Entering the Latvian Market
Foreign companies who wish to expand into Latvia will be met with the one of the strongest manufacturing sectors in the Baltics, a skilled and educated workforce, world-renowned competitive tax incentives, and a variety of growth incentives and collaborative opportunities for investors with the state.
However, setting up shop in an unfamiliar place comes with its own challenges. Foreign businesses must comply with employment, tax, payroll, and corporate legislation whilst ensuring that their employees are working productively and efficiently.
Starting a Business in Latvia
Latvia’s geographical position benefits from international access to diverse marketplaces in the EU, the Baltics, Russia, and Asia. With a robust infrastructure, and a dominant engineering and metalworking industry that contributes to about 80% of the total exports, and high-quality woodworking productions, this creates an attractive environment for any business owner who seeks to expand their business.
To start a business in Latvia you must go through a company registration procedure, which is straightforward and designed to be executed easily. These steps can be done online or in person – but for online registration, you will require an e-signature known as an eParaksts.
The necessary steps to start a business in Latvia include:
- Obtaining a local business address.
- Acquiring any additional permits or documentation for the business’ operation.
- Opening a bank account in Latvia to deposit the appropriate share capital.
- Preparing the appropriate registration documents and having them translated to Latvian or English.
- Notarizing and legalizing the registration documents at a notary’s office.
- Register your company and apply for a company tax number at the Enterprise Register.
- Register for a VAT Number at the State Revenue Service (only applicable if certain criteria are met).
- Register with State Social Insurance Agency (VSAA).
- Receive a Tax Identification Number, a certificate of registration and a unique registration number.
- Company registration is publicly announced by the Commercial/Enterprise Register Gazette.
Expanding into Latvia
Foreign companies wishing to expand into Latvia will be swept into a thriving economy with a sizable talent pool, and attractive administrative and labor costs – which is provided to all companies that enter their market. The country’s position in the Baltics offers access to trade between the West and East, as well as a formidable infrastructure and a progressive, western-oriented business environment.
Latvia boasts an abundance of natural resources and craftsmanship, which can be seen in its robust industrial sectors such as woodworking, metalworking, and technical manufacturing. However, Latvia also does well in transport and logistics, IT, energy production, food production, and creative sectors, some which are eligible to receive extra support from the state.
Whilst these industries can create opportune levels for international expansion, they can also be expanded locally to popular locations and tourist destinations such as Riga, Daugavpils, Liepāja, Jelgava, and Jūrmala.
Latvia Business Facts
- Capital City – Riga
- Population – 1,907,675
- Cities – Daugavpils, Jēkabpils, Jelgava, Jūrmala, Liepāja, Rēzekne, Rīga, Valmiera, Ventspils
- Official language(s) – Latvian
- Economy/GDP (2020) – $33,478 million, No. 101
- World Ranking (Ease of Doing Business) – 19th (2020)
- Leading sectors – processed foods, processed wood products, textiles, processed metals, pharmaceuticals, railroad cars, synthetic fibers, electronics
- Main exports – foodstuffs, wood and wood products, metals, machinery and equipment, textiles
- Main imports – machinery and equipment, consumer goods, chemicals, fuels, vehicles
- Main trading partners – Lithuania, Estonia, Russia, Germany, Poland, UK, Denmark, Norway, Netherlands
- Government – Unitary parliamentary constitutional republic
- Currency – Euro
Advantages and Challenges of the Latvian Market
The Latvian market has a variety of significant advantages:
- Low labour costs: Latvia offers an internationally competitive workforce and low workforce costs. Latvia is also one of the leading European countries with regards to wage-adjusted labour productivity.
- Competitive tax system: Latvia’s tax system has been recognized as the 3rd most competitive in the world, according to the International Tax Competitiveness Index (2019).
- Educated workforce: Latvia is ranked 7th in the world for the number of new students enrolling for bachelor programs in STEM (“Education at a Glance”, 2019).
- Language: English is the favoured language for doing business in Latvia, and most workers are multilingual – with knowledge of Russian, German, and other Scandinavian languages.
- Ease of Business: Latvia is ranked 18th in the EU in public digital business services (European Commission, Digital Economy and Society Index 2020).
- Logistics: Latvia boasts a highly developed infrastructure which grants easy and efficient access to the rest of Europe, the Baltics, Russia, and Asia in a matter of days.
- EU Benefits: Latvia is a member of the European Union and enjoys the same trade benefits of other EU nations.
The biggest challenge facing the Latvia market currently is the effects of COVID-19, like many other nations in the EU and around the world. Other challenges include resource centralization, and low talent pools, but reforms and incentives are taking place to combat these challenges.
The 100 per cent solution is to consider the alternative to setting up a subsidiary by working with Bradford Jacobs. Our international recruitment specialists will find the perfect fit for the roles you need to fill. Then our Employer of Record (EOR) in-country consultants will handle all the complexities of Latvia’s employment laws, tax regulations and payroll, ensuring your Latvia expansion plans progress smoothly and effortlessly.
Limited Company / Subsidiary or Branch in Latvia?
A subsidiary established in Latvia is considered a legal separate entity from the parent company, with independent administration and management, providing freedom explore the local market and create international credibility.
A branch, however, does not have any independence from the parent company, but it is taxed and reported similarly to resident entities, and is limited in its commercial activities.