Foreign investors can open a subsidiary in Latvia under the form of a limited liability company (LLC), people mostly choose Latvia for setting up a subsidiary because it offers the great benefits of taxation system. Besides this, Latvia is a country that offers several advantages to investors, including competitive costs for setting up a business, talented workforce, and accessibility to other countries in the region. A subsidiary is an entity that is regulated by a parent company. This structure offers a set of advantages when compared to the other typical forms of business organizations.
| Quick Facts | |
|---|---|
| Applicable legislation (home country/foreign country) |
Foreign country |
|
Best used for |
Limited liability of shareholders Taxation system |
|
Minimum share capital |
EUR2,800 |
| Time frame for the incorporation (approx.) |
4 weeks |
| Management (local/foreign) |
Foreign |
| Local representative required |
No |
| Local bank account |
Yes |
| Independence from the parent company | No |
| Liability of the parent company | Limited liability |
| Corporate tax rate | 15% |
| Possibility of hiring local staff | Yes |
When investors decide to establish their presence on the Latvian market, they will need to pay attention to the particularities of opening and managing a business entity, whether it is a branch or a subsidiary. Latvia specifically is suitable for opening a company because this country is multi-lingual and very proficient in conducting business between western and eastern companies. Commercial law in Latvia regulates the process of company formation, but with the increase in foreign investments, the legal regulations have been made quite easier.
Our team of company formation agents in Latvia can help you establish your presence on the market by opening a subsidiary.
Table of Contents
What are the main characteristics of the subsidiary in Latvia?
The subsidiary is a means of expanding a foreign business by creating an autonomous legal entity in the country where the company will establish its presence. Unlike the branch, which is fully dependable on the parent company, the Latvian subsidiary will be a separate business structure that is incorporated and registered as any other resident company.
The subsidiary in Latvia will be taxed as all other registered companies in the country, at the usual 15% rate. Permanent establishments that have been operating in the country for less than one year may use a simplified regime in which the company only pays tax on 20% of its profit. One of our company formation agents in Latvia can give you more information on this taxation regime.
What are the steps for opening a subsidiary in Latvia in 2023?
The joint-stock company and the private limited liability company are two business types that may be used to incorporate a subsidiary. The LLC or SIA is a suitable business form for small or medium companies, while the joint-stock is preferred by larger corporations.
Both types of companies have a minimum share capital and for the purpose of registration, the founders must submit the company documents, application forms and personal identification documents with the Latvian Commercial Register. A Latvian subsidiary requires a minimum share capital of LVL 2,000.
Below are the main steps for opening a subsidiary in Latvia in 2023:
- choose a company name: the name must be unique and it can contain only Latin or Latvian letters.
- incorporation documents: the SIA must have its Articles of Association and the Memorandum of Association drafted.
- minimum capital: it is necessary to deposit the minimum share capital for the new SIA into a bank account opened for the company.
- register the business: once all the documents are complete, the SIA is registered with the Commercial Register. Registered companies are promulgated through a public announcement. Registration fees apply.
- register for tax purposes: additional registration for VAT purposes may be needed according to the commercial activities of the company.
Subsidiaries operating in selected business fields in Latvia in 2023 will need to obtain additional special permits and licenses, which means that an additional step will be needed. The procedure of company incorporation in Latvia seems simple, but it is recommended to get in touch with a company formation specialist to get things done quickly. If you are planning to open a company in Latvia, please have a look at these benefits. Because of its advantageous location between important eastern markets and EU member states, Latvia is well-positioned to facilitate commerce between the east and the west. This highlights the need for a well-developed logistics network and transit services. The closeness of Latvia to the Schengen member countries at the EU’s external borders has had a significant positive impact on the country’s GDP. In addition, Latvia has built rail connections that connect the Baltic nations to the rest of Europe.
Benefits of opening a subsidiary in Latvia
Establishing a subsidiary in Latvia is very time-consuming and sometimes it takes months to finally set it up when you are operating without any assistance. But once you establish a subsidiary in Latvia successfully, you are good to go because its operational terms are not very tough. A limited liability company in Latvia protects your subsidiary and the parent company as well. It also allows these entities to operate independently. If the subsidiary is in Latvia then the parent company does not need to worry about incurring fines and litigation from the subsidiary because Latvian authorities allow the subsidiaries to choose their own operating structure.
However, the investor cannot realize these benefits until he/she actually spends months setting up his/her Latvian subsidiary. But if you want to get your work done in a fast and appropriate manner then you can contact our experienced consultants in company formation in Latvia.
