The Latvia's taxation system is affected by both the Latvian legislation and the requirements laid down by the European Union. It can be described as average, because every tax payer contributes to the budget 30 % of his/her income on average. Besides, the Latvia's diverse system of tax rates, tax relief and allowances enables every tax payer to choose the optimum sector for their occupation and management of funds. The Republic of Latvia has the lowest effective (average) tax rate in the European Union. There are several areas of trade business with individual tax privileges – payments that are lower by 80 % to 100 %: for example, Liepāja and Rēzekne have special economic zones, and free ports of Riga and Ventspils can grant tax relief.

The tax principles are laid down by the law On Taxes and Fees. Taxes are administered by the State Revenue Service (SRS), and they are classified as direct and indirect taxes. Indirect taxes are taxes that are not directly deducted from income and that are levied on goods and services. In their turn, the direct taxes are taxes that are levied on all taxable income of natural persons and companies.

Corporate income tax
The object upon which the corporate income tax is imposed is the taxable income obtained by a tax payer during a taxation period. The tax base is corporate financial income adjusted according to the law. The adjustments are mainly implemented in order to ensure that the income is greater than expenses on which the tax is not levied (for example, expenses that are not directly related to economic activity) or in order to reduce the income by a specific amount in case if the law envisages tax relief.
Corporate income tax payers are the following:

resident or domestic companies performing economic activity, organisations and institutions funded from the state budget or municipal budgets, which obtain income from economic activity;
non-resident or foreign companies, business entities, natural and other persons;
permanent representative offices of non-resident undertakings the income tax rate of which is 20%.
Individual undertakings are payers of the personal income tax, and the tax rate ranges from 20% to 31.4%, depending on the amount of income.

Personal income tax
The personal income tax is one of the steadiest sources of income adding funds to municipal budgets. Personal income tax payers are self-employed persons or undertakings that have been registered as tax payers, including agricultural and fishery farms. It is envisaged to repay the personal income tax to tax payers with eligible expenditure for education and medical services.

The personal income tax rates vary between 20% and 31.4%, depending on your income. It also must be noted that the tax is not levied on all income. Instead, a number of items are deducted from the total income before the tax is calculated:

non-taxable minimum
deductions for being a legal guardian of certain persons (e.g. children)
deductions for people with disabilities
other deductions
Social insurance contributions (social tax)
Compulsory social insurance contributions is a compulsory payment into a special budgetary account stipulated by the Law which entitles the insured person to receive the social insurance services defined by the Law. The social tax payments increase the state social insurance budget. Therefore an insured person can receive the following services: an old-age pension, disability pension, survivor's pension, sickness benefit, maternity benefit, insurance against unemployment and burial allowance.

The standard social tax rate is 35.09%, divided between the employer (24.09%) and the employee (11%). A number of deductions can be applied as well, mainly various tax cuts for state pension receivers.

Latvia is a country in Eastern Europe and one of the Baltic countries - the three countries located on the eastern coast of the Baltic Sea: Latvia, Lithuania and Estonia. In the past, Latvia has been a part of numerous other political entities, including the Old Livonia, the Polish-Lithuanian Commonwealth, The Russian Empire and the USSR. Eventually, the country achieved its independence in 1991.

Since the 13th century Latvia has been an important trading hub and a bridge between the Eastern Europe and the rest of the continent, also being a major member of the Hanseatic League, dominating the Baltic sea maritime trade up until the 16th century. Nowadays Latvia is a market in its own right and an important economic player in the Baltic region.

Economy
In the last decades Latvia has enacted a number of reforms to support trade and the domestic market, and they turned out to be successful, making the business environment better. The amount of foreign investments and domestic consumption has increased over this time (except for a setback during the crisis of 2008 - 2009), which shows that both Latvian residents and foreign investors place their trust in the current economic environment of Latvia.

