Positioned at the crossroads of northern and eastern Europe, the Baltic state of Latvia is rapidly making the most of its recently-acquired status as a member of the EU. Foreign investment is rising strongly and Latvian authorities have taken steps to streamline the regulations governing Latvian company formation. The range of possible business entities has been reduced from thirteen to five, bringing the commercial landscape more into line with established EU standards. The main sectors of Latvian economy are information technologies, chemical and pharmaceutical industry, electronics, mechanical engineering, wood processing, construction, food industry, textile industry, fishery and agriculture.
Latvian SIA (limited liability company):
- Minimum share capital is 2.800 Euro, at least half of the authorized capital must be paid upon incorporation
- Simple registration procedure, possibility of remote registration (without visiting Latvia) by power of attorney signed by the founders
- At least one director of any nationality and residence
- At least one shareholder of any nationality and residence
- Liability of members is limited
- Local registered office is required
Latvian AS (joint stock company):
- Minimum share capital is 35000 EUR and must be fully paid within the 1 month from the date of signing of the Memorandum and Articles of Association
- At least one director of any nationality and residence
- At least one shareholder of any nationality and residence
- The issue of bearer shares as well as registered shares is available. Bearer shares may be issued only by joint-stock companies (AS) and must be registered in Latvian Central Depository
- There is a two-tier system comprising management and supervisory boards
- Accounts to be audited and filed with authorities
Taxation:
- Corporate Tax is 20%
- Dividends received by a Latvian company are exempt from tax (regardless of whether the country which paid the dividends is a EU member state or a third country). However, there is an exception for dividends received from countries listed in Latvia’s blacklist
- Capital gains received from alienation of shares are exempt from tax (with exception for shares of offshore companies)
- Interest and royalties payable by Latvian company are exempt from withholding tax, with exception for interest and royalties paid to persons resident in the countries listed in Latvia’s blacklist
- VAT rate is 21%, lower rates are applied to particular goods and services - 12% (e.g., pharmaceuticals), 5 % (e.g. particular agricultural products), or 0% (e.g. export operations), as well as exemption from VAT (e.g., financial services, insurance, education, public health and others)
- Losses from 2008 and after may be carried forward indefinitely and used to offset current year profit, but not in excess of 75% of taxable income for the year