How to Incorporate a Business in Latvia: Complete Guide 2026

Last verified: April 2026

Disclaimer: This guide is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult a qualified professional for your specific situation.

Key Takeaways

• Favorable Tax System: Latvia boasts a unique corporate income tax (CIT) model where a 0% rate applies to reinvested profits, encouraging business growth and expansion. Profits are only taxed upon distribution.
• SIA for Foreigners: The Limited Liability Company (Sabiedrība ar Ierobežotu Atbildību or SIA) is the most common and recommended legal entity for foreign investors, offering liability protection and a straightforward structure.
• EU Market Access: As a full member of the European Union, a Latvian company provides seamless access to the EU's single market, facilitating trade and business operations across the continent.
• Efficient E-Registration: The company formation process is highly digitized and can be completed remotely through the Latvian Enterprise Register's online portal, making it convenient for international entrepreneurs.
• Strategic Location: Positioned at the crossroads of Northern and Eastern Europe, Latvia serves as a strategic logistics and business hub with excellent infrastructure connecting East and West.
• Remote Banking: Foreign entrepreneurs can open a Latvian business bank account remotely, further simplifying the setup process without the need to travel.

An Introduction to Latvia's Business Environment

Latvia, a resilient and innovative member of the European Union, has firmly established itself as a premier destination for international entrepreneurs and investors. Its strategic location, pro-business policies, and modern infrastructure create a compelling environment for company formation. At Incorporator.io, we have observed a significant rise in interest in Latvia, driven by its unique and highly advantageous tax system. The country's stable macroeconomic environment, coupled with its commitment to fostering innovation, makes it an ideal testbed for new business models and a reliable base for established enterprises looking to expand their European footprint.

In 2018, Latvia implemented a transformative corporate income tax (CIT) model, which exempts all reinvested profits from taxation [1]. This policy allows businesses to grow organically by reinvesting their earnings tax-free. This forward-thinking approach is particularly beneficial for startups and high-growth companies that need to channel resources back into their operations. Combined with a skilled, multilingual workforce—with English, Russian, and German widely spoken in business circles—and a streamlined, digital-first bureaucracy, Latvia offers a competitive edge for anyone looking to establish a foothold in the European market. This guide will walk you through the process of incorporating your business in this dynamic Baltic nation.

Legal Framework & Entity Types

Choosing the right legal structure is the foundational step for your business venture in Latvia. The Latvian Commercial Law provides several options, but the Limited Liability Company (SIA) is overwhelmingly the most popular choice for foreign investors due to its flexibility and liability protection. Understanding the different entities is crucial to making an informed decision that aligns with your business goals.

The Limited Liability Company (SIA)

The Latvian SIA is the workhorse of the Latvian economy and the preferred vehicle for most entrepreneurs. Its key advantage is that the shareholders' liability is limited to their contribution to the share capital, protecting their personal assets. There are two primary forms of the SIA:

• Standard SIA: This is the most common type, requiring a minimum share capital of €2,800. This capital must be fully paid before the company can be registered. The Standard SIA is suitable for most business activities and signals a higher level of commitment and financial stability to partners and financial institutions.
• Low-Capital SIA: For smaller ventures, Latvian law permits the formation of an SIA with a share capital of less than €2,800 (as low as €1). However, this type has specific restrictions, including a mandatory allocation of at least 25% of annual profits to a reserve fund until the capital reaches the standard €2,800. This option is ideal for entrepreneurs testing a business idea or starting with limited funding, but it's important to be aware of the limitations on profit distribution.

The Joint Stock Company (AS)

For larger enterprises or those planning to raise capital from the public, the Joint Stock Company (Akciju Sabiedrība or AS) is the appropriate legal form. It requires a significantly higher minimum share capital of €35,000 and has a more complex governance structure, including both a Management Board and a Supervisory Council. An AS can be either private (closed) or public, with the latter able to list its shares on a stock exchange. The regulatory and reporting requirements for an AS are more stringent than for an SIA, reflecting its suitability for more substantial business operations.

Step-by-Step Incorporation Process

The process of establishing an SIA in Latvia is managed by the Enterprise Register of the Republic of Latvia (Latvijas Republikas Uzņēmumu reģistrs) [2]. The procedure is efficient and can be completed entirely online with a qualified electronic signature.

1. Choose a Unique Company Name: The name must be unique and not misleading. It must be written in the Latin or Latvian alphabet. We recommend checking its availability on the Enterprise Register's portal before proceeding. A well-chosen name can be a valuable asset, so consider its branding implications.
2. Prepare Incorporation Documents: The following documents are required:
   • Memorandum of Association (if multiple founders) or Decision on Foundation (if one founder). This document officially declares the intent to form the company.
   • Articles of Association (the company's bylaws). This critical document outlines the company's internal governance, including the rights and responsibilities of shareholders and the management board.
   • Register of Shareholders. This lists all shareholders and their respective stakes in the company.
   • Consent from each Management Board member to take up their position. This must be a notarized statement.
   • Proof of Legal Address: A document confirming the company's right to use a property in Latvia as its legal address. This can be a lease agreement or a letter of consent from the property owner.
3. Open a Temporary Bank Account and Deposit Share Capital: You must open a temporary bank account in the company's name and deposit the full amount of the share capital (€2,800 for a standard SIA). The bank will provide a statement confirming the deposit. This step demonstrates the company's initial capitalization.
4. Pay Registration Fees: The state fee for registration must be paid. The fee varies depending on the speed of registration (standard or expedited). You can pay online via the Enterprise Register's portal.
5. Submit Application to the Enterprise Register: All documents, including the bank statement and proof of fee payment, are submitted to the Enterprise Register. This can be done electronically using a secure e-signature, which greatly simplifies the process for foreign investors.
6. VAT Registration: Once the company is registered, you must register with the State Revenue Service (VID) as a VAT payer if your turnover is expected to exceed €40,000 in a 12-month period [3]. This is a crucial step for most businesses and should be done promptly after incorporation.

