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I am interested in buying a Property in Latvia what taxation and legal issues are involved?

Latvia is one of the more advanced, fast growing 'transition' economies and has well-developed services, transportation network and logistics. There is a well-developed banking system, stable political and monetary conditions, and a favourable taxation regime.

There is no export duty on most goods exported from Latvia. However, certain goods such as metals, minerals, art, wood and wood products are subject to export duty and a license or permit is required. Zero % VAT is imposed on the export of goods and certain services, including those related to exports, international shipping and airlines.

The Latvian tax system neither favours nor discriminates against inward foreign investment. Companies are taxed at 15% and individuals at 25%. However it government policy to ensure all income generated in transacting business is taxed within the country.

For the last two decades real estate market prices have been constantly rising. Since 1998 residential property prices rose by 300% on average, land prices by 150-250%, and commercial property prices by 70-120%.

The legislation of Latvia provides foreign investors an opportunity to purchase or rent real estate property with virtually no limitations. All real estate is entered in the central land register - the Land Book, protecting ownership rights for the property and land. Mortgages are available for foreigners willing to finance their real estate purchases in Latvia.

There are currently 22 banks in the country with over 8 billion LVL (EUR 11.4bn) in total assets at the end of 2004. The market is relatively saturated in traditional banking services such as private and business accounts and account transactions, financing of import/export operations, lending and leasing, etc. Since 2005, all bank account numbers comply with the IBAN standard. Bank staff speaks at least three languages – English, Latvian and Russian.

Currently foreigners are allowed to own property in their own names, property can be owned in Latvia in the form of: a limited liability company (SIA) (the most usual method); stock company (A/s - public or closed); or as a branch of a company. It is also possible to register a representative office for the sole purpose of advertising and promoting a business. There are no restrictions on the ownership of Latvian companies by foreign investors. The overwhelming majority of Latvian businesses are launched as limited liability companies. 

In order to be a legal entity and to undertake business activities all companies must be registered with the Latvian Registry of Companies and also as taxpayers with the State Revenue.

Louise Carey is an Accountant/Tax Consultant based at 32 The Square, Listowel, tel: 068 21109, email:lc@taxconsultant.ie, www.taxconsultant.ie