As a result of the 2008-2011 financial crisis, Latvia's GDP contracted by about 20%. However, over the past time, the situation in the country has changed for the better: industrial production has stabilized at a high level and, in addition, an open market economy has had a positive impact on the quality of life. And the fact that this state is a member of the EU prompts many entrepreneurs from the CIS to think about how to open their own business in Latvia.
Features of the legislative framework
The tax legislation of the Republic of Latvia is one of the mildest among the EU countries. Moreover, some experts even express the opinion that, according to this characteristic, the country can be called an offshore zone. They substantiate this not by the norms of the law, but by the amount of taxes on business, which in fact are close to those applied in real offshores.
Riga is the preferred location for opening a company for Latvians and people who have decided to immigrate to Latvia. The state leadership, interested in the even development of the regions, opened the Rezekne, Liepaja and Latgale free economic zones and the same zones in the free ports of the capital and Ventspils. The taxes operating there are very low by European standards. But some of them are also subject to discounts.
Business registration in Latvia is carried out as soon as possible. Moreover, the personal presence of the owner of the company being created is not required - everything can be done by his authorized lawyers.
The country's legislation allows you to create an enterprise wholly owned by one person, who will be the sole owner.
Forms of ownership established by law
Doing business in Latvia is carried out on the basis of 4 forms of ownership. Let's consider them briefly.
- Limited Liability Company. The majority of those wishing to open a medium and small business in Latvia opt for just such an organizational and legal form. Since the legislation does not impose residency requirements, the founder of the LLC may be a foreigner. This also applies to members of the board of directors. The amount of the authorized capital is not less than 2,800 euros.
- Public corporation. The founders of an enterprise of this type can be several persons or one person - residents or non-residents. The status of an OJSC provides for full liability for obligations and debts in the amount of all property belonging to the organization. The share capital, the minimum amount of which is 35,210 euros, must be paid in cash only. Before submitting documents to the Register of Enterprises of Latvia, it is necessary to pay at least 25% of the estimated volume of this indicator, i.e. not less than 880.25 euros.
- Representative office or branch of a foreign company. Note that the difference between these concepts lies in the difference between the rights to conduct commercial activities. The branch can deal with it, but the representative office cannot. From the point of view of the law, both options are not independent legal entities: the entire burden of responsibility for their obligations lies with the foreign parent company.
- Individual merchant. This term refers to an individual doing business. For the results of activities, the full responsibility lies only with him - the entrepreneur is responsible for all this with all his property. The status of an individual merchant is suitable for persons providing consultations, providing intermediary services or working to order: graphic and web designers, lawyers, brokers, realtors, etc. In Russia, a similar organizational and legal form of business is called an individual entrepreneur.
Niches for business
Latvia is an attractive country for the implementation of business projects due to its flexible taxation system and favorable geographic location. Let us note only the main spheres of entrepreneurial activity, which bring in a decent income in this country.
- Real estate. Construction in the Republic of Latvia is developing rapidly. Therefore, a significant profit can be brought by a business related to the provision of commercial-type premises for lease, suitable for opening shopping and entertainment centers.
- Tourism. In the mid-2000s of the 21st century, it was considered that the most profitable business in Latvia was the tourism sector. The impetus was given by the country's accession to the European Union and the holding of such international events as the NATO summit, Eurovision, and the world ice hockey championship. And although there is no boom now, the tourism industry brings in considerable income. Tens of thousands of travel lovers come to Jurmala alone every year. And then there is Talsi, Sigulda, etc. Opening a large hotel complex or hotel is not at all necessary. In such regions, guest houses and small boarding houses are in demand.
- SPA salons, beauty salons. In recent years, this segment of the market, not only in Latvia, but also in the entire Baltic region, has been replenished mainly by small enterprises, and not by large players. This trend leads to greater availability of such services in the regions of the country. In recent years, the most profitable beauty business in Latvia has been recorded in those SPA salons where water procedures are carried out aimed at weight loss. This is primarily hydromassage, sauna, mud baths and baths with medicinal waters, body masks.
- Technique. It is difficult to deal directly with the sale of equipment in Latvia due to the high competition. It is quite another matter to create an enterprise specializing in the sale of components, for example, for the same personal computers. A computer service center can be opened at the store. In European countries, the population is not used to self-repairing such things.
