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Latvia
We have a dedicated team of professionals ready to support all your business needs, so you can focus on driving growth and expanding your operations in Latvia.
Why Latvia?
Latvia is a growing and competitive economy in Northern Europe, situated along the eastern coast of the Baltic Sea. It shares borders with Estonia, Lithuania, Russia, and Belarus. As a member of the European Union, Eurozone, and NATO, Latvia offers a stable, transparent, and business-oriented environment. In 2025, Latvia’s economy is projected to grow by 1.1 percent, with further acceleration expected in 2026. The country’s growth is driven by increased public investment, a strong export sector—particularly in IT and business services—and a vibrant services industry that contributes nearly three-quarters of the GDP. Latvia's well-developed infrastructure, digital connectivity, and ongoing reforms in innovation and workforce development create an attractive setting for businesses looking to establish and expand in the Baltic region.
Key Advantages
Latvia presents a promising and dynamic environment for business, supported by targeted reforms, fiscal discipline, and a commitment to long-term growth.
Strategic economic outlook
Latvia’s economic trajectory remains stable, supported by recovering private consumption, increasing public investment, and improving external demand. Inflation is forecasted to decline steadily, creating a favorable climate for business development and financial planning.
Strong fiscal and investment framework
The government has undertaken key tax reforms and follows a balanced fiscal strategy focused on sectors such as defense, infrastructure, and energy security. These efforts contribute to sustainable public finances and build long-term confidence among investors.
Focus on innovation and productivity
Latvia is implementing structural reforms to enhance productivity by improving access to finance, encouraging corporate investment, and shifting resources towards high-value sectors. The country continues to expand its digital capabilities, including investments in broadband and technological infrastructure, to boost national competitiveness.
Skilled workforce and labor market development
Latvia offers a well-educated and adaptable workforce. Government-led initiatives in education reform, skill development, and migration policy help ensure a steady supply of talent and support sustainable economic growth.
Strengthened financial and regulatory framework
Latvia’s financial sector is closely monitored and supported by strong macroprudential regulations and enhanced anti-money laundering standards. These safeguards create a secure lending environment and foster trust among local and foreign investors.
Energy security and sustainable growth
Latvia is investing in renewable energy and strengthening its integration into the European energy grid. The country’s energy policies support environmental objectives while ensuring security of supply and economic stability.
Taxation in Latvia
Latvia’s tax regime is designed to support entrepreneurship, with a focus on simplicity and reinvestment-driven growth.
Corporate income tax
From 2025, Latvia will continue applying corporate income tax at an effective rate of 25 percent on distributed profits (20 percent applied to 80 percent of the amount distributed). Undistributed profits remain tax-exempt, encouraging reinvestment into the business.
A 20 percent annual tax surcharge applies to credit institutions and consumer credit providers, regardless of profit distribution. Additionally, from 2025 to 2027, Latvian-registered credit institutions and foreign branches are subject to a solidarity contribution of 60 percent on net interest income growth exceeding 50 percent of the 2018–2022 average.
Micro-business tax
Micro-business tax is available to sole traders, individual undertakings, farms, fisheries, and individuals registered as traders (excluding VAT-registered businesses). Since January 1, 2024, a flat rate of 25 percent applies to all turnover. Only the business owner is taxed under this regime; employees remain subject to regular payroll taxes.
Personal income tax
Residents are taxed on their worldwide income, while non-residents are taxed only on income sourced in Latvia. For the year 2025, the personal income tax structure is as follows:
- 5 percent on annual income up to EUR 105,300
- 33 percent on income exceeding EUR 105,300
- An additional 3 percent on total income above EUR 200,000, applied via the annual tax return
Tax residency applies to individuals who meet any of the following conditions:
- Registered (declared) place of residence in Latvia
- Present in Latvia for 183 days or more within a 12-month period
- Latvian citizens employed abroad by Latvian-registered employers
Capital gains tax
Capital gains from the sale of property, securities, or intellectual property are taxed at 25.5 percent. However, if the transaction was initiated before 31 December 2024 and properly declared with the tax authority, it will be taxed at the prior rate of 20 percent for the years 2025 through 2027.
Real estate tax
Real estate tax applies to land, buildings, and certain infrastructure. Municipalities may set annual rates between 0.2 percent and 3 percent. In the absence of a published municipal rate, a flat rate of 1.5 percent applies to business properties.
Residential properties are taxed progressively:
- 2 percent for values up to EUR 56,915
- 4 percent for values between EUR 56,915 and EUR 106,715
- 6 percent for values above EUR 106,715
Uncultivated agricultural land may be taxed at up to 4.5 percent. A rate of 3 percent applies to buildings under construction that exceed permitted timelines. Company-owned rental properties receive reduced rates ranging from 0.2 to 0.6 percent. From 2024, certified eco-friendly buildings completed or renovated after 2023 are eligible for a 50 percent tax relief.
From 2025, taxation will consider two property valuation methods: a fiscal cadastral value (based on 2012–2013 data) and a universal cadastral value (updated and capped at 80 percent of July 2022 market averages).
Regulatory Updates for 2025
- E-invoicing becomes mandatory for business-to-government and government-to-government transactions from 1 January 2025
- Sustainability reporting is required for large companies starting from 2025, with first reports to be published in 2026
Types of Business Entities in Latvia
Limited liability company (SIA)
The most common business structure in Latvia. It is a separate legal entity with limited liability. Shareholders are liable only to the extent of their capital contribution. Minimum share capital is EUR 2,820, payable in cash or property. Both residents and non-residents may act as founders. Managed by a board of directors.
Joint stock company (AS)
Suitable for larger enterprises, the AS requires a minimum share capital of EUR 35,210, payable in cash. It has a board of directors and a supervisory council. Founders can be individuals or legal entities, whether domestic or foreign.
Limited partnership
This form includes at least one general partner with unlimited liability and one or more limited partners. It is not a separate legal entity and operates under a partnership agreement and a registered office.
General partnership
All partners share joint and unlimited liability for the partnership’s obligations. Typically used by professionals or small enterprises, it is formed under a partnership agreement and is not a separate legal entity.
Branch of a foreign company
A branch represents the foreign parent company and does not constitute a separate legal entity. The parent company remains fully liable. Branches must be registered but have no minimum capital requirements.
Representative office
Used mainly for marketing and liaison purposes, a representative office cannot engage in commercial activity or earn income. It is not a legal entity and remains under the control of the parent company.
Latvia – A Strategic Business Destination
Latvia stands as a gateway between Northern and Eastern Europe, with strong trade links, political stability, and a pro-investment climate. As a member of the European Union, NATO,