Latvia - a strategic choice for foreign entrepreneurs

As global competition becomes increasingly intense, Latvia's dynamic economy and business-friendly environment have become an attractive destination for foreign entrepreneurs and investors. It offers access to the European Union's single market, competitive costs, a skilled workforce, a developed digital infrastructure, and a business-friendly tax regime.

Starting a Business

One of the cornerstones of Latvia's competitiveness is the efficiency of the business registration process.

Foreign entrepreneurs are offered advantages such as 100% foreign ownership, which means that a local partner is not required to control the business. This provides greater autonomy in making strategic decisions and choosing the direction of the company's development. 

Establishing a company usually takes only a few days, and most procedures can be completed remotely. Digitalization in this area has reached a high level, allowing entrepreneurs to manage their business processes even without a physical presence.

The most popular business form for foreign investors is a limited liability company (LLC), which provides flexibility, limited risk, and relatively simple management. It is essentially analogous to the “Ltd” (UK) or “LLC” (USA) models. Depending on the size of the project, it is possible to choose both the classic model with a larger share capital and the small-capital option, which is suitable for early-stage projects:

• standard SIA model with a minimum share capital of 2800 EUR. It is suitable for serious projects, attracting investors and professional management, who are not just company owners;

• A small-capital LLC is an ideal solution for individual entrepreneurs or small-scale projects, where the share capital can range from 1 to 2799 EUR. This model allows you to test a business idea with minimal costs, although certain restrictions must be taken into account, such as the number of participants (up to 5) and the obligation to create a reserve for capital increase every year. The status of a small-cap SIA can be changed to a standard SIA at any time by increasing the share capital to 2,800 EUR and making changes to the articles of association.

For larger projects with public capital raising, a joint-stock company (AS) with a share capital starting from 25,000 EUR is suitable. In turn, a branch of a foreign merchant is an option for those who do not want to establish a separate legal entity, in which case the parent company is fully liable for all obligations.

Main steps for establishing a company

To successfully register a SIA, you must prepare and submit a certain package of documents. 

1. Choose your company name and legal address.

Make sure that the chosen company (firm) name does not repeat an already registered trademark or company.

2. Prepare the founding documents:

   • the articles of association, which are the "foundation law" of the company's operations, which determine the management structure, decision-making procedure and other rules;
   • foundation decision, if the founder is one person, or the founding agreement, if there are two or more founders;
   • application to the Enterprise Register (ER), which must include the share capital, address, composition of the board and founders. Please note that the legal address must be clearly indicated - the company must have a legal basis for being located at this address;
   • the founders' register section - a document listing all participants and the shares they own;
   • Beneficial Ownership Statement (BOS), which is mandatory information about the individuals who actually control the company (ownership over 25% or other form of control). The notification must include the name, surname, personal identification number (or date of birth), nationality and country of residence.
   • capital and payment document - if the share capital is over 2800 EUR, a bank statement on the cash deposit is required. 

3. Open a bank account.

Financial institutions in Latvia comply with strict international requirements for the prevention of money laundering (AML), which means detailed customer due diligence. Therefore, opening an account can take from one to 20 business days. Investors must be prepared to provide detailed information about the PLG, a clear business model and evidence of the origin of funds. These requirements also serve as a quality filter, strengthening the reputation and reliability of the financial system at the international level. In many cases, banks require face-to-face identification, although any EU-licensed payment institution can be used for initial registration.

4. Pay the share capital.

If there is a small-capital LLC (share capital from 1 to 2799 EUR), the founders themselves confirm the payment in the application. An opinion on the property investment is only required if the share capital is not paid in cash, but with property (for example, equipment, a car).

5. Submit documents to the Register of Enterprises.

In Latvia, company registration can be initiated online using the Latvian Investment and Development Agency's (LIAA) portal for entrepreneurs, business.gov.lv, which serves as a single access point for information and services. From this platform, the user is redirected to the website of the relevant service provider - the Enterprise Register - where the company registration itself takes place.

6. Receive registration confirmation.

Important: the documents required for company registration must be in Latvian or have a notarized translation. Each member of the board must sign a declaration that he agrees to hold this position. The aforementioned documents can be signed remotely using a secure electronic signature or by contacting a notary. If documents are signed by a notary abroad, they may require legalization or an Apostille, unless a legal assistance agreement has been concluded between the countries. 