- Transportation. Another profitable business in Latvia is cargo transportation or courier delivery. The presence of a well-developed road network in the country makes it much easier to do this type of business. The most convenient for one person to organize a business on transportation is such a legal form as an individual merchant - an analogue of a Russian individual entrepreneur.
- The sphere of nutrition. A kiosk, a small grocery store or even a mobile cafe is a profitable business that will quickly pay off your investment. Do not discount the possibility of making a profit from the operation of machines with coffee or other drinks, snickers-type bars located in crowded places.
As you can see, there are a lot of options for opening a profitable business in Latvia.
Business visa processing
A business visa to the Republic of Latvia is intended for business travel and negotiations with partners. In addition, the visa holder has the right to leave Latvia in order to stay in other Schengen states.
Package of documents
To obtain a business visa, a Russian must submit the following papers to the Latvian consulate:
- completed in accordance with the established form, an application form for a visa to the Republic of Latvia;
- valid international passport. This document must have at least 2 blank pages;
- passport-type color photo (size 3.5 × 4.5 centimeters);
- health insurance policy with coverage of at least 30 thousand euros;
- a document confirming the availability of a place to live in Latvia;
- a paper serving as proof of ownership of a business in Latvia, or an official invitation from partners;
- receipt of payment of state duty;
- a document confirming financial security for living in the country.
Employees of the Latvian diplomatic department may request that the foreign entrepreneur provide additional information.
After receiving the papers for their verification, as well as the production and issuance of a business visa, the Latvian consulate gives itself 5-10 working days. The Russian will have to pay 35 euros for all this.
Opening a company
Opening a company in Latvia by a resident of the Russian Federation involves the following activities:
- Preparation of registration documents.
- Contribution of the authorized capital. For this, a temporary account is opened in the bank, where funds are placed.
- Submission of documents to the Register of Enterprises.
- Opening a permanent current account with a financial institution.
- Obtaining a VAT payer number.
A package of required documents
To open a company in Latvia, a citizen of the Russian Federation will need to submit to the Register of Enterprises of the country:
- application for registration in the prescribed form;
- company charter;
- the register of the founders of the company;
- memorandum of association;
- certificate on the contribution of the authorized capital;
- legal address of the company;
- the consent of the owner of the real estate to provide the legal address of the organization.
In this case, the rules must be followed when choosing the name of the organization. Not only should it be unique, but it should also not contain misleading information about the occupation.
Many of our compatriots have a question about how much it costs to open a company in Latvia. The list of basic expenses includes the following items:
- state duty for registration of an organization such as LLC - 142.29 euros;
- placement on the pages of the newspaper Latvijas Vēstnesis of a notice of the opening of an enterprise - 27.03 euros;
- certification of signatures:
- at a notary - from 40 euros. The exact figure is a derivative of the number of board members and founders;
- in the Register of Enterprises - at least 14.22 euros. The final value of this parameter is influenced by the above indicators;
- opening a bank account. The cost of this procedure depends on the tariffs of the financial institution.
If we sum up these figures, in the end we get that the price of registering a company in Latvia ranges from 183.54 to 209.32 euros, excluding the cost of opening a bank account.
Business acquisition
There are cases when it is faster and easier to buy a business in Latvia than to spend time and money on creating a new one. In the network, offers for such sales are present in large quantities. There are even firms specializing in registering companies for the purpose of their further sale.
Formally, such organizations have a history and are trusted by counterparties, and their purchase is relatively cheap.
If a foreigner acquires an already operating ready-made business in Latvia, he will receive his fame and all the established business contacts. When making a decision, this is undoubtedly an important point. However, functioning enterprises are much more expensive.
Let's note one more thing. In January 2021, the Japanese rating agency R&I returned the credit rating of the Republic of Latvia to investment grade. This factor serves as one of the motives to buy a company in this Baltic country.
Earlier, such agencies as Moody’s and Fitch Ratings confirmed the prospects for a foreigner to invest in the Latvian economy.
Banking system in the Republic of Latvia
On the territory of the European Union, Latvian banks are traditionally considered one of the most stable. Therefore, it is not surprising that entrepreneurs from the CIS countries, European businessmen and Russian companies resort to their services.
The banking system of Latvia is two-tier.
- Central bank. Year of foundation 1990. Keeps the foreign exchange reserves of the government and does not depend on it. Has the right to monitor the economic situation in the country through the use of monetary instruments and issue national currency. Can act in banking transactions as a government financial agent.
