Doing Business in Latvia as a Foreigner: Complete Guide (2026)

In 2025, foreign-owned companies accounted for roughly one-third of Latvia's total corporate tax base -- a remarkable share for a country of under two million people. Latvia has quietly built one of Europe's more compelling environments for international entrepreneurs: EU single-market access, 0% corporate tax on reinvested profits, a digital-first registration process, and operating costs that undercut Western Europe by 40-60%.

Yet the practical reality of setting up as a foreigner in Latvia remains poorly documented in English. Government websites give you fragments. Consulting firms give you sales pitches. What most people actually need is a straight sequence: what to do first, what it costs, what can go wrong, and how long everything takes.

This guide provides that sequence. It covers company formation, taxation, residency options, banking, employment law, and the operational details that separate a functioning Latvian business from a registration certificate gathering dust.

Why Latvia? The Proposition for International Entrepreneurs

Latvia sits at an intersection that few European countries can match: eurozone membership, NATO security umbrella, Schengen-zone mobility, and a tax system designed to reward reinvestment.

The tax headline is genuine. Corporate income tax in Latvia is 0% on retained profits. You only pay the 20/80 rate (effectively 25% on the gross amount) when distributing dividends. For a growth-stage company plowing earnings back into the business, this is as good as it gets in the EU. Estonia offers a similar structure, but Latvia adds lower labor costs and certain holding-company advantages that Estonia lacks.

EU market access from day one. A Latvian SIA can invoice clients across all 27 EU member states, register for intra-Community VAT supplies, and sell services under the EU's freedom of establishment. For entrepreneurs based outside the EU -- Americans, Canadians, Australians, citizens of post-Soviet states -- a Latvian entity is often the fastest legitimate path into the European market.

Cost base. Average gross salaries in Riga run EUR 1,800-2,200/month for office staff, versus EUR 3,500-5,000 in Berlin or Amsterdam. Office rents in Riga's city center sit at EUR 12-18/m2, a fraction of most Western European capitals. This matters enormously for companies in the first years of operation when cash preservation determines survival.

Digital infrastructure. Latvia ranks consistently in the EU's top 10 for e-government services. Company registration, tax filings, social contribution declarations, and even some court proceedings happen online. You can register a company without physically visiting Latvia, using a notarized power of attorney.

80+ double tax treaties. Latvia has signed bilateral agreements with most major economies, including the US, UK, Germany, China, India, Canada, and all EU/EEA states. This network prevents double taxation on cross-border income and often reduces withholding tax rates below Latvia's statutory 20%.

Choosing Your Business Structure

Foreign entrepreneurs in Latvia typically choose between three options. In practice, one dominates.

SIA (Limited Liability Company)

The SIA is the default choice for roughly 90% of foreign-owned businesses. It offers limited liability (your personal assets stay protected), allows one or more shareholders of any nationality, and carries the credibility needed for banking relationships and B2B contracts.

Share capital: EUR 2,800 standard. A micro-capital option (starting from EUR 1) exists but comes with restrictions -- you cannot pay dividends until the capital reaches EUR 2,800, and banks view micro-capital SIAs with suspicion. For foreign entrepreneurs, the standard EUR 2,800 is worth every cent in terms of credibility and banking access.

Registration: EUR 150 state fee (EUR 50 for electronic submission). Processing takes 1-3 business days through the Register of Enterprises (Latvijas Republikas Uznemumu registrs). The process requires notarized founding documents -- articles of association, shareholder decisions, board member appointments.

Management: At least one board member (valde) is required. There is no nationality or residency requirement for board members, though having a Latvia-based representative simplifies banking and government interactions significantly.

Branch Office

A branch of a foreign company can operate in Latvia without forming a separate legal entity. The branch is taxed only on its Latvian-source income. This option suits companies that already exist elsewhere and want a Latvian presence without a new corporate layer. Registration runs through the same Register of Enterprises and requires certified documents about the parent company.

The drawback: banks are less enthusiastic about branch offices than SIAs, and the parent company remains fully liable for the branch's obligations.

