Company formation in brief

Latvia’s modern corporate law stipulates that foreigners may establish, in particular, companies of such organizational and legal forms as limited liability company and partnership.

A Partnership or a Company?

Partnerships may be established by partners with both limited liability and with unlimited liability for its debts and obligations. Both types of partners are subject to the same tax regime in Latvia.

One person (physical or legal person, resident or non-resident of Latvia) may establish a Latvian company. A company or a partnership must have the management board composed of one managing director or managing partner who may be both resident or non-resident of Latvia. Non-residents may own 100% of shares or interests in companies or partnerships, respectively, and be companies’ sole directors or partnerships’ managing partners.

If the Latvian business founder is a legal entity, the following documents should be provided to the Registrar in order to perform all registration formalities:

• a copy of the minutes of the founder’s constituent meeting;
• a copy of the registration certificate;
• a copy of the charter;
• a power of attorney issued to the person representing the founder during the Latvian company registration. This power of attorney should provide for the right to open and close subsidiaries, branches and representative offices in any country of the world.

Copies of the above documents must be legally certified and translated into the Latvian language. If Latvia has an agreement on mutual legal assistance with the country of the founder's incorporation, copies of those documents may be certified by notary.

The registration formalities in Latvia also include the need to provide:

• personal data and copies of passports of the representative and management board member(s);
• registration address in Latvia;
• name of the Latvian company for the address to be confirmed in the Commercial Register;
• management board member(s)’ specimen signature(s) certified in Latvia by notary (may be certified by notary together with the charter and the foundation agreement).

In establishing business, it is neither required nor prohibited to specify the future company’s proposed activities in the charter.

A Latvian business’s accounting records must reflect the remuneration paid to all company’s or partnership’s officials who are also subject to mandatory social insurance in Latvia.

Partnerships are not subject to corporate profit tax. However, each partnership member has to pay tax in Latvia on the profit share attributed to him. And it does not matter whether the profit was received in Latvia or in another country, and whether the profit was physically distributed or not.

Non-residents’ indirect income from sources in Latvia is subject to taxation depending on the type of income received but the tax is charged only provided that it has not been withheld at source earlier.

All businesses are required to be registered and to obtain a VAT number as provided for by law when the turnover from taxable transactions within 12 months reaches a certain level.

VAT in Latvia is imposed on all transactions related to distribution or provision of services in the territory of the European Union. The only exclusion is companies operating in certain branches of science, culture, education, medicine and the mass media. Those businesses are not required to be registered and to obtain a VAT number. We recommend that before planning activities as described above and which do not require registration and VAT payment, a company should consult with an auditor in Latvia.

A number of Latvian regions encourage investments, and companies operating there are subject to special tax regulation which provides for preferential tax rates reducing taxable profits to 50%, depending on the region. Companies registered in those regions may carry forward their annual losses within 10 years.

Latvia is not a tax heaven or offshore jurisdiction, and a concept of Latvian tax exempt company (and/or Latvian offshore company, International Business Company, trust, foundation etc. registration) does not exist in Latvia  as such. A company formation in Latvia  could be arranged with a professional registered agent providing incorporation, virtual office and other corporate services in Latvia . To set up a company in Latvia  is possible by correspondence, but to open a bank account in Latvia  will, most probably, require a personal visit.

Latvia Double Taxation Agreements

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99 classical offshore, onshore and midshore jurisdictions of Europe, America, Middle East, Asia, Africa and Oceania


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