability company) may apply for a Micro-Business Tax if they meet certain criteria and can benefit from lower tax rates.

Management

• Management bodies of a limited liability and joint stock company must include an annual general meeting of shareholders.

• A board of directors must also be formed.

Work with us as your trusted partner

Establishing an entity takes considerable time and resources, despite the ease of establishment you can find in Latvia. To do this, you need to acquire the right people and the right resources, which will not be easy. A cost-effective and time-saving alternative to this is engaging the services of a Professional Employer Organization (PEO) such as Bradford Jacobs.

With over two decades of global recruitment expertise and our Employer of Record (EOR) solutions, we can have employees operational within days, ensuring that all laws and regulations (employment, payroll, tax) are followed. When you are expanding into a new territory, it is important to ensure your administration operates flawlessly for both you and your employees.

Our Human Resources’ experts will ensure a smooth transition of your onboarded employees into your new territory. International borders should not stand in the way of international expansion.

Contact us today to make your expansion goals a reality, with ease and confidence.