The crisis of 2008 - 2009 mentioned previously was heavily influenced the economy of Latvia, as it did in many other countries. There was a drop in GDP of 17% and a peak of unemployment of 17% (more than 20% by some estimates), and the situation has reached its worst in 2010, just in the aftermath of the crisis. The economy entered the phase of contraction, during which the so-called shadow economy or underground/unofficial economy took up approximately 40% of all the Latvian economy.

From 2010 to 2012 Latvia has been implementing various economic reforms and projects in order to restore the damage economy. Eventually, with the help of international funds, the country announced in 2012 that the economy is steadily growing again. This claim was also approved by the International Monetary Fund (IMF). The GDP, export and domestic consumption grew, and unemployment declined to about 9.5% in 2016 (almost twice as low compared to the crisis period).

Economy sectors
Traditionally, there are four economic sector: agriculture (including mining and together extraction of natural resources), industry and manufacturing, services, and informational technologies (and other knowledge-based areas). Latvia, along with the majority of the world's most developed countries, is reliant on the tertiary and the quaternary sectors, namely services and knowledge-based industries.

Agriculture in Latvia
The agricultural sector takes up 4% of Latvia's GDP and provides jobs to approximately 7.7% of the population. The major industries within the agricultural sector is grain production, cattle, potatoes, sugar beets and other vegetables. The main agricultural export product is timber, as Latvia is abundant with forests, and the forestry industry is generally well developed in the country. Other than that, however, Latvia's resources are scarce are thus not very developed. This particularly concerns energy-related resources - these and their products are mainly imported from abroad.

Industry in Latvia
The industrial sector is the second most developed economy sector in Latvia. It contributes 24% of the country's GDP, and approximately 28% of the working population is employed in the sector. The most developed industries within are metalworking, food processing and construction, Lately, the high-tech industry also undergoes a significant development, and, although not a major branch right now, this area is expected to become a major contributor to Latvian economy.

Services in Latvia
Services, such as market entry legal support, and knowledge-based industries, such as internet technologies, are the primary economic sectors of Latvia. They take up approximately 72% of the GDP, and more than 63% of Latvians are employed in the sector. Specialists of the country are especially proficient in legal services and internet technologies, as well as a number of other industries.

The business register is the central institution that keeps all data and records up to date. It is mandatory to file incorporation documents with the register at the time of incorporation, as well as to file any changes in the board of directors (directors) or shareholders register.

The single register is also available electronically.

The business register has the following tasks:
for the registration of companies and their branches, representative offices and representatives of foreign companies and organizations, cooperatives,
for the registration of European economic interest groups, European companies, European cooperatives, political parties and their associations, administrators, insolvent corporations, associations and foundations for legal protection and insolvency proceedings, religious organizations and their institutions, trade unions, mass media, public and private partnership agreements, significant influences , commercial pledges, marital property and arbitration tribunals and to ensure the maintenance of the relevant registers;
to provide information about registered companies and facts of legal relevance;
Performing other functions referred to in laws and regulations.

Document Submission

Fast, reliable company registration and ready companies.
The business register checks the documents submitted for compliance with the law. This is where legal help can be helpful.

Documents should be in Latvian or supported by a certified translation.

If the documents are signed abroad outside the European Union, it is necessary to legalize the document or affix an apostille.

Information received by the Registry is believed to be true and reliable and has legal force. The Business Register maintains an official register of all types of companies and the information in the register is publicly available and reliable.

As with every years first of April, another change has occurred in the United Kingdom's main corporate tax rate. For the past couple of year’s the UK’s government has been reducing the main corporate tax rate and in 2014 the tax rate has almost reached 20%. The new tax rate is 21%, falling 2% from the last years of 23% and 5% in the past 3 years. Althogh the small profits rate for Profits of £300,000 or less has remained the same for couple years.

