Setting Up a Holding Company in Latvia

What is a holding company in Latvia?

A holding company's main purpose is to hold shares in other companies (subsidiaries). In Latvia, the preferred legal form for a holding is the SIA (Sabiedrība ar ierobežotu atbildību), the equivalent of a limited liability company.

A Latvian holding is particularly attractive for international entrepreneurs because it combines two rare advantages: EU membership, with everything that implies in terms of legal rights, directives and credibility, and a unique tax regime where corporate tax is only due when profits are distributed, not when they're earned.

Typical structure of a Latvian holding with EU subsidiaries

Many entrepreneurs arrive at this topic having searched for an "offshore company in Latvia". That's an understandable shortcut: Latvia's tax regime is attractive, structure costs are low, and remote formation is possible. But a Latvian SIA holding isn't an offshore structure in the classic sense, it's a regulated European company, subject to OECD standards, whose tax advantage rests on a legal mechanism recognised by every EU member state.

Tax advantages of a Latvian holding

Deferred taxation: 0% on reinvested profits

The Latvian regime works on a cash-flow tax principle: as long as profits stay in the company, no corporate tax is levied. The 20% rate only applies when dividends are distributed to shareholders. For a holding whose goal is to accumulate capital and reinvest, that's an exceptional tax position.

EU parent-subsidiary directive

As a company established in an EU member state, a Latvian SIA holding automatically benefits from Directive 2011/96/EU (the parent-subsidiary directive). In practice, dividends flowing up from a subsidiary established in another EU country to the Latvian holding are exempt from withholding tax, under two conditions:

• At least 10% shareholding in the subsidiary's capital
• Continuous holding for at least 12 months

Double-tax treaties

Latvia has signed double-tax treaties with more than 60 countries, which govern how double taxation is avoided. As an example, dividends paid from a French subsidiary to a Latvian holding are subject to a withholding tax of 5% (for a stake of 10% or more) or 15% (in other cases) under the France-Latvia treaty. If your subsidiaries sit in a different country, check that specific treaty's terms with a qualified advisor.

Dividend flows and achievable tax savings through a Latvian holding

Comparing European holding jurisdictions in 2026

Before choosing Latvia, it's worth comparing the main alternatives. Here are the decisive criteria:

Latvia stands out for combining one of Europe's lowest structure costs with a tax regime built on deferred distribution. Luxembourg and the Netherlands offer comparable advantages, but with substance requirements and maintenance costs that are significantly higher.

How to set up a holding company in Latvia: the steps

Real costs of a Latvian holding

One of Latvia's decisive advantages is how transparent and modest the costs are. Here are the real 2026 figures:

Holding structuring: good European tax practices

Setting up without living in Latvia

Non-residents, whether EU or non-EU nationals, can set up and run a SIA holding from abroad. There's no residency requirement for the director or the shareholders.

An entrepreneur based in Paris, Geneva or Toronto can own 100% of a Latvian SIA holding and run its effective management remotely. A notarised power of attorney and electronic signature let you handle every formality without travelling.

That said, for the structure to hold up under a tax audit, effective management genuinely needs to happen from Latvia (or be delegated to a local representative). A registered address alone isn't enough to establish economic substance.

Risks and mistakes to avoid

Controlled Foreign Company (CFC) rules

Many countries apply CFC-style rules: if you're a tax resident who owns more than 50% of a foreign holding whose income is mostly "passive" (dividends, interest, royalties), your home tax authority may apply transparency rules and tax that income directly at home, even if it hasn't been distributed. Check your own country's specific CFC rules before structuring around Latvia.

Withholding tax on outgoing dividends

Dividends paid by the SIA holding to an individual shareholder are subject to a 20% withholding in Latvia (creditable against home-country income tax under an applicable treaty). Factor this cost into your overall assessment of the structure's efficiency.

When Latvia is NOT the right choice

This guide would be incomplete without this section. Latvia isn't a universal solution. Here are situations where another jurisdiction would fit better:

• No achievable economic substance: if you can't demonstrate genuine local management (a representative, a local director, documented meetings), the structure is fragile.
• Activity mainly in your home country: if your clients, suppliers and operations are all in your home country, its tax authority will likely treat effective management as happening there.
• Complex multi-tier structures: for holdings with more than 3 levels or sophisticated financial instruments, Luxembourg or the Netherlands offer a more suitable legal framework.
• Non-EU entrepreneurs with no physical presence: Latvia is more restrictive for non-EU non-residents who want EU directive benefits without any local involvement.

Frequently asked questions