Representative Office

Strictly for marketing and market-research activities -- no commercial transactions allowed. Rarely used by serious businesses, but occasionally helpful for companies exploring the Latvian market before committing.

The Registration Process: Step by Step

Here is the actual sequence for registering a SIA as a foreign entrepreneur.

Step 1: Choose and verify the company name. Check availability in the Register of Enterprises database. Names must be in Latvian or use Latin characters. Avoid names too similar to existing companies -- the Register will reject them.

Step 2: Prepare founding documents. You need articles of association, a founding decision (or shareholder meeting minutes for multiple founders), and board member consent. If you are outside Latvia, these documents must be notarized locally and apostilled (Hague Convention countries) or legalized through the embassy chain.

Step 3: Appoint a legal address. Every SIA needs a registered address in Latvia. This can be a rented office, a co-working space that accepts registrations, or a legal address service. Costs range from EUR 30-100/month for a virtual address to EUR 300+ for actual office space.

Step 4: Open a temporary bank account for share capital. Deposit the EUR 2,800 share capital. Some banks allow this before full registration; others require a temporary accumulation account. This step is where many foreign entrepreneurs hit delays -- Latvian banks apply strict AML/KYC procedures to non-residents. Budget 2-4 weeks for this alone.

Step 5: Submit to the Register of Enterprises. Online submission (via the latvija.lv portal with eID) costs EUR 50. Paper submission costs EUR 150. Processing: 1-3 days.

Step 6: Receive your registration number. Once registered, you get a unified registration number that serves as your company ID across all government systems.

Step 7: Register with the State Revenue Service (VID). Technically automatic upon company registration, but you should log into VID's Electronic Declaration System (EDS) to confirm your taxpayer status, register for VAT (if applicable), and set up electronic communication.

Step 8: Open a permanent business bank account. This is distinct from the capital deposit account and involves a full due diligence review. More on banking challenges below.

Remote Registration

You do not need to visit Latvia to register a SIA. The process works through a power of attorney -- you authorize a Latvian representative (usually a lawyer or accounting firm) to handle the registration on your behalf. The power of attorney must be notarized in your country and apostilled. SIA "CORVUS ACCOUNTING & TAX" handles this process regularly for international clients; you can reach us at /contacts to discuss the specifics.

Total cost for remote registration (including legal fees, state fees, and address service) typically runs EUR 1,500-3,000, depending on the complexity of your shareholder structure.

The Tax System: What Foreign Entrepreneurs Need to Know

Latvia's tax system has several features specifically relevant to foreign-owned businesses.

Corporate Income Tax: The 0% Reinvestment Advantage

CIT in Latvia applies only to distributed profits. The rate is 20/80 on distributions (20% of the gross base, effectively 25% of the net dividend). Retained profits are taxed at 0%.

This means a foreign-owned SIA that reinvests all its Latvian earnings pays no corporate income tax whatsoever. The tax obligation triggers only when money leaves the company as dividends, share buybacks, deemed distributions, or certain expenses treated as non-business costs.

Starting 2026, an alternative regime offers 15% CIT on annual profit plus 6% PIT on dividends. For companies that distribute most of their profits, this can be cheaper -- but for internationally-focused businesses that reinvest heavily, the standard 0% retention model remains more attractive.

Withholding Tax on Cross-Border Payments

When your Latvian SIA pays dividends, royalties, or interest to foreign recipients, withholding tax may apply:

• Dividends to EU parent companies: 0% (under the Parent-Subsidiary Directive, if ownership exceeds 10% for 12+ months)
• Dividends to treaty-country residents: reduced rates per the applicable treaty (typically 5-15%)
• Dividends to tax-haven jurisdictions: 20% withholding, no treaty relief
• Royalties: 0% within EU (Interest and Royalties Directive), otherwise per treaty or 20% default
• Interest: 0% to EU companies, otherwise per treaty or 20%

VAT

Standard rate: 21%. Reduced rates of 12% and 5% apply to specific categories (food, pharmaceuticals, books). VAT registration is mandatory once taxable supplies exceed EUR 50,000 in a 12-month period, or immediately if you supply services to other EU businesses (reverse charge mechanism).

