Starting a Business in Latvia is an appealing proposition for global entrepreneurs, a gateway into the EU, a stable regulatory regime, and competitive taxation. Latvia’s business climate is particularly friendly to non-residents, with no requirement for a local director and full foreign ownership permitted. 

At the same time, setting up and scaling a company requires careful planning, including capital requirements, immigration, and compliance with corporate tax and VAT. 

In this guide, we walk you through the essential steps and considerations for starting a company in Latvia, and how a cross-border platform like Commenda can simplify your journey.

Key Highlights

  • Lithuania is a highly founder-friendly EU hub offering fast digital incorporation, low taxes, and strong access to European markets.
  • Foreigners can own 100% of a Lithuanian company, with simplified residency pathways for entrepreneurs.
  • Key legal/tax essentials include choosing the correct entity (UAB), complying with accounting rules, registering for VAT, and understanding local labor laws.
  • Ongoing compliance requires bookkeeping, annual financial reporting, tax filings, and, where applicable, sector-specific licensing.
  • Platforms like Commenda simplify multi-country compliance, automate filings, and support international scaling from day one.

Why Foreign Entrepreneurs Choose Latvia

Foreign entrepreneurs are drawn to Latvia for a mix of economic, legal, and geographic advantages. First, Latvia is an EU member and part of the euro area, providing seamless access to EU customers. It also ranks highly for ease of doing business, especially in terms of company registration and operational costs.

From a tax perspective, Latvia’s corporate tax system is unusual but favourable: companies do not pay corporate income tax on retained earnings; instead, a 20% tax applies only when profits are distributed (or “deemed distributed”). This deferral-friendly system lets businesses efficiently reinvest profits.

Latvia also offers a Startup Visa for non-EU founders. Up to five founders can apply for a residence permit valid for up to three years, making it easier for international teams to establish operations.

Understanding Market Entry Strategy in Latvia

Before you set up, you should assess the entry strategy. Start by researching the Latvian market, identifying which sectors are open to foreign investment (such as IT, clean energy, and export manufacturing), and studying customer preferences. For example, digitally native businesses may appeal in Riga’s startup ecosystem, while manufacturing firms can leverage Latvia’s transport infrastructure and port access.

Localization matters: business in Latvia involves not only understanding local regulations but also cultural norms, especially if you are bringing in a non-EU founding team. Administrative documents need to be submitted in Latvian, and a registered office address in Latvia is mandatory.

Minimum Capital and Investment Options for Foreigners

When you decide to start a business in Latvia, one of the first considerations is capital. For a standard private limited liability company (SIA), the minimum required share capital is €2,800, of which at least 50% typically must be paid in at incorporation. There is also a micro-SIA option with reduced capital requirements; minimal capital can be as low as €1 under certain conditions.

In terms of funding, foreign entrepreneurs can tap into:

  • Venture capital or angel networks are particularly active in Latvia’s startup ecosystem
  • Government grants or incentives, aided by Startup Latvia and other innovation-support programs in Latvia
  • FDI / large capital contributions: To qualify for certain residence permits, you may need to invest €50,000 or more into a Latvian company.

Latvia also offers investor residence permits, in which you contribute equity capital to a local company. For example, a temporary residence permit may be granted for an equity contribution of at least €50,000 in smaller companies, under specific conditions.

There is also a Capital‐Share Investor path via a “Golden Visa”-style scheme, involving a €50,000 capital injection plus specific ongoing contributions.

Choosing the Right Business Structure

Selecting the appropriate legal structure is a critical step when starting a business in Latvia. The main options are:

  • Limited Liability Company (SIA): This is the most common form. As noted, minimum share capital is €2,800 (or lower for micro-SIA). It allows full foreign ownership, and founders do not need to live in Latvia.
  • Joint [Stock] Company (AS): Suitable for larger businesses or those intending to raise capital publicly; minimum capital requirement is €35,000.
  • Branch Office: A branch of a foreign company can operate in Latvia without forming a separate capital company.
  • Representative Office: Good for market research and non-commercial presence; cannot trade.
  • Partnership: Either a general partnership (all partners fully liable) or a limited partnership (some partners’ liability capped).
  • Sole Proprietorship: The Simplest form, with no mandatory share capital, but personal liability is not limited.

For detailed incorporation steps, you can refer to our “How to Register a Business in Latvia” guide, which covers corporate registration, documentation, and interactions with the Latvian Enterprise Register.

Each structure has different implications for liability, taxation (especially on profit distribution), governance, and ongoing compliance. For example, SIA is favorable for minimizing risk, while a branch may make sense if you want tight control from a parent company.

Legal, Residency, and Immigration Requirements

Foreigners can own 100% of a Latvian SIA, and there is no requirement for a local (Latvian) director. A registered office address in Latvia, however, is mandatory.

To operate in Latvia long-term, non-EU founders often apply for a temporary residence permit. 

