Expanding your business internationally is an exciting opportunity, but it also comes with legal and financial responsibilities. For foreign entrepreneurs and investors establishing companies in Latvia, understanding the accounting landscape is essential to ensure compliance, avoid penalties, and optimize your business operations.
At NXM Consulting, we guide clients through every step of accounting and financial management, providing tailored solutions that meet local regulations while supporting business growth.
1. Understanding Latvian Accounting Requirements
Latvia has a structured and transparent accounting framework that foreign-owned companies must follow. Key points include:
- Bookkeeping Standards: Latvian companies follow the Law on Accounting, aligned with the EU’s accounting directives. Accurate bookkeeping is mandatory for all business transactions.
- Financial Statements: Companies must prepare annual financial statements, which include the balance sheet, profit and loss statement, and notes on operations.
- Retention Period: Accounting records must be kept for at least 5 years.
Proper bookkeeping is crucial for tax reporting, audits, and maintaining transparency for investors and authorities.
2. Corporate Taxes and VAT
Foreign-owned companies in Latvia must comply with taxation regulations:
- Corporate Income Tax (CIT): Latvia applies a 0% tax on reinvested profits and 20% on distributed profits.
- Value Added Tax (VAT): Companies exceeding €40,000 annual turnover must register for VAT. Standard VAT rate is 21%.
- Withholding Taxes: Payments to non-residents may be subject to withholding taxes depending on double taxation treaties.
Understanding these rules early helps foreign entrepreneurs avoid fines and optimize their tax position.
3. Payroll and Social Contributions
If your Latvian company employs staff, you must comply with payroll and social contribution obligations:
- Income Tax: Employee salaries are subject to personal income tax.
- Social Security Contributions: Employers contribute approximately 24.09%, and employees contribute 11% of gross salary.
- Payroll Reporting: Monthly reporting to the State Revenue Service is mandatory.
Outsourcing payroll management to a professional firm ensures accuracy and compliance, allowing you to focus on your business operations.
4. Why Professional Accounting Support Matters
Many foreign investors underestimate the complexity of Latvian accounting regulations. Partnering with an expert firm like
NXM Consulting ensures:
- Accurate and timely bookkeeping
- Compliance with Latvian laws and tax regulations
- Efficient VAT and corporate tax reporting
- Preparation for audits and inspections
- Peace of mind and more time to focus on growth
Our team provides tailored accounting solutions, whether you are a startup, SME, or a multinational company entering the Latvian market.
Madara, Founder of NXM Consulting:
“Latvia’s Corporate Income Tax is very competitive compared to many other European countries. With 0% on reinvested profits, entrepreneurs can reinvest into their business without immediate tax pressure, making Latvia a highly attractive destination for foreign investors.”
📌 NXM Consulting specializes in accounting, company formation, and EU residence services — helping foreign investors build their business in Latvia with confidence, clarity, and compliance.
