Latvia Info
Joined: 20 Apr 2007
Posts: 15
Home Country: latvia
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 Posted: Mon May 14, 2007 6:26 am Post subject: DOING BUSINESS IN LATVIA / LATVIA BUSINESS GUIDE |
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DOING BUSINESS IN LATVIA
STARTING A BUSINESS
STANDARDIZED COMPANY
Legal Form: Société à Responsabilité Limitée (SARL) - Limited Liability Company
Minimum Capital Requirement: 2,000
City: Riga
Registration Requirements:
Procedure 1. Complete signatories' cards and companies deeds, certify cards by a notary
Time to complete: 1 day
Cost to complete: LVL 10
Comment: According to the amendments to the Commercial Code effective on 21 May 2004, the Charter and the Foundation agreement (Foundation Decision) of the Company do not need to be notarised; only the Application to the Commercial Register must be notarised by notary public.
Notary fees for the notarization of founders' signatures on the company's registration application are approximately LVL 10.
Procedure 2. Open a bank account and get a receipt of reference from the bank
Time to complete: 1 day
Cost to complete: no charge
Procedure 3. Register at the Ministry of Justice, Register of Enterprises
Time to complete: 3 days
Cost to complete: LVL 124
Comment: : On 21 May 2004, amendments to the Commercial Code entered into effect. The amendments introduced the following main changes:
1) the application processing period at the Companies Register is 3 days (excluding public holidays and weekends);
2) the name of a company may not contain the words "the Republic of Latvia", however, the word "Latvia" can be included in the name of the company;
3) general partnership may be a founder of a company;
4) the requirement for notarization of founders' signatures on the incorporation agreement and the articles of association of the company is abolished;
5) the list of commercial activities is no more required in the articles of association, it may be included at the option of the shareholders;
6) 100% of the company share capital must be subscribed and at least 50% of share capital must be paid up before the submission of the registration application to the Companies Register;
7) the Latvian residency requirement for at least a half of board members is abolished;
8) company auditor's written acceptance to his appointment by the shareholders must be filed with the Companies Registry.
The cost for publication in the official gazette "Latvijas Vestnesis" on the registration of limited liability company is 24 lats.
Documents to be filed: registration application on special form provided by the Register; charter of the company; foundation agreement; minutes of the meeting; proof of investment; document verifying official address of the company; list of signatories authorised to sign on behalf of the company (the signatories has to be notarised); special licence; information regarding the founders; power of attorney.
The entries in the registry and the information for publication in the official newspaper "Latvijas Vestnesis" are submitted by the Registry notary within 3 days of making the entry. The fee for publication is to be paid before submission of company incorporation papers to the Commercial Registry.
Procedure 4. Register with State Revenue Service (tax authority) for VAT
Time to complete: 10 days
Cost to complete: no charge
Comment: The amendments to the VAT Act provides for special provisions with regard to the registration for VAT purposes if a person pursues the commercial activity within the territory of EU. The Act provides that a person not subjected to the payment of VAT but carrying out the commercial activity shall register as the VAT payer with the State Revenue Service within 30 days from the day when the value of the purchases made within the territory of EU amounts to or exceeds LVL 7000.
Procedure 5. Register employees for mandatory state social insurance contribution with the State Revenue Service
Time to complete: 1 day
Cost to complete: no charge
Comment: Regulations Nr. 397 On Registration of Persons Performing Mandatory State Social Insurance Contributions and Reports on Mandatory State Social Insurance Contributions and Personal Income Tax of the Cabinet of Ministers of Republic of Latvia, dated 14 November 2000, state that employers, self-employed persons, domestic employees working at foreign employers and foreign employees working at foreign employers shall register with the territorial agency of the State Revenue Service. Employer registers each employee with the territorial agency of State Revenue Service according to the place of registration of the employer by the fifth date of the month following that month, in which the person has acquired the employee's status, by submitting to the territorial agency of the State Revenue Service information about the employee on the basis of the Registration Card of Mandatory State Social Insurance Contributions. As advised by the representative of State Revenue Service, the State Revenue Service Revenue usually carries out this registration on the same day.
