Ease of Doing Business Rank: 19
Latvia is a Baltic country situated on the Baltic Sea. Estonia lies to the north, Lithuania to the south, Sweden to the west, and Russia to the east.
Latvian is the official language of Latvia. The 2011 census recorded it is the main language spoken at home by 62.1% of the population. 46% spoke English and 43.7% spoke Russian as a second language.
The 2019 population estimate for Latvia is 1.91 million.
The majority of the population lives in urban centers. Riga is home to about a third of inhabitants (632,614), followed by Daugavpils (82,604), Liepāja (68,945), and Jelgava (55,972).
The country only has five other cities with populations over 22,000. The remainder of the population lives in numerous small towns scattered throughout the country.
The top industries in Latvia are agriculture, chemicals, logistics, woodworking, textiles, food processing, machinery production and green technologies.
The Times Higher Education World Rankings ranked the University of Latvia and Riga Technical University in the top 1,000 in the world.
The Legatum Prosperity Index ranks Latvia’s education system 28th out of 149.
The most common business entities in Latvia are a Private Limited Liability Company, Joint Stock Company, General or Limited Partnership, and Sole Trader.
The most commonly incorporated entity in Latvia is the Private Limited Liability Company.
Latvia offers a number of incentives to promote business development. These include five special economic zones, including one in Riga.
SEZs offer up to a 100% reduction on real estate tax and up to 80% reduction on corporate and withholding tax for dividends, management fees, and fees for using intellectual property.
Donations to particular state-funded institutions and public benefit organizations may also qualify for a corporate tax reduction of up to 85% of the sum donated.
Latvian businesses can also defer tax payments for profits arising from the replacement of machinery. In some cases, qualifying businesses can also accelerate amortization and R&D related costs by a factor of three.
Companies investing more than 10 million EUR in particular industries may also qualify for corporate income tax relief. The investment must include new assets such as industrial buildings and machinery used to modernize, expand, or improve production or for a product or service shift.
Businesses investing over 10 million EUR qualify for 25% corporate income tax relief. Those investing over 50 million EUR qualify for 15% corporate income tax relief.
Riga is the capital city and financial center of Latvia.
Latvia includes the sophistication of city life, rich history, architecture, and miles of untouched natural beauty.
The Historic Center of Riga is a UNESCO World Heritage Site. It was a major center for a commercial and defensive confederation of merchant guilds and market towns in Northwestern and Central Europe from the 13th to 15th century. However, the city also features fine examples of Gothic cathedrals and Art Nouveau architecture.
Just 20 minutes from Riga you’ll find Jurmala, the Latvian Riviera on the Baltic coast. Swimming, spas, and sandy beaches make it a favorite for tourists and locals.
Contrasting Jurmala is Slitere National Park in the Kurzeme region. Miles of undeveloped coastland, rolling sand dunes, and deep virgin forests hug the Baltic Sea.
Latvia also has 12,000 rivers and 3,000 small lakes. The country is also one of the most forested in Europe with four national parks, 42 nature parks, and 260 nature reserves.
Latvia also has many noteworthy castles. Construction of Turaida Stone Castle began in 1214 for Albert of Riga. The castle and town at Cesis are some of the best-preserved medieval sites in the Baltics.
Rundāle Palace, built between 1765 and 1768, rivals the splendor and elegance of Versailles. This superbly restored Baroque and Rococo masterpiece and massive formal French gardens is one of the two major baroque palaces built for several dukes.
Daugavpils Fortress clearly shows the marks left by the Russian Empire. The building’s onion domes and Orthodox cupolas reflect 19th century St. Petersburg architecture.
The open air museum at Araisi chronicles the lifestyles of the early Middle Age tribes of the Baltic region. The Riga Art Nouveau Museum is one of the best in the world.
Latvia was one of the last strongholds for paganism in Europe. However, in 1201 the Pope sent a German Catholic military order called the Livonian Brothers of the Sword to the Gulf of Riga to force them to convert to Christianity. They encountered resistance and lost a major battle.
The surviving Brothers eventually became the Livonian Order and feudal ruling class, subjugating Latvians and founding settlements throughout the country.
By 1282, the settlement of Riga was part of the Hanseatic League. This league was a federation of German and Baltic cities controlling much of the trade in northern Europe. In 1365, the settlement of Valmiera also joined the league.
During the Protestant Reformation, Lutheranism found widespread support in rural areas when it reached the area in 1521. Eventually, only a small region remained Catholic, weakening the Catholic stranglehold on the country.
In 1558, Russia invaded Latvia from the sea which led to the very lengthy Livonian Wars. In 1561, Poland also invaded from the south and held southern territory until the 18th century. However, Poland was in political and military decline.
By the end of the century, Russia, Prussia and Austria divided Polish territory between them. Latvian territory came under Russian rule. Nobility ended serfdom and the population grew, reviving Latvian interest in culture and nationalism. However, the Russian government quickly quashed a wave of demonstrations in 1905.
After two Russian revolutions Germany overtook much of Russia’s territory in 1918, including Latvia. Russia invaded again in 1919 and captured Riga.
The Germans drove the Russian Communists out of the north and eventually withdrew from Latvia by the end of 1919. However, Russia held parts of southeastern Latvia until they signed a treaty in 1920.
During the 1930’s, Latvia suffered and discontent grew. Democracy faded and the country was ruled as a dictatorship. By 1939, Nazi Germany and Russia had agreed to split eastern European territories between them.
In 1940, the Soviet Union occupied Latvia. However, the following year the Germans invaded the Soviet Union and seized control of Latvia too. When Allied forces threatened Germany’s stranglehold, Russia seized Riga again in 1944. Many Latvians were deported, fled, or died in the fight against Communism.
Latvia remained under Communist rule until the 1980s. Demonstrations began again, and in 1990 the Latvian Supreme Council issued a declaration of restored independence. The Soviet Union sent an armed response in 1991, but their coup failed. Later that year, both the Soviet Union and the USA recognized Latvian independence.
The post-communist era led to strong economic growth and free elections. In 2004, Latvia joined NATO and the EU.
Today, many believe Latvia will continue to be one of the European Union’s fastest-growing economies.
The predominant religion in Latvia is Christianity (62.6%). The remainder of the population did not claim an affiliation with any church or religion.
The majority of the population is Latvian (62.2%), followed by Russian (25.2%), Belarusian (3.2%), Ukrainian (2.2%), Polish (2.1%), and Lithuanian (1.2%).
According to Forbes’ 2019 Best Countries for Business, Latvia is the 36th best country in the world for conducting business.
The 2019 Index of Economic Freedom rates Latvia 35th globally and states, “Lack of institutional reforms and the prevalence of state-owned enterprises hinder the emergence of a more profitable private sector. Corruption continues to impede the attraction of foreign direct investment, increase the overall cost of doing business, and undermine the rule of law.”
World Bank’s “Doing Business” rankings rate Latvia 19th for ease of doing business in the world.