What it means?
Meaning that the UK is supporting mid to large income companies and hoping that it would increase the formation of new companies. United Kingdom is aiming to reduce the main corporation tax to 20% by 2015, hoping that it would greatly improve the economic state of the Kingdom. And expecting a change in the GDP from a budget deficit to a profit by 2018-19.

Here you will find a collection of Latvian economic databases. These are different websites and knowledge centers providing information for the purpose of market access in Latvia. The business databases are represented by government agencies as well as by professional associations and trade unions.

Latvian Investment and Development Agency
The Latvian Investment and Development Agency (Latvijas Investīciju un attīstības aģentūra or LIAA) is a government agency under the control of the Ministry of Economy. Its main objectives are to provide information about starting and running a business in Latvia, as well as managing and attracting investments for domestic and foreign entrepreneurs. In addition to the passive provision of information (articles), LIAA also offers consultations with the respective representatives on all relevant issues.

As a company database, LIAA is useful as it contains lists of all Latvian institutions, authorities, regulations and laws that could be useful or relevant to any company, from a newly established company looking for tax regulations to a large corporation looking for it is looking for a proper way to attract European funding. It also contains a set of guidelines for starting a business in Latvia: from registering a company to paying taxes, including some advice on entering the Latvian market.


State Land Service Data Distribution Portal
Latvian State Land Service Data Distribution Portal (Kadastrs - Valsts zemes dienesta datu izsniegšanas serviss) is a combined database of real estate and land in Latvia. It contains data from a number of other registers, such as B. the National Address Register. All information is provided free of charge and is divided into public and authorized data. The public data is accessible to everyone, while the authorized part is accessible to those who intend to use it regularly or in large quantities.

As a combined database, the portal provides easy access to information about real estate and land in Latvia, which is especially useful for foreign entrepreneurs, as they are the ones who most often need local premises and real estate facilities.


Business register
The Business Register of the Republic of Latvia (Latvijas Republikas Uzņemumu reģistrs) is a government agency primarily providing business registration services in Latvia. The registry is also responsible for registering changes in corporate documents. In addition, it checks registered subjects and their relevant documents for errors and warns companies about violations such as non-filing of financial statements and conflicts between a company's official and actual address.

As a database, the register offers a wide range of information: various statistics for companies, relevant business laws (e.g. laws on intellectual property in Latvia), decisions of the chief state notary, as well as business-related information on the interactions between Latvia and the EU.

Business migration in Latvia and Lithuania
What are the possibilities to obtain a residency permit in Latvia or Lithuania (both are in European Union)?

IMMIGRATION IN LITHUANIA (UP TO 1 YEAR):
Lithuanian Immigration Law provides ability to apply for residence permit up to 1 year through investments in business. In order to obtain temporary residence permit in Lithuania, the investment must fulfil following conditions:

a company has at least EUR 28,000 share capital;
a company has genuine economical activities and pays minimum taxes;
the presence of investor is necessary for business activities of a company.
IMMIGRATION IN LATVIA (UP TO 5 YEARS):
Latvian Immigration Law provides ability to obtain residence permit if the foreigner`s activities are related to business. Residence permit might be granted for:

Official of the company: Manager Director, Chief Executive, Board Member, Proxy, Representative of Branch, Representative of foreign merchant
Shareholder of existing or newly established company: Residence permit through investment in share capital in the status of shareholder, for example, company formation and registration or acceding to existing company with significant investment
Residence permit through investments in subordinated capital of credit institution
Conditions for officials in the company
Foreigner is entitled to residence permit if he holds a position of:

Board member (Manager Director, Chief Executive), Proxy, Representative of Branch, Representative of foreign merchant
Please note! Although the residence permit is issued for 5 years, it must be registered each year. At the moment of registration, the following should be established:

Company must run actual business and generate taxes at least EUR 21,350 / year (this provision is not applicable to a new company)
Conditions on investing in the equity capital of an enterprise
According to Latvian Immigration Law there are two options:

The amount of investment must be at least EUR 35,000
Temporary residence permit is issued for up to 5 years though the foreigner is obliged to register the residence permit each year. Failure to do this might be basis for annulment of residence permit. For the second and following years, the foreigner shall approve his contribution to Latvian economy:

Company must run actual business and generate taxes at least EUR 40,000 / year
Conditions for investing in Latvian credit institutions:
the amount of financial investments must be at least EUR 280,000;
the term of transaction must be at least five years without the right to terminate it prior to the term of repayment of the deposit. Conditions on investing in the equity capital of an enterprise.