Obligations for subsidiaries in Latvia
As per 2023, there are some requirements that subsidiaries in Latvia are obliged to fulfill, like:
- – All subsidiaries in Latvia must have a registered office;
- – Upon incorporation, the parent company will need to provide a resolution/decision for incorporating a subsidiary in Latvia and other relevant information about its registration in the country of origin;
- – Subsidiaries must submit annual financial statements and in the case of large companies, an external auditor must prepare a report on these statements. Besides this, if you seeking assistance to understand the Latvian accounting requirements, our agents can assist you. One of the most crucial aspects of our accounting services is payroll and payroll tax compliance. For both local businesses and workers of international employers who are engaged in Latvia, our Latvian accountants perform all the essential payroll and payroll tax computations. You are advised to open a bank account to submit the share capital for incorporating a subsidiary in Latvia.
Corporate tax for subsdiaries
The subsidiary is a means of expanding a foreign business by creating an autonomous legal entity in the country where the company will establish its presence. Unlike the branch, which is fully dependent on the parent company, the unique factor about the Latvian subsidiary is that it will be a separate business structure that is incorporated and registered as any other resident company.
Corporate companies with subsidiaries in Latvia pay the corporate tax with a rate of 15% as per the provisions of double tax treaties. While the permanent establishments that have been operating in the country for less than one year may use a simplified regime in which the company only pays tax on 20% of its profit. Taxes have always been very complicated so, the assistance of an accountant is very necessary for calculating/paying taxes and one of our company formation agents in Latvia can assist you in this matter.
In 2023, the subsidiary in Latvia will be taxed as all other registered companies in the country, at the usual 20% rate. Other taxes for companies in Latvia include the payroll tax, real estate tax, social security contributions, stamp duty. Our company formation agents in Latvia can give you more information about the taxation regime.
What are some of the other applicable requirements for the subsidiary in 2023?
At the level of 2023, all subsidiaries in Latvia must have a registered office. Upon incorporation, the parent company will need to provide a resolution/decision for incorporating a subsidiary in Latvia and other relevant information about its registration in the country of origin.
Subsidiaries must submit annual financial statements and in case of large companies, an external auditor must prepare a report on these statements.
Why should a person invest in Latvia?
No foreign investor would like to invest in a country that is incapable of saving its benefits during an economic recession. Latvia is a country who has shown a constant development even in the time of economic crisis. The Latvian government implemented different plans in the country to pass through the period of economic crisis and those plans did attract investors. Over time the plans of the Latvian government for direct foreign investments have improved a lot. Its government has a pro-business mentality and provides foreign investors with excellent infrastructure and logistics instruments. Such great support and plans by the Latvia government encourage foreign investments in this country. A foreign businessman can get the following advantages by investing in Latvia:
- – Undoubtedly the Latvian authorities offer their investors a quick and uncomplicated registration process for companies. But obviously, these procedures are not easy enough to get understood by a layperson. To cut this hassle, the services of our consultants are available to help you out in the whole procedure;
- – The state of Latvia provides modern commercial platforms and modern infrastructure for setting up a subsidiary in Latvia. The modern approach is very necessary these days and this country tries its best to comply with the modern requirements. Such steps of the Latvian authorities make this place worth investing for foreign investors;
- – So far the most important aspect of Latvia is its location. The strategic location of this country allows the investors to have access to the western and eastern marketplaces.
Most attractive industries in Latvia
Foreign businessmen invest in different industries of Latvia, this way they get a chance to connect with the marketplace of the eastern and the western sides of the globe. The top 4 most beneficial Latvian industries in which bulk foreign investments are allocated are as follows:
- Manufacturing industries (11.7%);
- Insurance and financial activities (24%);
- Real estate (15.3%);
- Wholesale and retails (16%).
Besides these industries, the state of Latvia also benefits of major investments in textile industry, wood processing industry, technology and equipment, and food processing industry, etc.
If you are interested to invest in Latvia by setting up a company, the services of our incorporation agents are at your disposal. Latvia’s gross domestic product has increased by 2% in 2022. So, it is an optimal time to take advantage and invest in this country.
Foreign Direct Investments (FDI) in Latvia
According to World Bank’s 2020 “Doing Business” report, Latvia stands at number 19 out of 190 economies. Foreign investments play an outstanding role in the development of a country because these investments bring major employment possibilities with them. Like in 2020, the Investment and Development Agency of Latvia was involved in 51 foreign investment projects. Those investment projects were supposed to bring 2,893 new jobs and EUR 252.4 million to the country.
As per the Bank of Latvia, many developed countries are investing in Latvia like:
| No# | Foreign investors in Latvia | Percentage of foreign investment |
| 1 | Sweden | 17.5% |
| 2 | Russia | 11% |
| 3 | Estonia | 10% |
| 4 | The Netherlands | 7.2% |
Latvia is a country located in the Baltic region of Northern Europe. Over the years, the country has become an attractive destination for foreign direct investment (FDI) due to its strategic location, skilled workforce, and competitive business environment. The largest investors in Latvia are Sweden, Estonia, and Germany. Other significant investors in the country include the Netherlands, Russia, and the United Kingdom. The main sectors that attract foreign investment in Latvia include manufacturing, finance, and real estate.
Besides this, for more information about the requirements for a subsidiary in Latvia, please do not hesitate to contact us.