Tax system as an instrument of growth

Latvian tax policy is designed to stimulate the development and reinvestment of companies. One of the most significant benefits is the corporate income tax (CIT) application model, in which tax is paid only at the time of profit distribution. This model, which is one of the most competitive in OECD countries, means that CIT (currently 20%) is paid only when profits are distributed in dividends. If profits are reinvested in the company's development, the tax burden is zero, which is a huge boost for start-ups and fast-growing companies and creates  motivation to invest in innovation.

The standard value-added tax (VAT) rate is 21%. Registration in the State Revenue Service (SRS) VAT payer register is mandatory if the turnover exceeds EUR 50,000 within 12 months. In turn, labor taxes include mandatory state social insurance contributions and personal income tax.

In addition, entrepreneurs can use various support mechanisms, including tax breaks in special economic zones (SEZs), which operate in Riga, Ventspils, Liepāja, Rēzekne and Latgale. SEZs provide significant reductions in both corporate income tax and real estate tax. This approach is particularly attractive to manufacturing, logistics and export-oriented companies.

Human capital and innovation potential

Latvia offers a qualified workforce, especially in the fields of information technology, engineering and finance. Employees often speak multiple languages, which facilitates international cooperation. Compared to Western European countries, labor costs in Latvia remain competitive, which allows companies to optimize their cost structure without sacrificing quality.

The country is also actively developing the startup ecosystem, offering special visa programs for innovation projects and attracting talent from abroad. For entrepreneurs coming from countries outside the EU, Latvia offers flexible immigration solutions that promote a dynamic business environment and the development of new ideas:

• Startup visa is intended for authors of innovative ideas and founders of start-ups;

• Digital nomad visa allows you to work remotely from Latvia for a foreign employer;

• The EU Blue Card is intended to attract highly qualified specialists.

Where to look for support and information?

Entrepreneurs in Latvia can rely on extensive institutional support. Consultations, financial instruments and partner search opportunities are available, which help to integrate into the local market faster. Public-private sector cooperation in this area provides a structured approach to the development of investment projects. 

The Latvian Investment and Development Agency (LIAA) is the main contact point for investors, providing useful market information and assistance in the implementation of investment projects.

The Enterprise Register (UR) provides information on the forms of companies and carries out their legal registration.

The State Revenue Service (SRS) maintains the Electronic Declaration System (EDS) for taxpayers and provides consultations on tax and accounting matters.

State financial institution Altum offers a wide range of instruments – from loans and guarantees to venture capital investments.

Practical recommendations for a successful start-up

To fully utilize the advantages offered by Latvia, it is recommended to initially attract local professionals – lawyers and accountants, who will help you navigate the legal framework and ensure compliance with regulatory requirements. 

It is also important to evaluate financial partners and prepare the necessary documentation in a timely manner. Evaluate banks that are more open to serving non-residents and whose tariffs correspond to the specifics of the chosen business.

The use of digital solutions significantly facilitates daily operations, therefore it is recommended to fully integrate e-services into the company's operations from day one. When obtaining a residence permit, you will receive a full-fledged e-signature, which will allow you to sign contracts and communicate with state institutions digitally.

In conclusion

Latvia offers a modern and competitive platform for business development on a European scale. Its strengths – digital efficiency, favorable tax environment and qualified workforce – form a solid foundation for both new projects and the expansion of international companies. By properly utilizing available resources and support mechanisms, Latvia can become an important springboard for long-term business growth. Start with market research and the first consultation at LIAA – your path to the European market starts here.

The platform is being developed within the framework of the European Union Recovery and Resilience Mechanism Investment 2.1.2.1. “Digital Services Platform business.gov.lv”, in close cooperation with state institutions and business representatives.
Its development is taking place gradually – by testing solutions, improving usability and adapting the platform to the real needs of entrepreneurs. Special attention has been paid to user experience in the development process – entrepreneurs are actively involved in testing and provide feedback on the ease of use of the platform.
The project “Digital Services Platform for Promoting Business Development” is implemented with funding from the European Union's Recovery and Resilience Mechanism (NextGenerationEU).