US Company Formation from Latvia (2026): SIA Distribution Tax, the Micro-Enterprise Regime, How Latvia Taxes a US LLC, the US–Latvia Treaty and Riga's Logistics and Software Firms
How to set up a US company from Latvia: the SIA's 20% tax on distributed profit only, personal income tax at 25.5% and 33% (plus 3% above €200,000), capital income at 25.5%, how foreign dividends and a US LLC's distributions are taxed, the micro-enterprise tax, self-employed rules, the US–Latvia treaty (dividends 15%/5%, interest 10%, royalties 5%/10%), US LLC formation vs US C-Corp formation, euro examples, costs.
Latvia, like Estonia, taxes companies only when they distribute profits. A Latvian SIA pays 20% corporate income tax on the gross amount of a dividend (20/80 of the net), and nothing on profits it keeps. Riga's software houses, logistics companies, e-commerce sellers and freelancers have used that system since 2018. When they look at a US company, the question is what it adds to an SIA that already defers tax.
This guide explains how Latvia taxes individuals and companies in 2026, how it treats income from a US LLC or US corporation, the US–Latvia treaty, and when US LLC formation or US C-Corp formation is worth it. It goes further than our Baltic overview, with Latvian rates, examples and the micro-enterprise and self-employed options.
In short: Latvian residents can own 100% of a US LLC or C-Corporation, formed remotely. A Latvian SIA pays 0% on retained profits and 20% on the gross distribution; dividends from such taxed profits are then free of personal income tax. Personal income tax is 25.5% up to €105,300, 33% above, with an extra 3% above €200,000. Capital income, including dividends from untaxed foreign profits, is taxed at 25.5%. A US LLC that pays no US tax gives no credit, so its distributions are generally taxed in full. The US–Latvia treaty limits US withholding on dividends to 15% (5% for companies owning 10% or more), on interest to 10% and on royalties to 5% or 10%. With UCB, a Delaware corporation with EIN is $358 and a Wyoming LLC with EIN is $249, all-in.
Latvia's rules in 2026
| Item | Rate |
|---|---|
| SIA corporate income tax | 0% on retained profit; 20% of the gross distribution (20/80 of net) |
| Dividends from Latvian companies that paid CIT | 0% personal income tax |
| Personal income tax | 25.5% up to €105,300; 33% above; plus 3% on income above €200,000 |
| Capital income and capital gains | 25.5% |
| Micro-enterprise tax | A turnover tax covering income tax and social contributions, available only within narrow limits |
Self-employed people (pašnodarbinātie) can also register to pay income tax on business profit, with social contributions on their income.
How Latvia treats income from a US company
A US corporation
A US C-Corporation pays 21% federal tax on its profits. Under the treaty, its dividends to a Latvian individual carry 15% US withholding. In Latvia, dividends from a foreign company are taxed as capital income at 25.5%, with credit for the US tax. Latvian law also relieves dividends from foreign companies where tax was paid on the underlying profit and the resident holds a substantial interest, so ask your adviser whether your holding qualifies.
A US LLC
The IRS disregards a single-member LLC. Latvia generally treats a US LLC with limited liability as a foreign company. Its distributions to a Latvian individual are then foreign dividends on which no tax was paid anywhere, taxable at 25.5%. Latvia's CFC rules apply to Latvian companies that control low-taxed foreign entities, and a foreign company managed from Latvia can be taxed in Latvia through residence or a permanent establishment.
Example: an e-commerce seller in Riga
These are illustrative figures, not a client case, at €0.92 to the dollar.
Elīna sells handmade linen homewares online, mainly to US buyers, with revenue of US$160,000 and profit of US$60,000 (about €55,000).
- Through an SIA, she pays herself a salary taxed at personal rates, keeps the rest in the SIA at 0%, and pays 20% of the gross amount when she distributes. The dividend she receives is then tax-free in her hands.
- Through a US LLC run from Riga, the LLC may be Latvian-taxable because it is managed from Latvia. If not, its distributions to her are taxed at 25.5% as capital income. She also pays for US compliance and has to collect US state sales tax where her sales pass economic nexus thresholds.
She keeps the SIA as her main company. She forms a Wyoming LLC, owned by the SIA, only to use US payment processors and a US third-party warehouse, with the LLC buying stock from the SIA at arm's length. See LLC for e-commerce sellers and state taxes for a foreign-owned LLC.