FORMS OF BUSINESS ORGANISATION
1. Limited liability companies
2. Joint stock companies
Foreign investors prefer the limited liability company because it requires fewer organisational formalities, although joint stock companies, branches and representative offices are also possible. Branches and representative offices are treated as independent legal entities and are subject to requirements similar to those of companies. A foreigner may be the sole owner of a Latvian company.
Riga, the capital, is the financial centre.
TAXATION
Corporate tax
Main rate: Flat rate of 15%
Resident companies are taxed on their worldwide income; non-resident companies are taxed only on Latvian-source income. A company is resident if it is established and registered under Latvian law. Corporate tax is imposed at a flat rate of 15%. Dividends paid by a Latvian resident company to non-resident legal entities or individuals are subject to a 10% withholding tax unless reduced under the EC Parent-Subsidiary Directive or the terms of an applicable tax treaty.
Individual tax
Flat rate of 25%
Resident individuals are taxed on their worldwide income; non-residents are taxed only on Latvian-source income. An individual whose permanent place of residence is in Latvia, or who is in Latvia for 183 days or more in any 12-month period ending or beginning in the tax year, is considered to be resident in that tax year. Tax is charged at a flat rate of 25%. Dividends received are exempt, except where the distributing company is non-resident or is a resident company entitled to tax benefits in the special economic zones or free ports.
Capital gains
Generally taxed as income
Capital gains of companies are generally taxed as income. Capital losses realised by companies on taxable securities may only be offset against gains on such securities, but other capital losses may be offset against general income. Gains on the sale of publicly traded securities are exempt. Capital gains derived by individuals on personal property, including shares and immovable property, are exempt unless the property was acquired for the purpose of resale or the property was held for less than 12 months.
Indirect tax
Standard rate: 18% ; Lower rates: 5%, 0%
Value-added tax (VAT) applies to most transactions. The standard rate is 18%, and a lower 5% rate applies to certain services, such as hotel services, veterinary services, and water and waste collection. The export of goods and related services, and supplies and maintenance relating to vessels used by international shipping lines are zero-rated. Exemptions include cultural services, insurance, rent paid for dwellings, some financial services and copyright royalties.
Registration is compulsory for businesses with annual turnover above LVL 10,000 or for individuals or legal persons doing business or acquiring goods within the EU exceeding LVL 7,000 in a calendar year.
Tax administration and compliance
Tax year: Corporations: accounting year; Individuals: calendar year
Companies must make monthly advance payments by the 15th day of the month. A tax return is due within four months after the year-end, with any balance of tax due paid within 15 days after the tax return is submitted. The employment income of individuals is taxed by withholding. Individuals deriving business income must make four quarterly advance payments. The tax return is due by April 1st following the year-end, and any final tax is payable within 15 days after submitting the return.
Additional tax information
Withholding taxes: Dividends and Interest 10%, Royalties 5% or 15%, Management fees 10%, Income from a participation in a partnership 15%, Rental income from real estate situated in Latvia 5%, Income from the sale of real estate in Latvia 2%. Rates may be reduced under an applicable tax treaty or EC directives.
Tax treaties: Latvia has concluded 39 tax treaties.
Dividends: Domestic dividends and dividends paid by an EU company are exempt; foreign dividends paid by third-country resident companies are taxable (but with a participation exemption).
Revenue protection: There is transfer-pricing and thin-capitalisation legislation and rules against offshore companies.
Groups: Tax losses may be transferred between group companies within Latvia.
Incentives: Special economic zones; free ports; special regions; special depreciation rules for new technology equipment; investment in agriculture.
Other taxes: Customs duties, Excise taxes, Gambling and lottery tax, Natural resources tax, Real estate tax. |
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