Such permits, granted by the Office of Citizenship and Migration Affairs, are available for individuals who:

  • Invest in a Latvian company (e.g., at least €50,000 in equity for smaller companies)
  • Serve on the board or managerial body of a Latvian company.
  • Make subordinated capital investments (e.g., €280,000 in a Latvian credit institution)

There’s also the Startup Visa, explicitly designed for innovative entrepreneurs. It supports up to five founders, grants a three-year residence permit, and offers a low flat social tax and favorable conditions for stock options.

Note: a residence permit is not required to own a business in Latvia. But if you plan to reside and manage operations locally, the permit becomes essential.

Foreign Investment Restrictions and Business Incentives

Latvia generally imposes very few sector-level restrictions on foreign investment. Citizens and non-citizens alike may invest in most industries; there are no broad prohibitions on foreign ownership.

At the same time, there are incentives for investment in certain strategic areas:

  • Startup support: Eligible startups can benefit from 0% personal income tax and startup-friendly stock option regimes.
  • Special economic zones (SEZs) and free ports: Latvia has SEZs (e.g., in Riga, Liepāja) where companies may receive tax exemptions or other benefits. (Note: your source mentioned free ports and special zones for tax reductions; that aligns with policy.)
  • Tax deferral via retained earnings: Since corporate tax is imposed only on distributed profits, reinvestment is incentivized.

For those looking to obtain residency, investing in a Latvian company or placing capital into subordinated instruments can also open the door to a residence permit, as described above.

Opening a Bank Account and Managing Cross-Border Payments

Once you’ve chosen your legal form and are ready to establish operations, you’ll need a Latvian bank account. As a non-resident founder, you must undergo KYC (Know Your Customer) checks. 

Expect to provide:

  • Company registration documents
  • Proof of registered address in Latvia
  • Identification for shareholders or directors (e.g., passports)
  • Proof of business activity or business plan

If your minimum share capital is €2,800 (for a standard SIA), you will need to deposit these funds during incorporation.

Managing cross-border payments can be complex, especially when dealing with EUR and other currencies and global clients. Using a platform like Commenda, you can:

  • Open multi-currency accounts
  • Ensure compliant cross-border payments
  • Automate VAT, GST, or U.S. sales tax obligations
  • Reduce friction between jurisdictions

This consolidates banking, compliance, and tax functions under one roof. Simplifying operations considerably for foreign founders.

Taxation and Compliance for Foreign-Owned Businesses

Understanding tax obligations is central to scaling in Latvia. This is a core piece when you start a business in Latvia.

  • Corporate Income Tax: Latvia taxes distributed profits (dividends and deemed distributions) at 20%.
  • Deferred tax on retained earnings: Profits retained and reinvested are generally exempt from tax until distribution.
  • Effective rate on taxable base: Due to the calculation method, the effective CIT rate can be 25% in some instances.
  • Micro-business tax (MBT): For tiny enterprises, there’s a micro-enterprise regime: a rate of 25% for qualifying small taxpayers.
  • VAT: The standard VAT rate in Latvia is 21%, with reduced rates for certain goods and services. (As per your source)
  • Social security/payroll: When hiring, businesses must register with the State Revenue Service (SRS) for employer contributions.

Filing obligations: companies prepare annual financial statements and file them with the authorities. Compliance also means registering for VAT once turnover exceeds the threshold (or earlier voluntarily), and using electronic declarations (SRS’s EDS system) for tax returns.

Hiring Employees and Payroll Compliance

If you plan to grow locally, understanding Latvian employment law is key.

  • Contracts: Local employment contracts must conform to Latvian labor law.
  • Social contributions: Employers must make social insurance contributions for employees, registered via the State Revenue Service (SRS).
  • Minimum wage: While it changes, you must comply with national minimum wage laws when setting employee compensation.
  • Work permits/visas: If you hire non-EU nationals, they may need a residence permit or work permit.
  • Remote hiring: Alternatively, you can hire remote workers via a “local entity in Latvia” or maintain employment via your parent company, depending on structure and tax efficiency.

For payroll compliance, Commenda can help with integrated payroll solutions, local payroll expertise, and automated filings, ensuring your cross-border hiring remains fully compliant.

Setting Up Operations and Staying Compliant

After incorporation and banking, you must ensure your operations are legally sound:

  • Registered Office: Maintain a registered address in Latvia for official communications.
  • Accounting system: Implement bookkeeping and accounting, following Latvian GAAP or IFRS as needed.
  • VAT registration: If applicable, register for VAT and file VAT returns.
  • Insurance: Depending on business risk, you may need liability, property, or employer liability insurance.
  • Reporting & filings: Submit annual financial statements and maintain statutory registers (shareholders, board, etc.).

Commenda can be your backbone here: its platform automates filing deadlines, generates compliance alerts, integrates with accounting systems, and centralizes documentation so you’re audit-ready at any point.

Maintaining Your Business in Good Standing

Running a business in Latvia doesn’t end at registration; you must keep it in good standing:

  • Annual reports: File financial statements by the required deadline.
  • Tax filings: Ensure your CIT (on distributions), VAT, and payroll taxes are correctly filed.
  • Corporate governance: Hold and document annual meetings, maintain statutory records.
  • Audits (if needed): Depending on company size/category, auditing may be required.
  • Licenses/permits: If you are in a regulated sector, maintain any special permits.

