Latvia SIA | Micro

The most popular form of commercial companies in Latvia is Limited Liability Company (SIA). Legal entity where the liability of the founders is limited to the amount of the authorized capital and liability of each founder is limited by the size of its share in the authorized capital.


The minimum authorized capital for SIA is € 2 800. At least 50 % should be paid on bank account before applying for registration. The rest must be paid for one year from the date of the company registration.


Taxation:

  • Corporate profit tax – 15 %;
  • VAT – 21 %;
  • Dividends received (except dividends from offshore companies) – 0 %;
  • Dividends paid – 0 % (if the recipient is an individual person – 10 %, if offshore company – 15 %);
  • Interest paid (except interest to offshore companies) – 0 %;
  • Royalties paid (except royalties to offshore companies) – 0 %;
  • Capital gains from the sale of shares (except the shares of offshore companies) – 0 %;
  • Income tax – 23 %;
  • Social insurance – 34,09 %.


Accounting and audit.


The deadline for the submission of annual report for most companies is 30th of April. Accounting of excise tax, social tax and VAT should be submitted every month.

Annual report of the companies must be certified by a local licensed auditor if any two out of the three following conditions exceed:

  • Amount of balance – € 400 000;
  • Net turnover – € 800 000;
  • Average number of employees in the reporting year – 25.

The companies whose criteria don’t exceed the above don’t need submission of the audit report to the annual report.


Advantages:

  • Preferred treatment: dividends, which are received from abroad, are not taxable and dividends which are paid to non-residents legal entities (except offshore companies) are exempted from tax at source;
  • Interest and royalties also are exempted from tax at source (except for transactions with offshore companies);
  • Simple procedure for obtaining Certificate of tax residence and VAT number.


Disadvantages:

  • Necessarily to submit monthly the social and income tax reporting for employees;
  • It's necessary to submit final annual report and tax return to the tax authorities.


Tax regime of microenterprises

Special tax regime for microenterprises is established by law. This tax regime of microenterprises can be used by SIA.


To be considered a microenterprise, a company must meet the following criteria:

  • Annual turnover not above than € 100 000;
  • All members of the company are private individuals;
  • Company has no more than 5 employees;
  • Salary of an employee doesn’t exceed € 720 per month.


Reduced tax from annual turnover, that is paid quarterly, was fixed for microenterprises (the tax base is the annual revenue of the company without deduction of expenses).

The tax is paid at the rate of 9 % on first € 7 000 and at the rate of 11 % on income from € 7 000,01 (from January 1, 2015).

Microenterprises are exempted from taxes on profit.


The minimum authorized capital for microenterprise is from € 1.