ABLV bank offer's the most highly valued private banking experience, based on a unique understanding of our clients. ABLV main goal is to preserve and increase their clients capital, providing financial and advisory services necessary for achieving this aim.

ABLV understands peculiarities of their customer business, law and culture of their countries, and offering the best tailored solution for every client.

In 1993 year ABLV Bank was founded in Latvia. Since 2018 ABLV is no longer active and does not provide banking services.

Cyprus is currently facing economic challenges. Cyprus has taken out a €10 billion international loan, mainly to recapitalize its banks, which have been crippled by crisis-hit Greece.

The Cypriot government has enacted a law that provides for the taxation of existing bank deposits over 100,000 euros with a one-off tax. Such a step for Cyprus threatens with outflows of funds from the state.

From the point of view of experts, this situation is advantageous for Latvian credit institutions, especially those who work with clients from Russia and the CIS. Latvian banks are currently characterized by an influx of depositors.

Depositors and investors choose Latvia for its tax policy, favorable tax system, high level of confidentiality and flexible attitude to the transit of funds. Latvian banks are a safe alternative to offshore money storage.

The advantages of the Latvian business environment are open markets, resources not available elsewhere (land, wood, low labor costs), a business culture and mentality close to the European dimension.

Foreign investors also evaluate the experience, noting a number of advantages as business projects that had made good progress before attracting investment. They point out that Latvia has a long tradition of production.

Latvia or Cyprus?
The main differences, important for any entrepreneur, who has not decided yet – Latvia or Cyprus.

Latvia is located in Europe, Cyprus is located in Asia. Latvia has an advantageous geographic location close to the former Soviet markets, such as Russia and Ukraine, at the same time- it is part of the European market.
Cyprus is a member of Eurozone, Latvia will join Eurozone in 2014.
Latvian financial sector does not constitute a basic profit of GDP, as opposed to Cyprus. It points that Latvia is economically more stable.
Latvia has a high level of Russian language. The Latvian banking sector has experience working with clients from the former Soviet Union, and the banks are willing to work using Russian language.
Starting of 1st January 2013, the dividends are not taxable income in Latvia, if the company – Latvian resident pay out dividends to the non-resident unless it is located, established or founded in low tax or no-tax states or territories. Also, dividends received from the non-resident are not taxable unless it is located, established or founded in low tax or no-tax states or territories.
Latvia has concluded a convention with Russia of double non-taxation. This convention significantly reduces the tax burden for entrepreneurs based on Latvia or Russia.
Latvia increased its attractiveness for foreign depositors by passing a law in 2009 allowing anyone who invests 100,000 lats (€144,150, or in other specific cases €70,000) to get a residency permit. Residency permit allows them to move more freely around the EU.
While Cyprus has professional bankers as well as Latvia has, in Latvia bank services are more cheaply and also companies can be purchased cheaply.
Latvia is ranked as 25 in Doingbusiness. Cyprus is ranked as 36 in Doingbusiness. This survey points out that in Latvia is more easy deal with issues such as- Registering Property, Getting Electricity, Getting Credit, Enforcing Contracts and Resolving Insolvency, also Trading Across Borders.
Latvia is in upper middle income category. Cyprus is in high income category. That points out lower labour costs in Latvia.