Transfer Pricing

Latvia follows OECD transfer pricing guidelines. If your SIA transacts with related parties (parent companies, sister companies, shareholders), these transactions must be at arm's length. Documentation requirements kick in when related-party transactions exceed EUR 250,000 annually or when the SIA's revenue exceeds EUR 1.5 million.

Residence Permits: Staying Legally While Running Your Business

Foreign entrepreneurs who are not EU/EEA citizens need a legal basis to stay in Latvia beyond 90 days.

Temporary Residence Permit Through Business

Latvia offers a temporary residence permit (TRP) for business owners who meet one of these criteria:

• Company investment: The SIA has share capital or investment of at least EUR 50,000, and the company has paid at least EUR 40,000 in taxes during the previous year
• Job creation: The company employs at least 5 Latvian or EU residents on full employment contracts

The TRP is issued for up to 5 years (renewable) and gives you the right to live and work in Latvia, plus Schengen-zone travel for 90 days per 180-day period.

Application processing takes 30-90 days. The fee is approximately EUR 100-200. In practice, the EUR 50,000 investment threshold is the most common route for foreign entrepreneurs.

Digital Nomad Visa

Citizens of OECD countries can apply for Latvia's digital nomad visa, which allows remote workers to live in Latvia for up to one year while working for a foreign employer or their own foreign company. The flat PIT rate is 15% -- significantly lower than Latvia's standard progressive rates.

This is not a business-formation path but rather an option for individuals who want to test living in Latvia before committing to a local company structure.

EU/EEA Citizens

No residence permit needed. Register your stay at the Office of Citizenship and Migration Affairs (PMLP) if you plan to stay longer than 90 days. The registration is procedural, not discretionary -- it cannot be refused if you have a legitimate reason (employment, business, study).

Banking: The Most Common Pain Point

Let's be direct: opening a bank account for a foreign-owned company in Latvia is the single most frustrating step in the entire process. Since the 2018 banking reforms following the ABLV scandal, Latvian banks have applied rigorous AML/KYC procedures that disproportionately affect non-resident businesses.

What banks want to see:

• A clear, documented business model (not a one-paragraph description -- a proper business plan)
• Proof of the beneficial owner's identity, residence, and source of wealth
• Existing contracts, invoices, or letters of intent showing real business activity
• A rational explanation of why you chose Latvia (not just "low taxes")
• Ideally, a physical presence in Latvia -- at least an office and local employees

Timeline: 2-4 weeks for most applications, sometimes longer. Rejections happen. Having an introduction from a Latvian accounting firm or lawyer improves success rates materially.

Alternatives to traditional banks: Fintech providers like Wise, Payonaut, or local payment institutions offer business accounts with lighter KYC requirements. These work for operational transactions but may not satisfy all regulatory requirements (for example, VID sometimes wants to see a Latvian IBAN for certain filings).

At SIA "CORVUS ACCOUNTING & TAX" (Russell Bedford network), we regularly assist clients with bank introductions and application preparation. Contact us at /contacts if you need support navigating this process.

Employment Law Basics for Foreign-Owned Companies

If your Latvian SIA hires employees, Latvian employment law applies regardless of the owner's nationality.

Minimum wage (2026): EUR 780/month gross.

Social contributions (VSAOI): Total rate approximately 34.09%, split between employer (23.59%) and employee (10.50%). This is a mandatory cost -- there are no exemptions for foreign-owned companies.

Employment contracts: Must be in writing, in Latvian (bilingual contracts are permitted). Notice periods depend on tenure: two weeks during probation, one month after.

Probation period: Up to three months. During probation, either party can terminate with two weeks' notice.

Work permits for non-EU employees: If you want to hire a non-EU citizen to work at your Latvian company, you need a work permit from the Office of Citizenship and Migration Affairs. The process involves demonstrating that no suitable EU/EEA candidate is available (with some exceptions for highly qualified specialists).

