The Republic of Latvia enjoys a headline rate of corporation tax rate of just 15 percent. This rate compares favourably with western European countries such as Germany and the UK. What is more, it also competes with lower-tax jurisdictions such as Cyprus.
You can open a single-member Latvian company with a non-resident foreign director, although you must have a local registered office, which we can provide at a highly competitive rate.
Moreover, the formation process is straightforward and usually takes around a week.
The fully paid-up share capital for a Latvian limited company is €2,800. You must deposit this amount in a temporary bank account as part of the company formation process.
However, you also have the option of forming a company with a lower amount share capital of between €1 and €2,799. What is more, there is no requirement to deposit this sum in a temporary bank account.
Equally, there is no difference between the two approaches – both are fully fledged limited companies. The only difference is the amount of paid-up share capital.
Micro business regime
In addition, Latvia also offers a highly attractive micro-enterprise regime for all legal forms – whether legal or natural persons. The micro-regime features a turnover-based tax of just 9 percent. A micro-entity can have a paid-up share capital as low as just one Euro.
In essence, the difference with the micro-company regime boils down to a difference in tax rates.
A micro-company is a quick way to get a business up and running, especially for a single-member company.
However, you must be aware that its annual turnover has to stay below €100,000, and the monthly salary of each employee cannot exceed €720. What is more, micro-companies cannot pay a dividend.
In these circumstances, it is sensible to convert the company to a full-scale limited company by simply paying up the share capital.
Attractive holding regime
Latvia is also a very attractive holding company destination – particularly for Latvian company shareholders based in the EU/ EEA, Russia or the US.
What is more, since 2014, dividends are generally free of withholding tax. However, dividends paid to a shareholder based in a low-tax jurisdiction are subject to a 15-percent withholding.
Similarly, interest and royalty payments attract withholding tax only if they are made to companies in tax havens.
One other point to bear in mind is that from 1 January 2017, Latvian companies must report all payments made to non-residents.
In summary, we think that Latvia is an ideal location for either a holding structure or a single-member start-up thanks to its business-friendly tax regime and commonsense approach to regulation.
This is worth knowing
• EU member state
• one of Europe's lowest rates of corporation tax
• one-member companies allowed
• highly educated workforce
• business-friendly regulation
dividends paid to non-taxhaven shareholders are free of withholding tax