US LLC formation from Latvia
US tax position
A single-member LLC with a non-resident owner pays no US income tax if the owner works from Latvia and the LLC has no US office, employees or dependent agents (see effectively connected income explained). A US third-party logistics warehouse acting as an independent contractor does not by itself create a US trade or business. The LLC files Form 5472 with a pro forma Form 1120 every year, and the penalty for missing it is $25,000 (see Form 5472 explained).
US C-Corp formation from Latvia
US tax position
A US corporation pays 21% federal tax on its profits plus state tax, and files Form 1120 and Form 5472 every year (see the 21% corporate tax explained and the C-Corp guide for non-residents). Its dividends to an SIA owning 10% or more carry 5% US withholding. The SIA can generally receive them without corporate income tax and pays its own 20% only when it distributes to its shareholders.
Example: a Riga logistics software company
Take an illustrative case: a Riga company that makes route-planning software for freight forwarders signs US trucking companies and hires a US customer success team in Chicago. It forms a Delaware corporation registered in Illinois:
- The US subsidiary employs the team, signs US contracts and pays US tax on its margin.
- The SIA develops and owns the software and licenses it to the subsidiary. Royalties carry 10% US withholding under the treaty (5% for some industrial royalties), creditable in Latvia when the SIA eventually distributes.
- The SIA's profits are not taxed in Latvia until distributed, so it can reinvest the royalty income in development.
See US subsidiary for a foreign company.
Start-ups
Latvian start-ups raising money from US investors usually need a Delaware C-Corporation at the top, with the SIA as a subsidiary that keeps its tax deferral on reinvested profits. See raising US investment as a foreign founder.
The US–Latvia treaty
The treaty in force since 1999 limits US withholding:
| Payment from the USA | Treaty rate |
|---|---|
| Dividends to an individual | 15% |
| Dividends to a company owning 10% or more | 5% |
| Interest | 10% (0% in some cases) |
| Royalties | 5% for industrial equipment, 10% for others |
It also limits US tax on business profits to a US permanent establishment and contains a limitation on benefits article. Claim it on Form W-8BEN or W-8BEN-E (see W-8BEN-E vs W-8BEN explained).
Which state
- Delaware for a subsidiary or start-up.
- Wyoming or New Mexico for a small LLC owned by an SIA.
- The state where US staff work.
See best state for non-residents and the state selector.
What it costs
UCB's prices include state fees and the first year of registered agent service:
- Delaware corporation with EIN: $358.
- Wyoming LLC with EIN: $249, or $348 with a US bank account application.
A Delaware corporation costs $578 a year to keep active. A Wyoming LLC costs $121 a year, or $421 with the annual federal return. A US business address with your own suite number is $60 a year. See what a US LLC costs every year.
Documents and banking
For an individual, a Latvian passport or ID card and proof of address. For an SIA, a Lursoft or Enterprise Register extract in English and a board decision. US fintech banks accept Latvian owners readily. See US business bank accounts for non-residents and Stripe for non-residents.
Mistakes to avoid
- Replacing an SIA with a US LLC for tax deferral that the SIA already gives.
- Not declaring LLC distributions at 25.5% because no US tax was withheld.
- Running a US LLC from Latvia and forgetting it may be taxable in Latvia.
- Forgetting US state sales tax on online sales.
- Missing Form 5472 in a year when no US tax was due.
Frequently asked questions
Is a US LLC better than a Latvian SIA? Rarely for a Latvian resident. The SIA pays no tax on retained profits, and dividends from it are tax-free after its 20% distribution tax.
How does Latvia tax distributions from my US LLC? Generally as capital income at 25.5%, with no US tax to credit.
Is there a US–Latvia tax treaty? Yes. Dividends 15% (5% for companies owning 10% or more), interest 10%, royalties 5% or 10%.
What is the best US structure for a Latvian company? Usually a Delaware corporation as a subsidiary, with transfer pricing documented.
Does my US LLC pay US tax? Not if it has no US office, staff or agents. It files Form 5472 and a pro forma 1120 every year.
How UCB can help
We form US companies for Latvian residents and SIAs remotely: the state filing, EIN, registered agent, US business address and bank application. We prepare W-8BEN-E treaty forms, and each year we file the US returns through our US tax filing service. See our formation, EIN and bank account package, and the Estonia and Lithuania guides.
Setting up a US company from Latvia? WhatsApp us at +1 315 961 2956 or email enquiries@ucbsolutions.com.
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This article is general information for non-resident business owners and is not legal or tax advice. Rules and fees change; contact us to confirm what applies to your situation.
