Latvia uses the same deferred-tax model that's made Estonia famous: profit that stays in the company is genuinely tax-free, and corporate tax only applies once you actually distribute it. Combined with a fast registration process, it's a compelling option in the Baltics. Here's what it takes to start a business in Latvia in 2026.
1. Which business structure fits you?
Before you register anything, it helps to know what you're actually choosing between.
- IK (Individuālais komersants). An individual merchant, Latvia's sole proprietorship. Easy and cost-efficient to set up, with unlimited personal liability and taxation at personal income rates.
- SIA (Sabiedrība ar ierobežotu atbildību). Latvia's standard limited liability company. Standard minimum share capital is €2,800 (with at least 50% deposited at registration), though a micro-capital option starting from €1 exists with certain ownership restrictions.
Foreign entrepreneurs can own 100% of either an SIA or the larger AS structure, with no requirement for local directors or shareholders.
2. Register your business
Registration goes through Latvia's Enterprise Register (Uzņēmumu reģistrs). Standard processing is 1 to 3 business days once your file is complete, with a 24-hour expedited option for an additional fee. You'll need notarized incorporation documents, and capital needs to be deposited into a temporary bank account before registration for an SIA.
3. Get your tax number
Your company receives a tax identification number from the State Revenue Service (VID) as part of registration, no separate application needed. Note that VID has been increasing scrutiny on new registrations, particularly around VAT, and now expects concrete proof of real economic activity, such as contracts, premises, or a working website, to guard against shell-company registrations.
4. Check licenses and permits
Latvia doesn't issue a single national business license. What you need depends on your industry: food businesses register with the Food and Veterinary Service, financial services need Latvijas Banka supervision, and construction companies need certificates from the Building Board, among other sector-specific requirements.
5. Understand Latvian taxes
IK owners are taxed on business profit at personal income tax rates, broadly progressive.
SIA companies benefit from Latvia's distinctive corporate tax structure: profit that stays in the company, reinvested or simply retained, isn't taxed at all. Corporate tax only applies once you distribute profit as dividends, at 20% (calculated as 20/80 of the net distribution). A separate micro-enterprise tax regime is available for companies with turnover under €40,000 a year, taxed at 25% on a simplified basis.
VAT is 21% standard, with reduced rates of 12% and 5% for specific goods and services. Registration is required once turnover crosses roughly €40,000 to €50,000, depending on the specific threshold that applies to your activity.
6. Stay compliant
Every SIA must maintain proper bookkeeping from day one, a legal requirement with penalties starting at €150 for non-compliance. If you're hiring, you'll register as an employer with VID before your first employee starts; late registration brings fines and retroactive social contribution payments. VAT-registered businesses file returns on the schedule tied to their registration.
Latvia business costs at a glance
| Item | Cost |
|---|---|
| SIA minimum share capital (standard) | €2,800 (50% at registration) |
| SIA minimum share capital (micro-capital option) | From €1 |
| Tax number (VID) | Free, automatic |
| Corporate tax on retained/reinvested profit | 0% |
| Corporate tax on distributed profit | 20% (20/80 of net distribution) |
| Micro-enterprise tax (turnover under €40,000) | 25% |
| VAT, standard rate | 21% |
| VAT registration threshold | ~€40,000 to €50,000 turnover |
Frequently asked questions
What's the corporate tax rate in Latvia?
0% on profit that stays in the company, reinvested or retained. Tax only applies once you distribute profit as dividends, at 20% (20/80 of the net distribution).
How much capital do I need to start an SIA in Latvia?
Standard minimum is €2,800 (at least 50% deposited at registration), though a micro-capital option from €1 exists with certain ownership restrictions.
How long does it take to register a company in Latvia?
1 to 3 business days once your file is complete, with a 24-hour expedited option available for an additional fee.
Can a foreigner own 100% of a company in Latvia?
Yes. Both an SIA and the larger AS structure allow full foreign ownership with no requirement for local directors or shareholders.
When do I need to register for VAT in Latvia?
Once turnover crosses roughly €40,000 to €50,000, depending on the specific threshold for your activity. The standard VAT rate is 21%.
Fees and rates above come from Latvia's Enterprise Register and the State Revenue Service (VID) as of 2026, and they do change over time, so double check before you file. None of this is legal or tax advice. Talk to a Latvia-qualified accountant or lawyer about your specific situation.