Workforce Payments Guide Latvia

Last updated: Jan 14, 2024

Currency
Euro (EUR)
Payroll Frequency
Monthly
Capital
Riga
Fiscal Year
1 January - 31 December
Employer Taxes
20.77% - 23.59%
Employee Costs
9.5%
Central Bank
Latvijas Banka
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3rd Party Payments

 

Payments Coverage

Papaya Global Supports workforce payments on Latvia

Contractor Payments

Papaya Global supports payments to contractors in Latvia. The payout currency may vary depending on the receiver bank account setup when receiving foreign currencies. It is advised for contractors to reach out to their bank to confirm how foreign currencies are handled.

Payroll Frequency

Monthly

IBAN

IBAN Example Latvia

LV33XOLT1G8821A859510

IBAN in print

LV33 XOLT 1G88 21A8 5951 0

Country Code LV
Digit Code 33
Bank code XOLT
Account Number 1G8821A859510

KYC

The Know Your Customer (KYC) process in Latvia involves various legal procedures for customer identification and verification to combat money laundering, terrorist financing, and other criminal activities. This process is obligatory for all businesses and banks. Companies typically utilize specialized KYC service providers and automated solutions to streamline the process.

The KYC process requires businesses to identify and verify the identity of their customers and their beneficial owners. A beneficial owner is someone who directly or indirectly owns more than 25% of a company’s capital/voting rights or exercises ultimate control over it. If a beneficial owner cannot be determined, someone from the client’s senior management may be admitted as the beneficial owner.

The identification information for beneficial owners must be obtained from the Enterprise Register. Businesses also have the obligation to implement ongoing verification of the accuracy of KYC data.

In addition to these, the KYC process in Latvia involves verification of identity cards and passports issued by the Office of Citizenship and Migration Affairs (OCMA), driving licenses issued by the Road Traffic Safety Directorate (CSDD), credit/debit cards, and online transactions. Facial recognition and document authentication are used for remote authentication. Address verification is used to avoid false deliveries and invalid customer locations.

Customer onboarding is conducted through 2 factor-authentication and accurate verification of end-users through their mobile phones. Also, customers and their transactions are verified in real-time with biometric consent; authenticated with Selfie Verification along with a Unique Message. AML services are provided to Latvian banks and businesses to identify high-risk clients with faster PEP screening and real-time sanction list monitoring.

Banking Regulations

Cross-border workforce payments in Latvia are subject to several laws and regulations. Here are some key points:

Currency: The official currency is the Euro (EUR). International transfers can be made in the required foreign currency to another account opened with a bank that operates abroad.

Cross-Border Payment Regulation (CBPR2): This regulation ensures that cross-border payments in euro are not more costly than national transactions in the national currency of a non-euro Member State.

Banking Practices: According to the law of the country of the respective beneficiary bank and common market practices, for proceeding incoming payments the bank is authorized to credit the transferred amount into the beneficiary’s account according to the account number indicated in the payment order.

Opening a bank account

To open a company bank account in Latvia, the following requirements and steps must be met:

1. Collection of a complete package of documents, which should include:

  • The most recent edition of the company’s Incorporation Certificate
  • Memorandum and Articles of Association
  • The List of Beneficiaries
  • IDs of the company’s top managers and owners
  • Documents confirming relation to Latvia (if any) such as lease agreements for renting the office, warehouses, other facilities
  • Contracts with employees and/or payroll statements
  • Utility bills
  • Agreements with contractors

2. Preparation of a detailed description of the business and confirmation of the legality of the origin of funds by providing convincing documents.

3. Confirmation of the real address of doing business.

4. A personal meeting with a bank representative may be required.

5. If you are a non-native speaker, make an appointment to ensure an English-speaking clerk is available or to have a translator present.

6. Signing of documents at a notary.

7. Acquisition of legal address owners consent.

8. Opening of a temporary bank account and payment of share capital.

9. Payment of state duties.

10. Submission of documents to the Enterprise Register and filling in bank forms and submitting additional information if required.

