2014 GLOBAL COMPANY FORMATION SURVEY:

LATVIA

1. Company law: Commercial activities are being regulated by the Commercial Law (Komerclikums and Civil law). 2. Types of company: (a) Type of company preferred for international transactions: Limited liability company. (b) Shareless companies: Partnership, General partnership. 3. Capital requirements: Minimum amount of equity capital of an LLC is LVL2,000 (approx. EUR2,850). At least 50% of the equity capital of the LLC shall be paid upon submission of the registration application; the remaining share shall be paid within one year from the day when the company was recorded in the Commercial Register. Equity capital may be paid in money or by property contributions. Equity capital of a company may be less than LVL2,000 (approx. EUR2,850), if the following conditions are met: the founders of the company are natural persons, and there are not more than five of them; the shareholders of the company are natural persons, and there are not more than five of them; the board of directors of the company consist of one or several members, and they all are shareholders of the company; and each shareholder of the company is a shareholder of only one such company. If the equity capital of a company is less than the LVL2,000 the company shall, each year, establish a mandatory reserve, making a deduction of at least 25% from the net profit of the accounting year. 4. Costs to incorporate, excluding government fees: Costs for the notary public approx. LVL100 (approx. EUR150). Legal EUR1,500 - EUR3,000. All of the documents which are not in Latvian shall have a notarised translation (approx. EUR25 for each). 5. Fees paid to authorities to incorporate: State fee for recording the LLC in the Commercial Register is LVL100 (approx. EUR150) and for the publication of the recording of the LLC LVL19 (approx. EUR28), the application will be considered within three working days. Paying the threefold state fee, LVL300 (approx. EUR428), the application will be considered within one working day. For a company with small equity capital: state fee: LVL15 (approx. EUR22) for three days and LVL45 (approx. EUR65) for one day. Fee for publication is LVL10 (approx. EUR15). 6. Annual fees paid to authorities: No, except taxes. 7. Taxation rates applied to companies generally: The taxation of companies in 2(a): 15% - no withholding tax on outgoing dividends to corporate shareholders, except offshore (15%) and private individuals (10%), interest and royalties. 8. Method of incorporation: On the Register of Enterprises. Steps are as follows: decision regarding the foundation; preparing necessary documents; opening of a temporary bank account; payment of the equity capital; registration in Register of Enterprises; opening a permanent bank account; registration in the State Revenue Service. 9. Who may incorporate are local professionals required? Any natural or juridical person. Professionals are not required, but may provide assistance during the process. 10. Length of time to incorporate: (a) Are ready made/shelf companies available? Yes 11. Minimum number of members: One or three working days. 12. Directors and secretary: One (a) Must there be a resident director/secretary? No; nominee shareholders are allowed. (b) Are corporate directors allowed? No (c) Is a local registered agent required? No, but the registered address (registered agent) must be in Latvia. 13. Amount of fees payable to appointee directors/secretary: (d) Are shadow directors required to be registered? No Director starting from EUR3,500 p.a.; Secretary starting from EUR1,500 p.a. Amounts 14. Annual Meetings: depend on activities to be performed during the year and are discussed individually. 15. Is an annual return filed with details of directors and members? Shareholders' meetings shall be held at least once a year. 16. Accounts: Yes (a) Must financial statements of a company be audited? Yes, if company meets at least two of following criteria: balance sheet total: LVL250,000 (approx. EUR357,000); net turnover: LVL500,000 (approx. EUR714,300); average number of employees in the accounting year: 25. (b) Are annual accounts filed with annual returns? Yes 17. Are there any exchange control or other financial restraints? Transactions made in cash of over LVL1,000 (approx. EUR1,430) must be declared. 18. Is migration of companies permitted? Permitted only for European Companies (Societas Europaea). 19. Must foreign companies administered locally be registered? No only where there is a PE. 20. Are protected cell companies permitted? No 21. Are civil-law type foundations possible? Yes 22. Are common-law foundations possible? It is possible to establish a general partnership. It is also possible to establish a limited partnership. 23. Can LLCs be formed? Yes 24. Are regulators empowered to request the production of: (a) Information on the identity and background of beneficial owners and officers: Yes (b) Accounting information on companies. Yes 25. Can such information be exchanged with other jurisdictions? Yes 26 Any amendments to company law over the last 12 months? Amendments where passed last year in order to avoid illegal takeover of companies or, as it is called regionally, to avoid Raiders. Anti-raiders amendments foresee more cases in which a notarised signature is mandatory as well as new rules for the shareholders register, payment of dividends and transfer of shares. 27. Anticipated amendments to company law in 2014: Amendments necessary for the introduction of EURO as the official currency in Latvia. Compiled by BDO Tax 28 OI 244 March 2014
Offshore Investment 2014. Reproduction in whole or in part by any means without the written permission of the publisher is strictly prohibited.