How to launch a Startup in Latvia: documents, taxation, and key steps — explainer

Latvia’s startup ecosystem is growing rapidly. It offers a compelling environment for entrepreneurs thanks to its dynamic community and strategic location. In recent years, the country has experienced substantial growth in venture capital and active startups, promoting innovation in fintech, deeptech, as well as greentech. 

With its competitive operating costs, talented workforce, and access to the EU market, Latvia is an ideal launchpad for global expansion. Thanks to this, Latvia boasts several remarkable startup success stories that showcase the country’s potential for substantial growth and investment.

• Printful: One of the most notable unicorns in Latvia, Printful is an on-demand printing and fulfillment service. In 2021, Printful achieved a valuation exceeding $1 billion, demonstrating the potential of Latvian companies to grow internationally.

• Draugiem Group: Rather than being a single startup, the group represents a network of interrelated companies that exemplify Latvia’s entrepreneurial spirit.

• Lokalise: A localization and translation startup on the way to becoming a second unicorn for the country. In 2021, the team secured $50 million in Series B funding round from a number of notable European investors.

After hearing about these success stories, an aspiring entrepreneur might ask, “What is needed to launch a startup in Latvia?” AIN has compiled all the necessary information to help you start a successful business.

How to start a business in Latvia

First of all, you’ll need to select an appropriate legal structure which best suits your startup. The most popular option is a limited liability company (or SIA). However, you can also register as a sole proprietor (IK) or a joint-stock company (AS). 

Next, you will need to prepare the following documents:

• Articles of Association. Defines the company’s structure and operations.

• Foundation Decision. Confirms the decision to establish the company.

• Confirmation of Legal Address. Proof of the company’s registered address.

• Temporary Bank Account. For companies with €2,800 or more in share capital.

• Identification and Residence Documents. For founders, including passports or ID cards.

• Proof of Financial Self-Sufficiency. For foreign entrepreneurs applying for the Startup Visa (€4,560 minimum).

• Proof of Accommodation. For foreign entrepreneurs applying for the Startup Visa.

Before submitting the registration application, founders of companies with a capital of €2,800 or more must open a temporary bank account to deposit the share capital. Once the company is registered, the temporary account becomes permanent.

Key steps to become an official entrepreneur in Latvia

1. Register Your Business.

To legally establish your company, first register your legal entity with the Register of Enterprises. Then, register your company with the State Revenue Service (SRS) for tax purposes, to comply with tax laws, and to handle employee-related contributions.

2. Choose a taxation mode.

If you set up a company as your legal entity, you will need to pay the following taxes: Corporate Income Tax (CIT), Personal Income Tax (PIT), Mandatory State Social Insurance Contributions (MSSIC).

As a business owner, you must choose one of the following methods to pay personal income tax (PIT).

• Tax on income from business activities.

• License fee for performing specific business activities.

• Reduced license fee for certain business activities.

• Micro-enterprise tax.

• Tax for non-registered business activities.

Depending on your business activity and registration type, other taxes may apply.

3. Register employees, workplace, and equipment.

If you hire employees, you are considered an employer. Before entering into an employment relationship, employees must be registered with the SRS.

4. Work with the SRS via the Electronic Declaration System (EDS).

Entrepreneurs must submit all tax declarations and statements through the EDS. This applies regardless of the type of business. You must comply with the deadlines set by relevant tax legislation.

To interact with the EDS, log in through the Latvija.lv portal using one of the available authentication methods, such as internet banking or an electronic identification card (eID).

5. Utilize the SRS Public Data.

Adhering to tax regulations and maintaining transparency with business partners is key to fair competition. Use the SRS public data databases to build trust with your business partners and ensure compliance with tax laws.

How to get a Startup Visa in Latvia

Although everyone calls it a “Startup Visa,” it is more accurately a residence permit that streamlines the process for talented individuals to establish themselves and develop their businesses. The requirements have been eased and financial support is available, all of which is designed to give ambitious entrepreneurs a crucial head start.

Prospective innovators must present a detailed description of their product vision, along with their passport and a completed residence permit application downloaded from the government website. Demonstrating financial self-sufficiency is a critical component: applicants must show a minimum of €4,560 in their bank account to cover their first three months in Latvia. This assures the immigration authorities of their ability to support themselves while their startup takes flight.

Beyond initial solvency, applicants must demonstrate a commitment to earning a minimum monthly income of €859 either by running their own startup or by being employed by one. Applicants must also provide proof of accommodation for their first six months in Latvia, such as a landlord’s letter or rental agreement, along with a passport photo and confirmation of the €99.60 application fee. This fee must be paid before submission for standard 30-day processing. Indian nationals, for example, must also submit a criminal record clearance.

How Latvian taxes companies

• Flat income tax rate is 25.5% (previously 20-31%) for income up to €105,300 per year;

• Income over that is taxed at 33%;

• Capital gains tax is 25.5%;

• An additional 3% tax is payable on income exceeding €200,000 per year (including capital gains).

Additional governmental support for entrepreneurs in Latvia

Latvia provides robust support for entrepreneurs through initiatives such as the Startup Visa program, which streamlines the entry process for foreign founders, and the Startup Law, which offers tax incentives and relief. Key agencies like LIAA and ALTUM provide grants, loans, venture capital, mentorship, and guidance.

Latvia also has a thriving network of incubators and accelerators, including TechHub Riga and Buildit Accelerator, that help startups grow quickly. With access to EU funding and a focus on research and development (R&D), Latvia provides a supportive environment for entrepreneurs to grow their businesses in sectors like technology and sustainability.

What’s next?

Latvia’s startup ecosystem is evidently growing, supported by government initiatives, financial backing, and a network of thriving accelerators. As Latvia continues to develop as an innovation hub, particularly in fintech, deeptech, and greentech sectors, entrepreneurs can expect more funding and mentorship opportunities.

Thanks to its EU membership, competitive operating costs, and access to global markets, Latvia is poised to remain an attractive destination for entrepreneurs in the future. Successful startups like Printful, Printify, and Lokalise exemplify the country’s growth potential, serving as a launchpad for businesses to reach new heights.