A Latvia Limited Company (SIA) is very popular with foreigners because it offers limited liability protection and all the shares may be owned completely by foreigners.
Background
Latvia is located in the Baltic region in Northern Europe. It is officially called the “Republic of Latvia”. It borders Lithuania to the south, Estonia to the north, Belarus to the southeast, Russia to the east, along with a maritime border with Sweden to the west.
Politically, it is defined as a “democratic parliamentary republic” with an elected one house legislature, a prime minister, and a president. It was established as a nation in 1918 after the end of World War I created new countries in the region. From 1940 until 1991, it was part of the Soviet Union under Russian control.
Latvia Limited Company (SIA) Benefits
A Latvia Limited Company (SIA) offers the following benefits:
• 100% Foreign Ownership: Foreigners may own all of the shares in a SIA.
• Limited Liability: Shareholders have limited liability up to their contributions to the company’s share capital.
• One Shareholder: Only one shareholder is required in order to form a SIA.
• One Director: The sole shareholder may become the only required director to manage the SIA.
• Low Capital: The minimum share capital is currently 3,000 Euro where only 50% must be paid before registering.
• Small Company: A small (micro) company SIA can be created requiring a lower share capital.
• EU Member: Since 2004, Latvia became a full member of the European Union (EU) providing greater opportunities to conduct business with other EU members.
• Fast Registration: Only 1 to 3 days approval after registration.
• Low Tax: A micro company only pays a 9% corporate tax rate. However, U.S. residents and everyone subject to global income taxes must declare all income to their governments.
Latvia Limited Company (SIA) Name
The SIA company name must be completely different from any other company or other legal entity’s name in Latvia. A check of the company names registered with the government can be conducted for name availability prior to registration.
Company names cannot contain words which mislead the public as to the nature of the business it conducts. Company names using the words “Bank”, “Group”, or “Insurance” will be rejected unless the new company obtains a special license to conduct that type of business.
The company name and all documents must be written in the Latvian language or in another language accompanied by a translation.
Limited Liability
A shareholders has limited liability protection up to his or her contribution towards the share capital.
Registration
The Commercial Register handles all application for new companies in Latvia.
The minimum share capital is deposited with a local bank which issues a document verifying the amount deposited which is filed with the Commercial Register. While most SIA’s will pay 50% of the minimum share capital of the current value of 3,000 Euro, a micro company (with a lower minimum share capital) must pay the full amount prior to registration.
Small companies are recognized in Latvia known as “micro” companies. To qualify as a “micro” company the SIA must:
• The shareholders are natural persons and not a legal entities;
• A maximum of five (5) shareholders are permitted;
• The Board of Directors include the original shareholders; and
• A shareholder can only be a shareholder in one micro company.
The Articles of Association including the make-up of the Board of Directors will then be filed with the Commercial Register.
Once all documents are registered, the company name will be entered into the Register of Enterprises. At this point, the SIA is legal and can begin conducting business.
All new companies must publish their details in the Official Gazette called the “Latvijas Vēstnesis” which publishes all new laws, government rules, and regulations.
Shareholders
Only one shareholder is required to form a SIA. The shareholders may be natural persons or legal entities. They may reside in any country and be citizens of all countries.
The SIA is a commercial company with limited liability protection for its shareholders. In addition, a SIA is a private company whose shares are not sold or traded with the public.
Directors
A sole shareholder may be the only director since only one director is required. Directors may be citizen of any country and can reside anywhere.
Share Capital
The share capital consists of the total amount of the capital shares (or stocks) par value.
Share capital may be paid in cash or using material assets with current value (in Latvian LVL) assessment when contributed. Contributions of material assets must be specified in the formation agreement or in the internal regulations. Otherwise, only cash contributions can be made. A valuation expert must assess the value of the material assets which must be approved by the Registrar.
The minimum share capital for a SIA is 2,000 LVL (currently, 3,000 Euro). The share capital is divided into similar par value indivisible shares. A minimum of 50% of the share capital must be paid up when application is made for registration of the new SIA.
A micro company has a lower share capital, but it must be paid in full by the time of registration.
Registered Address
Every SIA must maintain a local legal address which is the company’s headquarters. The legal address is where all official notices whereby all correspondence sent to the company’s legal address will be presumed to have been received by the company’s management.
Taxes
The normal corporate tax rate is 15%. However, a micro company only pays 9% as long as the total income does not exceed 100,000 Euro. The excess will be taxed at a 20% rate.
The personal income tax rate is 24% for those foreigners wishing to reside in Latvia.
Note: U.S. taxpayers must disclose all world income to the IRS as do everyone subject to global income taxes must report all income to their tax agency.
Time for Formation
By law, the registration and approval process may take up to 30 days. However, common practice dictates that it normally takes from one to three business days after submitting all of the registration documents to receive approval.
Conclusion
A Latvia Limited Company (SIA) has these types of benefits: complete foreign ownership, fast registration, low taxes for small companies, low share capital requirements, one shareholder who can be the sole director, limited liability, and EU membership.
