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Establish a Subsidiary in Latvia

Establish a Subsidiary in Latvia

Foreign investors can open a subsidiary in Latvia under the form of a limited liability company (LLC).  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. Our team of company formation agents in Latvia can help you establish your presence on the market by opening a subsidiary.

 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

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 dependent 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 25% corporate tax 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.

A bank account for a subsidiary in Latvia can be opened as soon as the tax registration is done. The document requirements vary depending on the business type, in this case, a subsidiary in Latvia.

What are the steps for opening a subsidiary in Latvia in 2024? 

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 registration, the founders must submit the company documents, application forms, and personal identification documents to the Latvian Commercial Register.

Below are the main steps for opening a subsidiary in Latvia in 2024:

  1. choose a company name: the name must be unique and it can contain only Latin or Latvian letters.
  2. incorporation documents: the SIA must have its Articles of Association and the Memorandum of Association drafted.
  3. minimum capital: it is necessary to deposit the minimum share capital for the new SIA into a bank account opened for the company.
  4. 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.
  5. 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 2024 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 discuss it with our local representatives.

One should consider the fulfilments for foreign subsidiaries in Latvia as soon as this entity is formed and registered. Considering this aspect, it is good to mention that an annual meeting is mandatory for subsidiaries in Latvia. Such a meeting discusses business progress, profitability, activities, and other business-related aspects.  

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 2024, 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. 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.

If the assets of a subsidiary in Latvia surpass EUR 800,000 while the net turnover is beyond EUR 1,600,000, the financial statements of that respective subsidiary must be audited. You can ask for the externalized services that can be provided by our Latvian accountants in this endeavor. 

Corporate tax for subsidiaries 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 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.

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 2024, 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, and 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 2024?

At the level of 2024, 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. 

Why should a person invest in Latvia?

The Latvian government implemented different plans in the country to pass through the period of economic crisis and those plans did attract investors. 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 with 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 in 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:

  1. Manufacturing industries (11.7%);
  2. Insurance and financial activities (24%);
  3. Real estate (15.3%);
  4. Wholesale and retails (16%).

Besides these industries, the state of Latvia also benefits from major investments in the textile industry, wood processing industry, technology and equipment, food processing industry, etc. If you are interested in investing in Latvia by setting up a company, the services of our incorporation agents are at your disposal.

Foreign Direct Investments (FDI) in Latvia

According to the 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.

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