Failure to comply can result in penalties, fines, or loss of good legal standing. With Commenda, you get automated reminders, compliance dashboards, and expert support to prevent lapses.

Finding Local Partners, Accelerators, and Support Networks

To grow your business in Latvia, tapping into the right ecosystem is crucial:

  • Startup accelerators: Programs like TechChill and those supported by the Investment and Development Agency of Latvia (LIAA) offer mentorship, networking, and early-stage funding.
  • Chambers of commerce: Join bilateral business associations (e.g., American–Latvian Chamber of Commerce) to build relationships.
  • Trade agencies: LIAA provides insight, grants, and entry support for foreign investors.
  • Professional services: Local law firms, accountants, and corporate services providers are invaluable for navigating Latvian regulation.

Commenda’s global network also connects you with trusted local advisors. But you still benefit from local relationships for market intelligence, partnerships, and community building.

How to Close or Sell Your Business in Latvia

When you decide to wind down or exit your Latvian entity, here’s how to proceed:

  • Deregistration / Liquidation: File for liquidation with the Enterprise Register, settle debts, and distribute remaining assets.
  • Tax obligations: Pay final VAT returns, ensure any distributed profits are taxed appropriately, and file final corporate income statements.
  • Employee obligations: Provide termination notices in accordance with Latvian labor law, pay severance, if required, and settle social contributions.
  • M&A or sale: If selling, transfer shares or assets; if merging, ensure due diligence, valuation, and regulatory compliance.

Throughout, Commenda can support you by preserving records, handling cross-border transfer of ownership, and ensuring your entity closure is fully compliant.

Challenges Foreigners Commonly Face

Even though Latvia is investor-friendly, foreign entrepreneurs can face some typical hurdles:

  • Regulatory navigation: The Latvian language and local bureaucracy may be unfamiliar.
  • Banking delays: Opening a non-resident account can take time due to strict KYC requirements.
  • Tax registration complexity: VAT thresholds, annual filing, and dividend taxation require careful planning.
  • Cross-border compliance: Managing VAT, global tax, and filings across countries can be error-prone.

Pro Tips:

  • Engage a cross-border platform like Commenda to unify your tax and compliance workflows.
  • Use a registered local address and a virtual office to fulfill statutory requirements.
  • Plan cash flow to account for share capital deposits, tax on distributions, and banking hold times.
  • Use the Startup Visa program if qualifying; it eases residency and hiring.

Why Choose a Cross-Border Platform Instead of Local Agents

Relying on fragmented local agents (accountants, lawyers, tax firms) can become inefficient as you scale internationally. Each advisor typically handles only a part of the puzzle, requiring you to coordinate multiple providers.

By contrast, Commenda offers:

  • Unified incorporation across 30+ jurisdictions
  • Centralized global VAT and U.S. sales tax compliance
  • Automated compliance tracking with reminders and filings
  • Single point of contact for cross-border teams and entities

This consolidates costs, reduces risk, and provides a scalable solution for global growth.

How Commenda Helps You Start and Scale Globally

Here’s how Commenda supports your Latvia expansion, and beyond:

  • One-click incorporation in Latvia (and other countries) with expert guidance
  • Global VAT & U.S. Sales Tax Management: Register, file, and stay compliant from one dashboard
  • Automated compliance tracking: Get alerts, file annual reports, tax returns, and financial statements on time
  • Dedicated support: A cross-border specialist understands both local (Latvian) and global compliance needs, streamlining your growth

Start your business in Latvia and scale globally with Commenda, your single platform for incorporation, tax, and compliance. Book a demo call with Commenda today!

FAQs

1. Can foreigners own 100% of a company in Latvia?

Yes, 100% foreign ownership is allowed for a Latvian SIA.

2. What are the visa or residency requirements to start a business?

Foreigners can apply for a Startup Visa or for a temporary residence permit via business investment (e.g., €50,000 in equity).

3. What’s the minimum capital needed to start a business in Latvia?

Typically, SIA requires €2,800; micro-SIA can be set up with as little as €1.

4. How are foreign-owned companies taxed in Latvia?

Corporate income tax (20%) applies to distributed profits; retained earnings are not taxed.

5. What incentives are available for foreign investors?

Incentives include tax deferral on retained earnings, special economic zones, and startup visa benefits (0% PIT, favorable stock option policies).

6. How can I open a bank account as a non-resident?

You’ll need KYC documentation: company registration docs, proof of address, and IDs. Deposit share capital when forming your company.

7. What are the ongoing compliance obligations for foreign businesses?

Obligations include annual reporting, VAT filings, corporate tax on distributions, maintaining a registered office, and possibly audits.

8. How does Commenda simplify cross-border incorporation and global tax compliance?

Commenda consolidates incorporation, VAT, and U.S. sales tax into a single platform, automates filings, and provides centralized cross-border support.