Latvia Holding Companies

How to Set Up a Holding Company in Latvia and Enjoy Its Tax Benefits

If you are looking for a way to optimize your tax planning and manage your business assets more efficiently, you may want to consider setting up a holding company in Latvia. Latvia is a small Baltic country that offers attractive tax incentives for holding companies, as well as a stable legal and economic environment. In this article, we will explain what a holding company is, how it works, what are the advantages of having one in Latvia, and how Datapres Solutions can help you with the process.

Why choose Latvia for your holding company?

Latvia is a small Baltic country that joined the European Union (EU) in 2004 and adopted the euro as its currency in 2014. It has a population of about 1.9 million people and a GDP of about 34 billion euros (as of 2020). It ranks among the top 20 countries in the world for ease of doing business according to the World Bank.

Latvia has also developed an attractive tax system for holding companies that aims to compete with other well-known jurisdictions such as Cyprus, Malta, Luxembourg, or Ireland. Some of the main benefits of having a holding company in Latvia are:

No corporate income tax on dividends received from subsidiaries: A Latvian holding company does not pay any corporate income tax on dividends received from its subsidiaries located anywhere in the world (except for blacklisted jurisdictions). This applies regardless of whether the subsidiary pays any withholding tax on dividends or not.
No withholding tax on dividends paid to shareholders: A Latvian holding company does not withhold any tax on dividends paid to its shareholders located anywhere in the world (except for blacklisted jurisdictions). This applies regardless of whether the shareholder is an individual or another legal entity.
No capital gains tax on disposal of shares: A Latvian holding company does not pay any capital gains tax on profits derived from selling shares or interests in its subsidiaries located anywhere in the world (except for blacklisted jurisdictions). This applies regardless of whether the subsidiary pays any withholding tax on capital gains or not.
No corporate income tax on retained earnings: A Latvian holding company does not pay any corporate income tax on its retained earnings until they are distributed as dividends or deemed to be distributed. This means that a Latvian holding company can reinvest its profits without paying any tax on them. The standard corporate income tax rate in Latvia is 20%, but it is effectively reduced to 15% by applying a coefficient of 0.8 to the taxable base123.
No thin capitalization rules: A Latvian holding company does not have to comply with any thin capitalization rules, which limit the deductibility of interest expenses based on the debt-to-equity ratio of the company. This means that a Latvian holding company can finance its subsidiaries with debt without facing any tax restrictions.
No controlled foreign company (CFC) rules: A Latvian holding company does not have to apply any CFC rules, which attribute the income of foreign subsidiaries to their parent company if certain conditions are met. This means that a Latvian holding company can avoid double taxation of its foreign subsidiaries’ income.
Access to double tax treaties and EU directives: A Latvian holding company can benefit from the extensive network of double tax treaties that Latvia has signed with more than 60 countries, as well as from the EU directives that eliminate withholding taxes on dividends, interest, and royalties paid within the EU. These instruments can help reduce or eliminate foreign taxes on income received or paid by a Latvian holding company.

How to set up a holding company in Latvia?

Setting up a holding company in Latvia is a relatively simple and fast process, and there is no need to have a specific number of founders or certain share capital. The most common type of legal entity used for holding purposes is a limited liability company (SIA), which can be incorporated online within one day.

The main steps for setting up a SIA are:

Choosing a unique name for the company and checking its availability with the Register of Enterprises
Preparing and signing the articles of association and other incorporation documents
Opening a bank account for depositing the share capital (if any)
Registering the company online with the Register of Enterprises
Obtaining a registration certificate and a taxpayer identification number

The minimum share capital for a SIA is 1 euro, but it can be increased at any time. The shareholders can be individuals or legal entities, residents or non-residents. The director can also be an individual or legal entity, resident or non-resident.

The annual compliance requirements for a SIA include:

Filing an annual report with financial statements and an auditor’s opinion (if applicable) with the Register of Enterprises by April 30th (or within 4 months from the end of the company’s financial year) 1
Filing a corporate income tax return with the State Revenue Service by July 31st (or within 7 months from the end of the company’s financial year) 2
Keeping accounting records and supporting documents for at least 5 years

How can Datapres Solutions help you?

Datapres Solutions is a leading provider of legal tech solutions for businesses that want to optimize their tax planning and asset management. We have extensive experience and expertise in setting up and managing holding companies in Latvia and other jurisdictions.

We can help you with:

Choosing the best legal structure and jurisdiction for your holding company
Preparing and filing all the necessary incorporation documents
Opening a bank account and obtaining a taxpayer identification number
Providing registered office address and nominee services
Handling all the annual compliance requirements
Advising on tax optimization strategies and double tax treaty benefits
Protecting your intellectual property rights and confidential information

With Datapres Solutions, you can enjoy all the advantages of having a holding company in Latvia without having to worry about any legal or administrative hassles. We will take care of everything for you, so you can focus on growing your business.

A holding company is a powerful tool for managing multiple businesses across different sectors or jurisdictions. It can help you reduce your tax burden, protect your assets, access financing opportunities, and streamline your operations.

Latvia is one of the best countries in Europe to set up a holding company, thanks to its favorable tax regime, stable legal system, easy incorporation process, and access to double tax treaties and EU directives.

If you are interested in setting up a holding company in Latvia or want to learn more about our services, please contact us today. We will be happy to assist you with any questions or inquiries you may have.

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