Latvia is very attractive to many United States (US) businesses for its strategic location, which provides access to both European Union (EU) and eastern markets, via rail, road, plane and ports that do not freeze. Latvia is a member of the EU, NATO, WTO, UN and OECD. Latvia uses the Euro currency. Riga, the capital of Latvia, is a significant aviation center. Latvia has a highly educated, mature, and multi-lingual workforce, that is comparatively much cheaper than in the US. Also Latvia has a state medical system, thus expenses for medical insurance for employes are not like those in the US.
For the above reasons, many US companies have offices, branches or shared services centers in Latvia. Latvian programmers and its IT sector are world class. Latvia also has a startup visa program, that attracts foreign entrepreneurs. The minimum wage in Latvia is 870 USD per month. The average Latvian gross wage is USD 2,100 and net wage is USD 1,500 per month.
Taxation
Compared to the US, Latvia has a very simple tax system.
Corporate Tax: 20% standard rate and 25% effective rate. All undistributed corporate profits are exempt, that is 0% if the profit is reinvested. Said exemption covers both active (trading) and passive income (dividends / interest). Accountant fees (and attorney fees) are roughly less than half of the US average.
Latvia allows interim distribution of dividends, and has other dividend-like distributions. Profit distributions can also be made via reduction in share capital in some cases. Lending made to related parties is considered a profit distribution, with some exceptions.
Micro Enterprise Taxation: Generally, a sole proprietor, individual enterprise, or an individual engaged in economic activity, can be a micro business, if they are not a VAT (Value added tax) payer. The tax rate is set at 25%, irrespective of turnover. Employees have standard payroll taxes at the standard rate. If the annual turnover exceeds EUR 50k, the company is required to register as a VAT payer.
Personal Income Tax – Progressive tax rate
25.5% Standard rate on income up to 105,300 EUR / year.
33.0 % On income between 105,300 EUR and 200,000 EUR / year.
3.0 % Additional charge on income above 200,000 EUR / year.
10.0 % Income from property.
Forms of business entities in Latvia
Joint Stock Companies, Limited Liability Companies, Sole Proprietors, General Partnerships, Foreign branches, and Micro Enterprises.
The most popular corporate entity in Latvia is the limited liability company, which is easy to set-up. The only issue is that bank accounts lately have been more difficult to open due to sanctions issues arising from the Russia / Ukraine war.
As always, before setting up shop in Latvia, make sure to engage trusted council! If you have any questions or comments, feel free to contact me at matiss@ska.lv.
By: Attorney at Law Matiss Davis Kukainis (Licensed in the US and Latvia)
Board Member – Latvian American Chamber of Commence
E: matiss@ska.lv T: +371 2839 0346 W: www.ska.lv
This article is a part of the 2025 Latvia-USA Business Report.