The Wave Market Entry strategy is a simultaneous expansion of business into a number of foreign markets, but unlike the Sprinkler strategy, it limits the number of eligible markets by dividing them into groups. It does this by analyzing the culture and business environment of the available markets and grouping them according to how similar they are to the home market. For example, Latvia, Lithuania and possibly Estonia would be grouped together based on similarities in culture, business environment and economic relationships between the countries (although Estonia may not be included due to some parameters, it all depends on the analysis performed by the company itself).

Similar to the waterfall strategy, the wave-like business expansion can be divided into stages. The first stage includes markets that are similar to domestic ones and are also typically closer geographically. Each successive level includes another group of markets that resemble the domestic market less and less. This is reminiscent of circles of waves that emanate from a single center and first have to traverse the immediate vicinity in order to reach more distant areas.

Implementation
The Wave market entry strategy is usually initiated with a thorough analysis and grouping of the available markets. Then, for the initial expansion, a group most similar to the domestic market is selected. Due to the similarities, the business model from the home market can be transferred to these markets. With the initial expansion secured, the company can move into the next group of foreign markets, which now resemble less the domestic markets. Thus, the gains and experiences from each previous group offset the potential risks of each subsequent market as they become less and less known.

When grouping the available markets, it is important not just to choose one or more parameters, but to integrate them into a system. It would be a good idea to develop a rating table where each country gets its own score based on all the criteria and parameters. This is crucial as a foreign market can be culturally similar to the domestic one but radically different in terms of business environment or political stability. A company that fails to take this into account risks grouping economies that are intrinsically different in their own right, thereby diminishing the benefits of the wave market entry strategy.

Advantages
The main benefit of the wave market entry strategy is that it combines the breadth of the sprinkler strategy and the security of the waterfall strategy.

First, when entering multiple markets at the same time, a company gains multiple sources of profit and experience in internationalizing companies. While not as extensive as the sprinkler strategy, it also gives the company an advantage over the competition. This is particularly effective against domestic competitors who may be interested in the same first wave/group markets as they are the easiest to enter. Such an early and simultaneous expansion into all well-known foreign markets gives the competition no opportunity to gain a technological advantage, unless your business withdraws.

On the other hand, the Wave strategy also offers a certain level of stability and security in the event of failure to enter another group of markets. If the entry of the first wave fails, the company can withdraw to its domestic positions. If one of the following waves fails, the company can use resources from previous waves to recoup the losses and continue its international expansion. This minimizes the risks of each individual case, making the wave strategy quite cost-effective.

Disadvantages
While the wave strategy combines the advantages of the waterfall and the sprinkler strategies, it is also a middle path between the two, and it is not utilizing their advantages to the fullest. It does not allow entering all the available markets at once, and the competitive advantage there can be lost. It is especially noticeable if a competitor manages to enter more distant markets successfully, and by the time the business in question reaches them, it will be lagging behind in introducing itself to the local market.

Although not a disadvantage at all times, the wave strategy is sometimes criticized for taking extra time for analyzing a lot of markets in order to group them. Although a market analysis is required in any strategy, the wave method needs to analyze more markets than the waterfall strategy, and also needs to produce a more detailed analysis than the sprinkler strategy. As this part of business expansion is essential in this case, it add more possibilities for errors, which can then turn into a failed market entry attempt.

Getting a job and working in Latvia is one of the reasons one might want to get a residence permit in Europe (an example of this would be a residence permit in Latvia). If you work in Latvia, you can also enjoy all the benefits of being in the EU, e.g. B. Freedom of movement within the Schengen area, the ability to work and conduct business in member states with lower requirements, and travel to European destinations without a visa requirement (with some exceptions).

Job offers
Currently there are about 29 704 job vacancies in Latvia. That is 3.2% of all filled and unfilled positions in the country.

Wages and expenses
In Latvia, the minimum wage is 430 euros, while the average salary is 806 euros.

A single person in Latvia spends an average of 594 euros per month, not including rent.