- Commercial banks in Latvia. Currently, there are about 2 dozen credit institutions of this type in the country. At the same time, only 10 provide a full package of services for individuals and corporate clients. The rest of the banks specialize in carrying out specific types of activities within a certain segment of the financial market.
Tax system
The tax system of Latvia in a simplified form consists of more than a hundred state duties and 16 taxes, including direct and indirect. The rates and the mechanism of their collection are subject to constant adjustments.
An innovation, the effectiveness of which has been proven even in neighboring Estonia, can serve as a striking example. It is formulated as follows: income tax should not be levied on the reinvested profits of enterprises. In simple terms, this means that if in the reporting period the company's income was not distributed, then the earned funds are not subject to taxation.
But even before this innovation, in 2021, the European business environment recognized that taxes in Latvia, based on their number and size of rates, form one of the most optimal taxation systems among the EU countries.
However, not without comments from influential financial institutions. Thus, the World Bank in 2021 voiced an urgent recommendation to introduce a progressive income tax rate for individuals, but with the VAT at the same level.
Here are some examples of corporate taxation:
- the size of the base income tax rate - 20%;
- for certain categories of goods, it is possible to apply reduced VAT rates. In particular:
- pharmaceutical products - 12%;
- certain types of agricultural products - 5%;
- the rate of OVGSS (compulsory state social insurance contributions) as of the beginning of 2021 for:
- employer - 24.09%;
- employee - 11%.
State programs to support entrepreneurs
The Latvian government has set itself the goal of increasing the employment rate of the country's population.
In any state, the number of people seeking to earn income through entrepreneurship is quite large. At the same time, experts from the European Union found that the main obstacle to the implementation of a business idea in many cases is the lack of start-up capital.
Therefore, in 2009 the Republic of Latvia began, in cooperation with the European Community, to implement the state program "Support for the start of entrepreneurial activity". Within its framework, people with a desire to do business became participants in a competition to receive seed funding. The decision to allocate money was made on the basis of the evaluation results of the business plans submitted by the contestants. Financing was made from the budgets of the state and the European Union.
The program was discontinued in 2021. Nevertheless, experts note that in the course of its implementation, noticeable results have been achieved.
As of the beginning of 2021, there are a large number of programs aimed at supporting entrepreneurship in the Republic of Latvia, and new ones are replacing those that are ending. The authorities and organizations of the corresponding activity profile have information about them.
How to close a company in Latvia
Latvian legislation provides for the following procedure for liquidation of a company:
- Making a decision to close the organization. The holders of the shares of the capital of the LLC or the shareholders make this decision by a majority vote. In this case, a liquidator is appointed and a deadline for filing claims for the repayment of accounts payable is established.
- Launching the liquidation process through the Register of Enterprises.The liquidator submits an application to the Register of Enterprises with a request to register the beginning of the closing procedure. After considering the submitted documents, this authority makes a decision on the liquidation of the organization and publishes information about the initiated process in the state newspaper Latvijas Vēstnesis.
- Determination of assets and payables. The company prepares an initial balance sheet, as well as a breakdown of accounts payable / receivable. At the end of the term for filing creditor claims, the liquidator will settle issues with the firm's creditors.
- The final stage. At the meeting of shareholders (members of the company), a decision is made on:
- filing documents with a petition to remove the company name from the Commercial Register;
- payment of the established liquidation quota (property or money);
- approval of the final balance sheet of the organization.
Latvian legislation clearly regulates the process of liquidation of an enterprise, therefore its implementation is not associated with special difficulties.
Conclusion
Summing up, let's name the advantages and disadvantages of doing business in Latvia for foreigners. Let's highlight the main advantages:
- a person who has not decided to emigrate to Latvia can register his company in the republic and independently manage its work;
- relatively low tax burden;
- there is no pressure from government agencies that goes beyond the law;
- business success is favored by the developed infrastructure of the Republic of Latvia.
The disadvantages include:
- the authorized capital must be deposited into a bank account before the time the company is registered;
- a significant part of the population is wary of Russians;
- the documentation must be kept in Latvian;
- high labor costs compared to the value of this indicator in the CIS countries.
Thus, we can conclude that Latvia is one of the most attractive investment states on the European continent.