Costs & Fees

Budgeting accurately for your company formation is crucial. The primary costs include the share capital deposit and official government fees. While using a corporate service provider (CSP) like those featured on Incorporator.io will involve professional fees, their expertise can save you time and prevent costly errors.

Tax Overview

Latvia's tax regime is arguably its most compelling feature for international businesses. The system is designed to fuel growth by deferring taxation until profits are distributed.

Corporate Income Tax (CIT)

The cornerstone of the Latvian tax system is the 0% CIT on all reinvested profits. This means any profit your company earns and keeps within the business for development, investment, or operational purposes is not taxed. This applies to both active and passive income. This innovative approach makes Latvia one of the most attractive jurisdictions in Europe for reinvesting earnings and scaling a business.

When you decide to distribute profits (e.g., as dividends), a 20% CIT is applied. However, the calculation is unique. The taxable base is the net dividend amount divided by a coefficient of 0.8, which results in an effective tax rate of 25% on the amount paid out to shareholders [1]. While this rate on distributed profits is higher than in some other jurisdictions, the benefit of tax-free reinvestment often outweighs this, especially for growing companies.

Other Key Taxes

• Value Added Tax (VAT): The standard VAT rate is 21%. Reduced rates of 12% and 5% apply to specific goods and services, such as pharmaceuticals and books.
• Social Security Contributions: Both employers and employees contribute to the state social insurance system. The total rate is approximately 34.09%, with the employer paying 23.59% and the employee paying 10.50%. These contributions fund pensions, unemployment benefits, and other social services.
• Personal Income Tax (PIT): This is relevant for salaries paid to employees and is levied at progressive rates, ranging from 20% to 31%.

Banking & Financial Infrastructure

Latvia has a modern and accessible banking sector that caters to international clients. Major Scandinavian banks like Swedbank and SEB have a strong presence, alongside local and specialized banks such as Rietumu Banka. A key advantage for foreign investors is the ability to open a business bank account remotely, which significantly streamlines the setup process.

To open a corporate account, you will typically need to provide the bank with a comprehensive set of documents, including the company's registration certificate, articles of association, details of the ultimate beneficial owners (UBOs), and a solid business plan. Banks in Latvia are diligent with their Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, so be prepared for a thorough due diligence process. This increased scrutiny is a result of Latvia's efforts to strengthen its financial sector and align with international best practices, ensuring a secure and transparent banking environment.

Compliance & Ongoing Requirements

Once your Latvian SIA is operational, you must adhere to ongoing compliance obligations to maintain your company in good standing:

• Annual Reporting: All companies must file an annual report with the State Revenue Service (VID) by a specific deadline, typically four months after the end of the financial year. This report includes the company's financial statements and a management report.
• Accounting: Proper accounting records must be maintained in accordance with Latvian law and International Financial Reporting Standards (IFRS). We recommend engaging a local accounting firm to ensure compliance.
• Legal Address: You must maintain a valid legal address in Latvia at all times. Any changes to the legal address must be reported to the Enterprise Register.
• UBO Register: Information on the company's Ultimate Beneficial Owners must be kept up-to-date with the Enterprise Register. This is a critical compliance requirement to ensure transparency.

Pros and Cons of Incorporating in Latvia

Frequently Asked Questions (FAQ)

Q: Can a foreigner be the sole owner and director of a Latvian SIA? A: Yes, 100% foreign ownership is permitted. A single individual can be the sole shareholder and the only member of the Management Board without any residency requirements.

Q: Do I need to travel to Latvia to register my company? A: No. The entire incorporation process, including opening a bank account, can be completed remotely using a power of attorney and the services of a professional corporate service provider.

Q: How long does the company registration process take? A: Once all documents are correctly prepared and submitted, the Enterprise Register can complete the registration in as little as 1-3 business days, depending on whether you choose the standard or expedited service.

Q: What is a 'low-capital' SIA? A: It's an SIA that can be registered with a share capital of less than €2,800 (down to €1). It's designed for small businesses but comes with the requirement to build up its capital to €2,800 from profits over time.

Q: Is Latvia a tax haven? A: No. Latvia is a reputable, transparent EU jurisdiction with a unique tax system designed to encourage investment. It is not blacklisted and complies with all international tax standards.

Q: What are the annual compliance costs for a Latvian SIA? A: Annual costs typically include fees for accounting services, legal address rental, and the preparation and filing of the annual report. These costs can vary depending on the complexity of your business, but you should budget at least €1,000 - €2,000 per year for basic compliance.

Q: Can I get an EU VAT number for my Latvian company? A: Yes. Once your company is registered, you can apply for an EU VAT number from the State Revenue Service (VID). This is essential for doing business with other companies within the EU.

Sources

[1] PwC, "Corporate - Taxes on corporate income," https://taxsummaries.pwc.com/latvia/corporate/taxes-on-corporate-income [2] Enterprise Register of the Republic of Latvia, "Official Website," https://www.ur.gov.lv/en/ [3] State Revenue Service of the Republic of Latvia (VID), "Official Website," https://www.vid.gov.lv/en [4] The Commercial Law of Latvia, "Official Text," https://likumi.lv/ta/en/en/id/5490-the-commercial-law [5] CompanyFormationLatvia.com, "Open Bank Account in Latvia," https://companyformationlatvia.com/open-bank-account-in-latvia/