Please note that Latvian banks do not open accounts for offshore companies registered in tax-free jurisdictions or companies with nominee structures. Banks may also charge non-residents a fee to open an account.

The usual time duration for company registration by the Enterprise Register is 3 working days. An urgent registration procedure is also available which takes 1 working day, but it requires a higher state duty to be paid. After the company is registered, the temporary bank account needs to be transformed into an ordinary current account.

Furthermore, after receiving a full package of documents from the client, the bank considers them within five days. The decision is usually announced within one week. The maximum time for making a decision is 30 business days. Depending on the complexity of the case, the process can last within a matter of minutes or hours, but it can also take a few days or even weeks in some cases.

International Banks

Swedbank AS: This is a part of Swedbank Group (Sweden). Swedbank AS is a universal bank offering retail, private, and corporate banking products and services to both private individuals and companies with the focus on private individuals and SMEs.

AS “SEB banka”: SEB Banka is a part of SEB Group (Sweden). SEB Banka operates as a universal bank, offering retail, private, and corporate banking products and services to individuals and companies.

Major Local Banks

The major local banks operating in Latvia are:

  • AS “Citadele banka”
  • AS “LPB Bank”
  • AS “Regionala investiciju banka”
  • AS “Rietumu Banka”
  • AS “Industra Bank”
  • AS “SEB banka”
  • BluOr Bank AS
  • Latvijas Banka
  • Signet Bank AS
  • Swedbank AS
  • AS DnB NORD Banka
  • AS GE Money Bank
  • AS LTB Bank
  • AS UniCredit Bank
  • Baltic International Bank
  • BIGBANK lv
  • Danske Banka
  • JSC Akciju komercbanka Baltikums
  • JSC Latvijas Krajbanka
  • Latvijas Biznesa banka
  • Mortgage and Land bank of Latvia
  • Multibanka
  • National Bank of Latvia
  • Norvik Banka
  • Parex Bank
  • PrivatBank
  • Regionala investiciju banka
  • Trasta Komercbanka
  • VEF Banka

Payment Tools

The B2C payment tools available in the specified country include:

  • Money remittance
  • Credit transfers
  • Card payments (Visa and Mastercard)
  • Cash deposits and withdrawals from the account
  • Payment initiation
  • Service enabling the placement of cash on a payment account
  • Service enabling cash withdrawals from a payment account
  • Execution of a payment
  • Issuing of a payment instrument or acceptance of payments
  • Payment initiation services
  • Account information services
  • Internet banking platforms
  • Apple Pay
  • PayPal
  • Link payments
  • Digital wallets (including Swedbank Card payments and Apple Pay digital wallet)
  • PayPal checkout
  • “LinkPay” payment links

Cryptocurrency

The country recognizes the use of cryptocurrencies, but they are not considered as official currency or legal tender. Cryptocurrency is viewed as a contractual means of payment that can be used in transactions of exchange, essentially perceived as a commodity or product that can be used as an exchange medium if the parties agree.

Businesses wishing to adopt cryptocurrencies must obtain a license from the Financial and Capital Market Commission (FCMC) and adhere to strict compliance and data security requirements. They are also required to provide information about their customers and activities to the FCMC. Furthermore, businesses need to comply with legislation concerning counterterrorism financing and anti-money laundering. Latvia has implemented the Fifth Anti-Money Laundering Directive of the European Union, which establishes standards for preventing terrorism financing and money laundering.

In terms of taxation, capital gains from the sale of cryptocurrencies are exempt from income tax, transactions made with cryptocurrencies are exempt from VAT, and companies that accept cryptocurrencies as payment can benefit from a tax reduction on their profits. Cryptocurrencies are treated as intangible assets, and capital gains tax is applied to any profits made from bitcoin trades. Businesses that accept cryptocurrencies as payment are subject to corporate income tax based on the market value of the cryptocurrency at the time of the transaction. Cryptocurrency miners’ profits are taxable as business income.

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