How to Register a Sole Proprietorship (Individuālais komersants / IK) in Latvia

Registering as a sole proprietor in Latvia (Individuālais komersants, or “IK”) is appealing because it offers one of the simplest legal forms for doing business: you can start with low upfront costs, relatively little red tape, and quickly be up and running via online systems.

The process is easy, especially if your turnover is modest and you don’t need to be VAT-registered. The main challenges include understanding when registration in the Commercial Register becomes mandatory, choosing the right tax regime (general vs micro-enterprise), and knowing when VAT registration is required. The main benefits are full control, simpler accounting, lower administrative burdens, and flexibility to scale as needed.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Latvia?

In Latvia, a sole proprietorship is legally known as Individuālais komersants (abbreviated IK). It is also referred to in English as a sole trader or individual entrepreneur. This business form is owned and operated by one person.

The owner is fully responsible for all liabilities of the business (i.e., unlimited liability), although they also enjoy all of the profits. It is often chosen by freelancers, consultants, small retailers, or service providers who want a simple setup and flexibility.

How does a sole proprietorship (individuālais komersants) work in Latvia?

Individuālais komersants vs Limited Company in Latvia

If you expect to grow your business, hire employees, or operate with larger turnover, you may consider other legal forms.

Step-by-step guide: How to register a sole proprietorship in Latvia

Step 1: Verify eligibility and business idea

Make sure you can legally operate in Latvia (citizen, resident, or with permit), are of legal age, and that your business activity is permitted for IK. If your activity is one that requires professional certification or falls under regulated sectors, check those requirements first.

Step 2: Pick your business name

Decide on a unique name for your sole proprietorship. The name must include “Individuālais komersants” or “IK” as a suffix or prefix. Confirm its availability in the Commercial Register.

Step 3: Prepare required documents

You’ll need your identity documents (passport or ID card), proof of address, business name registration form (KR2), and possibly documents regarding your intended business activity. If you plan to register as a micro-enterprise taxpayer, fill out that part in the registration form.

Step 4: Register in the Commercial Register

Submit the application form (often KR2) to the Commercial Register. You can do this in person, by paper, or via Latvia’s e-services portal (electronic submission). Signatures may need to be certified (including e-signature), depending on the method.

Step 5: Register for tax and social contributions

Simultaneously with registering your IK, you will need to register with the State Revenue Service (SRS) for income tax and social insurance contributions. If you qualify for micro-enterprise status, indicate that on your tax registration.

Step 6: VAT registration (if required)

If your annual turnover of taxable supplies exceeds €50,000, you must register for VAT with the SRS. You may also apply for VAT registration earlier if that suits your business. The standard VAT rate is 21%, with reduced rates for certain goods and services.

Step 7: File required reports, maintain accounting, and comply with obligations

Once registered, you must file income tax returns, pay your social insurance contributions, keep proper accounting records, and issue invoices, especially if VAT-registered. Use the SRS Electronic Declaration System (EDS) for filings. If you employ staff, register as an employer for social function obligations. Any licence or regulatory permits for your specific activity must be maintained.

Financial and tax obligations for sole proprietors in Latvia

• Income Tax / Personal Income Tax (PIT): As IK under the general regime, you pay PIT on net profit (revenues minus allowable expenses). Social security contributions are also due. Depending on income level, marginal rates may vary.

• Micro-enterprise tax regime: If you meet criteria (turnover below VAT threshold, etc.), you may opt for micro-enterprise tax status. This allows a simplified tax treatment combining taxes and social contributions under a special regime.

• VAT obligations: Once turnover for taxable supplies exceeds €50,000 per calendar year, VAT registration is mandatory. The standard rate is 21%, with reduced rates for specific goods and services.

• Record-keeping and declarations: Must maintain appropriate records of income and expense, use the SRS EDS for tax / VAT filings, and meet deadlines as determined by SRS.

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FAQs

What is the minimum capital required to start an IK in Latvia?
None. There is no minimum capital required to establish an Individuālais komersants.

Do IKs need to register for VAT immediately?
No. Only when their taxable turnover exceeds €50,000 per calendar year (for domestic businesses). Below that, VAT registration is optional.

How much are the registration and publishing fees?
When registering, you’ll pay modest state fees (e.g., registration form fees), plus fees for publishing the registration in the official gazette (“Latvijas Vēstnesis”), and small fees for document certification. For example, KR2 application fees, publication fees, etc.

Can an IK hire employees?
Yes. If you have employees, you’ll need to register as an employer, report payroll, and pay social security contributions accordingly. There are obligations around workplace registration, social insurance, etc.

How long does it take to register as an IK?
If you have all the required documents, the registration process is often quick (a few days), especially via the online portal and e-services.

Can foreign nationals register as IKs?
Yes. Foreigners can operate as sole proprietors in Latvia. You will need a legal address, identification, and meet any migration/permit requirements. Documents must often be in Latvian (or officially translated) and signature certified.

Do IKs need a separate business bank account?
Not always mandated by law, but strongly recommended for clarity of bookkeeping and separating business vs personal finances. Many clients or authorities prefer seeing business payments via a business account.

What happens if I stop being an IK (cease business)?
You should notify the Commercial Register, close your IK registration, file final tax returns, de-register for VAT (if applicable), settle any employee obligations, and maintain records as required by law for a retention period.

Are there any government incentives or reduced rates for new IKs?
The micro-enterprise regime is the main simplified option. There may also be reduced VAT rates for certain goods and services (e.g., reduced rate categories). Sector-specific incentives may apply under national policy.

Can I use Deel as an IK to get paid by international clients?
Yes. Deel allows Individuālais komersants and freelancers to receive payments globally, offer invoice templates meeting Latvian legal requirements, and help with record keeping.

Does Deel generate compliant invoices for IKs?
Absolutely. Deel invoices include the necessary information (business name, identification, VAT if registered, etc.) so they can be used for compliance with SRS rules.

Can Deel help me with taxes as a sole proprietor in Latvia?
Yes. Deel offers downloadable tax reports, transaction histories, and records that you can use when filing your income-tax returns and VAT returns.

Does Deel offer contracts for freelancers and IKs?
Yes. Deel includes contract templates that align with Latvian legal norms for freelancers / individual entrepreneurs.

Can I access benefits through Deel as an IK?
Yes. Deel may offer optional benefits depending on your region (health insurance, retirement planning, etc.), helping reduce the administrative overhead of managing them alone.