Starting a business in Latvia: The Beginner's Guide
Guest Blog Post by Bharti Rana, Content Marketer
Starting a business in Latvia is simple, promising, and surprisingly beginner-friendly. Latvia’s business environment is one of the friendliest in the world for entrepreneurs (especially if you have Latvian citizenship). The country has a very open and favorable business environment, and a simple process for starting a business.
Latvia is a great place to start your own company because it offers comprehensive support programs and resources for new businesses. Additionally, doing business in Latvia provides all the advantages of a thriving economy and a launching pad for the European Union.
Continue reading this article to discover what advantages Latvia offers entrepreneurs, who can start a business in Latvia, and how to set up your new Latvian company.
Why you should start a business in Latvia
Starting a business in Latvia is an excellent idea for entrepreneurs who want to be located in a country that is business-friendly and has a growing economy.
Latvia is a member of the European Union and the Eurozone, which provides businesses with access to a large market of suppliers and consumers.
The country offers a skilled workforce, a well-developed infrastructure, and many incentives for businesses (including opportunities for entrepreneurs to obtain residence and Latvian citizenship).
The benefits of starting a business in Latvia:
● Strategic location: with a central location that neighbors Scandinavia, the Eastern markets, and the hub of the Baltic Sea, Latvia is ideally situated to do business. And as a member of the EU, the country enjoys a large and stable marketplace for goods and services.
● Flourishing economy: Latvia enjoyed a 5% economic growth in 2021 despite the recent pandemic crisis. And as a country with a stable currency and institutions, it provides the ideal climate for businesses to thrive
● Business-friendly taxation: taxes in Latvia are low even when compared with other areas of the EU and they are particularly favorable to new and innovative businesses.
● Excellent infrastructure: Latvia has one of the fastest internet speeds in the world as well as three ports, extensive railways, airport connections, and a first-rate transport system.
● Supportive business environment: as shown by Latvia’s 26th place worldwide in ease of doing business, this country is an excellent destination for entrepreneurs. Not only does it offer a straightforward company setup process, but also provides funding and guidance to new businesses and helps entrepreneurs obtain residence and, eventually, Latvian citizenship.
Who can start a business in Latvia
Latvia is very welcoming to foreign investors and entrepreneurs. Nowadays, you can get a 3-year residence permit (called Startup Visa) if you have a sound startup idea, no matter what non-EU country you hail from. After your business is founded, you can even bring in your team with a work visa.
On the other hand, having Latvian citizenship from the start can help you start your EU business even faster and with less paperwork. To be eligible for immediate Latvian citizenship (without a mandatory period of residence), you need to meet three main criteria:
● Having ancestors (parents, grandparents, or great-grandparents) who were Latvian citizens before 1940.
● Proving that they left Latvia or were exiled between 1940 and 1990.
● Having documentation to prove their citizenship and withdrawal as well as your family connection.
How to set up your company in Latvia
1. Knowing your product
To obtain a startup visa and start your business in Latvia, you need to prove to the authorities that your business idea is sound. You can check the eligibility of your idea with the Investment and Development Agency of Latvia before you apply.
2. Meeting the requirements
To obtain this kind of residence permit, you also need to meet other requirements such as proof of subsistence (€6,000) and a 3-year business plan. The review process can take up to 30 days and, if approved, you will present additional documents. To bypass the need for a visa, find out if you are eligible for Latvian citizenship.
3. Choosing the right kind of company
You now have 3 months to register your company. In Latvia, the most adequate kinds of organizations for startups are a limited liability company (LLC or SIA in Latvian) or an LLC with reduced capital (under €2,799).
4. Doing the paperwork
Before company registration, you will need to open a bank account to transfer the capital. Then you need to submit your complete application to the Register of Enterprises.
The documents you will need to start your business in Latvia include:
● Notarised deeds of incorporation
● Proof of equity capital payment
● Company charter
● Articles of association
● Information on directors and shareholders
● Proof of registered address
● Payment of state duties
● Payment of publication fee
5. Knowing your taxes and obligations
The relevant taxes for an LLC in Latvia encompass:
● Corporate income tax: applied as 20% on paid-off dividends. Reinvested profits pay 0% taxes.
● Personal income tax: this tax is paid in three tiers. Annual income above €20,004 pays 20%, between €20,004-62,800 23%, and above €62,800 31.4%
● Social taxes: 24.09% of an employee’s gross salary is paid directly by the company.
The new Latvian Startup Law indicates that a startup can opt for aid: either state co-financing of highly-qualified workers or low flat social tax per employee and waived income tax.
You can deduct employee training and research from taxation. Business activities in Latvia’s free ports and special economic zones enjoy further tax incentives.
Keep in mind that, as time goes on, you might have to show proof of having attracted a qualifying investment (€30,000 from venture capital or €15,000 from angel investors) or a progress report. This is a step to renewing the initial startup visa. Those entrepreneurs with Latvian citizenship do not need to prove this.
Getting support as a new business in Latvia
Latvia has been dubbed the new “startup paradise”: an unsaturated business ecosystem committed to attracting startups through lenient regulations and extensive backing.
Entrepreneurs with innovative business ideas can obtain many benefits for their new company. These include financial support, business advice, tax exemptions, and EU residence with the possibility to get Latvian citizenship later.
Latvia offers startups remarkable opportunities to grow:
● A unique startup visa that accommodates up to five founders and their families. This residence permit allows you to move freely within the EU and, potentially, Latvian citizenship in the future.
● Business guidance: when founding a company in Latvia, you can benefit from a Welcome Pack, a single point of contact for all bureaucratic processes, and business mentorship.
● Financial support: As a new business in Latvia, you might be able to access a Startup Fund providing up to €50,000 or participate in fast-tracking incubators. Additionally, Latvia organizes business networking hubs like TechChill and DFF.
Starting a business in Latvia is a straightforward process that sets your company up for growth and long-term success. Latvia’s economy and business environment are very supportive to investors and entrepreneurs, especially if you are someone with Latvian citizenship.