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Latvia (Republic of Latvia) – is a country in the Baltic region of Northern Europe. The capital city is Riga, the official language is Latvian. Latvia is bordered by Estonia, Russia, Belarus and Lithuania. Administratively the country is divided into 110 regions and 9 republican cities. Latvia is a parliamentary republic headed by the President. The country is part of the European Union since 2004, and belongs to Schengen Zone since 2007.
European Union membership contributed to the expansion of trade relations with developed European countries, primarily with Germany, Sweden, Great Britain. The lion`s share in economy belongs to the services sector. About a quarter of the GDP is industrial sector. The main export categories are electrical equipment, vehicles and machinery, steel and iron, as well as pharmaceutical products.
A number of economic reforms, as well as the appliance of legislative EU regulations made it possible to create in the country favorable conditions for attracting foreign investments. Company registration in Latvia – is a good option for doing business in the EU. There is also possibility to buy ready-made company in Latvia.
The popularity of this option explains for several reasons:
- One can open a respectable European company;
- Membership in EU and WTO provides wide opportunities for business;
- Loyal corporate legislation based on European legal standards;
- Liberal taxation system;
- Inexpensive registration of onshore companies in Latvia and low prices for its administration;
- One can buy a ready business in Latvia;
- Latvia has signed more than 50 agreements on avoidance of double taxation;
- There are no foreign exchange controls.
The tax system in Latvia is characterized by wide opportunities to reduce tax costs. Latvian companies and representative offices of foreign companies are considered as tax residents. Income tax, the rate of which is 15% is one of the lowest in Europe, and charged with all business profits. Payments occur on a monthly basis in the form of advance payments, and the final settlement occurs after the date of the annual financial statements representation.
The standard VAT rate in Latvia is 21% and mainly apply to trading activities, carried out in the country. The tax is not charged if the transaction concluded with EU member countries. Some activities give opportunity to reduce the VAT rate to 12%. The company is obliged to register as VAT payer for a year if there are trade transactions valued at more than EUR 50 000 in the country. If opening the onshore companies in Latvia includes transactions with EU countries, then the registration is required prior to commencement of business.
Privileged regime for holdings resides in exemption from capital gain tax on sales revenue from securities and capital shares, which are in public trading of EU and EEA and are not shares. In addition, income from received and paid dividends are tax-exempted. Exceptions are offshore companies from the "black list" and private persons. In this case, there is 15% tax rate. Income tax for private persons is 24%, social insurance contribution is 34, 09%, the worker will cover 10.5% from this amount. Withholding tax within transferring interest and royalty are not taxable, if transfer oriented to non-resident.
Company registration in Latvia is available in the following forms:
- Joint Stock Company (AS);
- Personal (contractual) Company (PS, KS);
- Limited Liability Company (SIA);
- Private Entrepreneur (IK).
The most popular option is to open onshore company in Latvia in the SIA form. The minimum authorized capital is 2000 LVL (about 2800 euros), half of which must be paid in cash at the time of company registration in the form of SIA in Latvia. In the case of micro-enterprises, the minimum amount of capital is 1 LVL. For onshore company opening in Latvia it should be at least one shareholder – private or legal person and one director (only private person) without any residency requirements. One should submit tax and annual financial statements before April 30 (large companies - to 31July). Information about directors and shareholders of the company disclosed to the local registered agent, the presence of which is obligatory. Information about beneficiary is confidential. Alternatively, one can buy a company in Latvia, which re-registration takes a short while and will ensure early start of business.
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