Company registration in Latvia. Limited liability company – SIA. Service offer

The most common type of companies registered in Latvia is a limited liability company (SIA).

The company incorporation process includes the following steps:

• company name to be checked for its availability (at least two names);
• company structure (director, shareholder);
• share capital (normally the min. EUR 2 800) and distribution of participations between the shareholders;

*In the case of a reduced share capital (not exceeding EUR 2 799), only individuals can be shareholders.

• company’s type of business: detailed description for stating it in the constitutive documents;
• company’s geography of business and main counteragents.

• copies of passports of the director and shareholder – with an apostille and a notarized translation into Latvian;
• proof of address.

• if the shareholder is a legal entity, then a full set of constitutive documents is required, including a certificate of good standing (or its equivalent) for a company older than 1 year, and a recent extract from the register in original; the documents for a corporate shareholder must disclose the ownership structure right up to the ultimate beneficial owner.

For each company, a contract for administration and audit services is signed with the beneficial owner and a client information form is completed.

To pay the share capital, it is necessary to open a temporary account at a Latvian bank (company incorporation requires providing the relevant bank statement to the Register of Companies).

When opening a temporary account, banks request as much information as they normally do in the case of opening a current account for business transactions, including details of the company’s beneficial owners – the opening of an account is not included in the company incorporation cost and is payable for separately depending on the selected bank.

If a temporary account for the payment of share capital is not “converted” into a permanent current account, then a current account will need to be opened elsewhere, with all funds to be transferred there from a temporary account.

A director can only be an individual; the minimum number of directors is 1. There are no statutory requirements as to the residency of the director.

The details of directors are publicly available.

A shareholder can be either an individual or a legal entity. There are no statutory requirements as to the residency of the shareholder.

The details of shareholders are publicly available.

The amendments to the Commercial Law of the Republic of Latvia, that came into force on 13 July 2011, regarding beneficial ownership information require holders of shares/participations in a Latvian company to provide information that allows to identify the company’s beneficial owner.

If a shareholder is an individual, he is by default considered the beneficial owner. If an individual is not a beneficial owner, he must notify the company accordingly (if he has acquired at least 25% of the company’s shares/participations).

If a shareholder is a legal entity, then in case the following conditions are met:

1. the shareholder is not a company registered under the laws of an EU Member State, and
2. the shareholder holds 25% of shares/participations in a company,

such shareholder is obliged, within 14 days, to give the company a notice of the persons considered to be its founders, members or persons of similar status who, at the time of giving the notice, benefit from the existence of this legal entity.

Within 14 days from the date of receipt of such notice, the company submits it to the Latvian Register of Companies.

The minimum share capital of a Latvian company is EUR 2 800. The capital must be fully paid before registration.

Every year, Latvian companies are required to submit to the state Register of Companies an Annual Return containing the annual financial statements. The return must be submitted by 30 April.

To have these returns prepared, it is necessary to provide underlying documentation, invoices issued and paid by the company, contracts, and bank account statements.

A mandatory audit is required for:

• large and medium-sized companies,
• all entities with securities traded on a regulated market.

An audit must also be conducted for consolidated financial statements prepared by the parent company of a group.

Small companies have different options for conducting an audit of financial statements:

1. a statutory audit must be performed;
2. a review of financial statements must be performed (by certified auditors);
3. no audit is required.

A statutory audit must be performed if one of the following conditions for a small company is met:

1. it exceeds two of the following criteria for two consecutive years:
   1. total balance sheet – EUR 4 000 000;
   2. net revenue – EUR 8 000 000;
   3. an average of 50 employees in the financial year;
2. it is a parent in a group of companies;
3. it is a public person’s company or its subsidiary or a public-private capital company; or
4. it elects to recognize certain financial statement items in accordance with IFRS.

A review of financial statements must be performed if the above conditions for statutory audit do not apply to a small company and if it exceeds at the balance sheet date two of the following criteria for two consecutive years:

• total balance sheet – EUR 400 000;
• net revenue – EUR 800 000;
• an average of 25 employees in the financial year.

In all other cases, an audit for small companies is not required.

The corporate income tax rate is 20%.

No corporate income tax is paid until dividends are distributed. For this purpose, deemed distribution of dividends includes non-business expenses, interest payments exceeding certain limits, transfer pricing adjustments, assets transferred abroad, etc.

Gains from the sale of assets are included in the general tax base. Profit from the sale of shares may be exempt provided they have been held for at least 36 months. Received dividends can be excluded from the tax base, except for dividends received from blacklisted countries.

The corporate income tax period is one month. In some cases, the tax period can be a quarter. In general, a tax return is submitted monthly, if there is a taxable base.

The standard VAT rate is 21%. Some goods and services are subject to the reduced rates of 12% and 5%.

VAT returns are submitted quarterly.

Payment of dividends, interest, and royalties is not subject to withholding tax unless such payment is to a blacklisted country. In this case, the tax is withheld at the rate of 20%.

To assess the company’s tax burden, we recommend seeking tax advice (which can be arranged upon request).

[1] The fees are valid as at March 2024.