Ongoing Obligations: The Compliance Calendar

Running a Latvian SIA involves recurring obligations that foreign owners sometimes overlook:

Monthly:

• VSAOI declarations (by the 15th of the following month)
• VAT returns (if VAT-registered)
• PIT withholding from employee salaries

Quarterly:

• CIT declaration (only in months when distributions are made)
• Statistical reports (for certain company sizes/sectors)

Annually:

• Annual financial statements (due by April 30 for the preceding year)
• Submission of annual report to the Register of Enterprises (within 4 months of fiscal year end)
• Transfer pricing documentation (if thresholds are met)
• Confirmation of beneficial owner information

Missing deadlines triggers penalties. VID's late-filing fines start at EUR 150 and scale up. For companies with foreign boards that are not physically in Latvia, outsourcing accounting and compliance to a local firm is not optional -- it is a practical necessity.

Special Situations: Holding Companies, SEZs, and Treaty Planning

Latvia offers several structural advantages for sophisticated international setups.

Holding companies: 0% tax on incoming dividends from subsidiaries and 0% on capital gains from share sales (when holding exceeds 10% ownership for more than 3 years). Combined with Latvia's treaty network, this makes Latvian holdings competitive with Luxembourg, Netherlands, and Cyprus structures -- at a fraction of the setup and maintenance cost.

Special Economic Zones (SEZs): Companies operating in Latvia's four SEZs (Riga Freeport, Ventspils Freeport, Liepaja SEZ, Rezekne SEZ) can receive up to 80% CIT rebate. These incentives have been extended to 2035, with framework provisions through 2050. Relevant for manufacturing, logistics, and certain service operations.

Treaty planning: With 80+ double tax treaties, Latvia offers legitimate routes to reduce withholding taxes on cross-border income flows. The specific benefit depends on the countries involved and the type of income. Professional structuring advice is essential here -- the treaties are detailed and the anti-avoidance rules are real.

Common Mistakes Foreign Entrepreneurs Make in Latvia

After years of working with international clients, certain patterns repeat:

Underestimating banking timelines. Clients assume they can register a company and open a bank account in the same week. Plan for the bank account to take 2-4 weeks after registration.

Ignoring transfer pricing. Related-party transactions (management fees from a parent company, IP licensing, intragroup loans) need proper documentation. VID audits these actively for foreign-owned companies.

Choosing micro-capital to save EUR 2,800. The savings are illusory. Banks view micro-capital SIAs with suspicion, and you cannot pay dividends until the capital reaches EUR 2,800 anyway.

Not appointing a local contact person. While not legally required, having someone in Latvia who can receive mail, attend to urgent government inquiries, and meet with auditors or bank representatives saves enormous amounts of time and frustration.

Assuming Latvian rules mirror their home country. Every tax system has quirks. Latvia's deemed distribution rules, for example, can trigger CIT on expenses that do not have a business purpose -- a surprise for entrepreneurs accustomed to more permissive jurisdictions.

What It Actually Costs: A Realistic Budget

For a foreign entrepreneur registering and running a SIA in the first year, here is a realistic cost breakdown:

| Item | Estimated Cost | |---|---| | Company registration (including legal fees) | EUR 1,500-3,000 | | Share capital | EUR 2,800 | | Legal address (virtual) | EUR 360-1,200/year | | Accounting services | EUR 200-600/month | | Bank account opening assistance | EUR 300-500 | | Annual report preparation | EUR 500-1,500 | | Residence permit application (if needed) | EUR 500-1,500 | | Total first-year estimate | EUR 8,000-15,000 |

These figures exclude salaries, rent, and operational costs -- they cover only the administrative shell of running a Latvian company.

Next Steps

Starting a business in Latvia as a foreigner is straightforward on paper and moderately complex in practice. The tax advantages are real, the EU market access is valuable, and the costs are manageable. The friction points -- banking, compliance, and distance management -- are all solvable with the right local support.

SIA "CORVUS ACCOUNTING & TAX," operating as part of the Russell Bedford international network from Elizabetes iela 45/47 in Riga, works with international clients across all stages: pre-registration planning, company formation, accounting, tax compliance, and ongoing advisory. If you are considering Latvia for your business, reach out to discuss your specific situation.