Executive Summary
Latvia is one of three Baltic countries (also Estonia and Lithuania) situated on a Baltic sea shore with the population over 2.3 million people, of which a Russian minority constitutes around 30%. It boarders to Lithuania, Estonia, Belarus and Russia, and covers more than 64, 000 sq km surface.

Its climate is temperate seasonal, however, the temperature in winter may reach – 35 C, but in summer + 35 C. Riga is the capital of Latvia, that celebrated its 800 years anniversary in 2001; the national currency is Lats (Ls, LVL).

Latvian is the national language which is closely related to the Lithuanian language structure, and both make part of the Indo-European family.

Latvia gained its independence in 1918 for the first time. It was occupied by Soviet regime in 1940, then overtaken by Germans and returned to make part of the Soviet Union involuntarily in 1945 till 1991, when it gained its independence again. Since then the primary goal of the foreign politics was entering in the EU and NATO which was realized in the year 2004. Latvia is a democratic parliamentary republic, it has a growing transition economy built on services, logistics and tourism.

Latvia is situated on the Eastern shore of the Baltic Sea and almost 40% of its territory is covered by forests. Pines and oaks are frequently met trees. The most part of the territory lays at or below 200 m above the sea level, while the highest point is Gaizinkalns (around 312 m).

There are many rivers (the biggest of which are Daugava and Gauja) and lakes on its territory, and a beautiful 531 km long sand sea shore. The ports of Liepaja and Ventspils do not freeze in winters providing an important support to ships and cargos in the Baltic region.

Map, Flag and Coat of Arm

Types of Company

Company formation in Latvia is influenced by the German Law and is regulated by the Commercial Code which follows the EU directives.

Limited Liability Company (SIA)
It is the most widely used type of company in Latvia, with the minimum capital requirement of 2,000 Ls. A number of documents should be submitted to the Commercial Register for the company registration. Shareholders’ liability is limited to the capital subscribed. Only registered shares are allowed to be issued.

Public Limited Liability Company (AS)
It has a required minimum share capital of 25,000 Ls and the company is allowed to offer its shares to the general public.

Joint Stock Company
This type of company is allowed to issue registered and bearer shares, and it also may issue the bonds. The minimum share capital is of 25,000 Ls. Companies that operate in insurance and banking market segment are required to subscribe a higher share capital.

Joint Stock Company is supposed to issue different types of shares that allow the shareholders to execute different rights: voting rights, rights to fixed dividends, priority on wining up, etc. It also issues employees’ shares that are not more than 10% of a company’s subscribed share capital, and cannot be transferred or inherited.

Representative Office
A non-resident company can establish a representative office in Latvia for a period of five years that can be renewed for additional five years with no limitation on number of renewals. After all the documents have been submitted and the approval for Representative Office registration has been received, a company should submit the foundation documents to Enterprise register within two weeks.

A branch of a foreign company that is registered in Latvia does not have a legal personality. However, it must follow the same rules as a local company for the purposes of taxes and submitting all the required reports.

General Partnership
it is the structure in which two or more partners conduct a business activity under a single name. A general partner can be ether private or a corporate entity which is liable for all the partnership obligations with all its assets. Partners make an agreement with the goal to operate together, and amendments to it can be made only when all the partners give their consensus. A partner’s contribution can be either monitory or made with another type of assets. It is necessary to register such a partnership in Commercial Register.

Limited Partnership
It is a structure with at least one general partner (liable with all the assets) and at least one limited partner (liable to the capital invested in the partnership) who agree to work together under a single name. Rules of incorporation and conducting a business activity of a Limited Partnership are similar to the General Partnership regulations and practice.


Individuals are taxed at the rate of 25% on their income. Residents pay income tax generated in the country or abroad (worldwide), non-residents pay tax on the income that has been received on the territory of Latvia.

A resident is a person who permanently lives in Latvia, or passes there at least 183 days in a year, or a citizen of Latvia employed abroad by the government of Latvia.

Certain dividends, interests on Latvian bank deposits, income from certain types of property sale, some cases when money is received from insurance, income derived from state treasury bills and number of government benefits are exempt from tax.
Deductions are processed on obligatory social security contributions, donations to charities, expenses on scientific and artistic works and contributions to private pension schemes.
Annual tax declaration must be submitted by 1st April 2008. Individual income tax is usually withheld from the salary (payroll tax) by an employer who submits the sum of money payable to tax authorities on a monthly basis.

Local companies (excluding partnerships) as well as foreign companies that generate income on the territory of Latvia are liable to a corporate income tax. To be resident in Latvia a company should be incorporated there.

From 2002 when an income tax was equal to 25% it dropped to 15% in 2004 which is applied up to date. A double declining balance method of depreciation is applied for tax purposes. Tax losses can be carried forward for five years.

A fiscal year corresponds to a calendar year and tax return form should be submitted within four months, while large companies may obtain an extension up to seven months. However, companies may make tax advance payment by the 15th day of each month.

There is a withholding tax the rates of which vary depending on each particular case. The standard VAT rate is of 18%, while a lower rate of 9% is applied to certain products and services categories.

Global business gate Global internet marketing consultations Publisher Global networks