Once you have registered your company in the Register of Enterprises of the Republic of Latvia, opened a settlement account with a bank and received VAT payer’s registration number (for more information please refer to the News section and consult the article All information you need for registering your company in Latvia), the time has come to start planning your activities.

1. Accounting:

Since the activities of a limited liability company are commercial activities, all stages of the company’s operations are governed by various laws and regulations. Accounting of business operations is an integral part of the company’s activities. If you decide to keep accounting records on your own, you will have to take care of furnishing the accountant’s workplace: computer, accounting software, desk, chair, as well as some space in the office. Along with the hassle of organizing the workplace, you will also need to solve the question regarding personnel: whether to employ a hired accountant or promptly master the wisdom of accounting yourself.

A profitable and efficient alternative to the above is contracting out the accounting tasks to an external provider of such services. In this case, you have no need for equipping the workplace, employing the accountant and finding space for keeping piles of paper. It is self-evident that using the services of an accounting company is more cost-effective than hiring your own accountant.

Opting for a company engaged in providing accounting services, you will just have to agree on the timing for the transfer of documents, preparation of specific reports (for example, for submission to credit institutions for funding) and rapid exchange of information.

2. Staff:

Until the company begins selling its services or goods, it is more profitable to pay your employees by the hour. Suppose your company provides consulting services. You, as the founder, board member and employee in one person spent 10 hours in one month on providing advice to a client. Therefore, the time sheet will only need to be filled with ten hours and payroll accounting with the subsequent payment will be done based on the fact that you worked for 10 hours. Hiring employees on part-time or full-time basis is efficient when the amount of work performed actually reaches the part-time or full-time level.

3. Registered address:

The registered address of the company is the address where the company’s board is available or, at least, the correspondence delivered to this address will reach its addressee.

The question of choosing the registered address of the company may get quite serious when the company’s activities are in full swing, the sales are booming and the staff is fully engaged, but a sudden visit of the tax authorities to the said address becomes a total mess, as the watchwoman who receives correspondence may be the only person who knows about the whereabouts of the company.

To avoid such situations, it is best to set up the registered address at the actual location, such as the company’s office or production department. Change of the company’s registered office of the company is not a difficult task. If the company is located at several addresses (e.g. the production department is geographically separated from the administration department), one of the addresses can be set up as the registered address and the other – as the operational unit of the company.

When entering into the lease agreement for office space, please make sure whether the landlord allows to set up the office address as your registered address and whether sublease is possible (in case you need to register additional companies).

It should be noted that the existence of the lease agreement or the availability of documents that indicate ownership of real estate (apartment, building or house) are required for registration of the company as a VAT payer.

4. Standard reporting:

а) The company’s reporting to the State Revenue Service starts when the decision on hiring an employee is made. Report on changes in personnel in case of hiring an employee must be submitted before the start of employment. Suppose the employee starts work on 1 August. In this case, the report regarding the hired employee must be sent on 31 July. Make sure that the specialist who is responsible for submitting reports on the newly-employed staff has been promptly informed of the hiring of the new staff member.

b) When you have employees who are on payroll, the company must submit the report on social insurance payments and personal income tax. The report should be submitted within the period prescribed by the State Revenue Service. Notification from the State Revenue Service is sent shortly after the registration of the new company in the Register of Enterprises.

c) Termination of employment of a staff member should also be reflected in the Report on changes in personnel. In the case of dismissal, the appropriate report must be submitted no later than within three days from the date of termination of employment.

d) If your company has acquired the status of a VAT payer, you will have to submit reports on the Value Added Tax with varying frequency depending on the size of taxable transactions:

The taxation period (reporting period) is one month for those VAT payers:, whose amount of taxable transactions has exceeded LVL 35,000ls;
- or who have made deliveries of goods from the Republic of Latvia to any of the European Union’s countries;
- or who have provided services with the place of rendering in any of the European Union’s countries (the definition of the place of rendering services is regulated by Section 41(4) of the Law on Value Added Tax of the Republic of Latvia).

The taxation period (reporting period) is six months for those VAT payers, whose amount of taxable transactions has been less than LVL 10,000;
- and who at the same time have made no deliveries of goods from the Republic of Latvia to any of the European Union’s countries;
- and who have provided no services with the place of rendering in any of the European Union’s countries (the definition of the place of rendering services is regulated by Section 41(4) of the Law on Value Added Tax of the Republic of Latvia).

The taxation period (reporting period) is three months for those VAT payers, who have registered as a VAT payer in the reporting year;
- and who do not fall under the definition of those tax payers who must submit the report every six months:
- whose turnover has been more than LVL 10,000, but less than LVL 35,000;
- and/or who at the same time may have made deliveries of goods from the Republic of Latvia to any of the European Union’s countries;
- and/or who have provided services with the place of rendering in any of the European Union’s countries.

Submitting the reports on Value Added Tax is a rather difficult task for an unskilled accountant, so it is better to entrust the preparation and submission of reports to a qualified accountant who is experienced in filling in VAT returns.

Should you require detailed information on any of the above issues, please consult the experts of IT & FINANCE by calling +371 2-725-000-7 or sending e-mail to info@itellfinance.com