Latvia Regulatory Enviroment

Latvia’s Business Environment: Ease of Doing Business, Startup Costs, and Taxation

Latvia’s regulatory environment is designed to foster a business-friendly atmosphere, facilitating the establishment and operation of enterprises. Below is an overview of key aspects related to the ease of doing business, the process of starting a business, and the tax obligations for companies operating within the country.

Ease of Doing Business in Latvia

As of the 2020 World Bank’s Doing Business report, Latvia is ranked 19th out of 190 countries, with an overall score of 80.3. This high ranking reflects Latvia’s conducive regulatory environment for business operations.

Time and Cost to Start a Business

In Latvia, the process to register a company is efficient and cost-effective:

• Processing Time: Company registration typically takes between 1 to 3 business days.
• Registration Costs: The state fee for company registration is €150 for companies with share capital equal to or exceeding €2,800, and €20 for companies with share capital below €2,800.
• Minimum Share Capital: The standard minimum share capital for a limited liability company (SIA) is €2,800. However, it’s permissible to establish an SIA with a reduced share capital as low as €1, with the requirement to increase it to €2,800 over time by allocating at least 25% of annual profits until the minimum is reached.

3. Tax Burden on Businesses

Latvia offers a competitive tax regime aimed at supporting business growth:

• Corporate Income Tax (CIT): Latvia employs a unique deferred CIT system where undistributed profits are exempt from taxation. Distributed profits are taxed at a rate of 20%, applied to the gross amount by dividing the net distribution by 0.8, resulting in an effective tax rate of 25%.
• Value Added Tax (VAT): The standard VAT rate is 21%, with reduced rates of 12% and 5% applicable to specific essential goods and services.
• Microenterprise Tax (MET): For small businesses, sole traders, and micro-entities, Latvia offers a simplified tax regime known as the Microenterprise Tax. As of January 2024, a flat MET rate of 25% is applied, streamlining tax compliance for small-scale entrepreneurs.

In summary, Latvia’s regulatory framework is structured to facilitate ease of business establishment and operation, with efficient registration processes and a favourable tax environment that supports both new and existing enterprises.

Sources:

• LIIA – Latvia keeps the high 19th place in the world in Doing Business 2020
• How Long Does It Take To Register A Company In Latvia?, House of Companies
• Doing Business in Latvia