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Latvia: Latvian Parliament introduces the status of “risk person” prohibited from legal business activities

Latvian Parliament introduces the status of “risk person” prohibited from legal business activities

If you are looking for a local business partner to establish a company in Latvia, you should be aware of hidden dangers which could ruin your plans.

The Latvian Parliament recently set a procedure for accepting or contesting decisions by which a natural person is declared a “risk person”. A risk person will be unable to occupy positions connected with representing a company or subsidiary. For example, a risk person will not be able to become a board member, procurist, branch representative or liquidator.

At first sight this may seem to concern only situations where natural persons sell their personal data and agree to become executives of fictitious companies. Of course, the procedure relates to cases when a company is established for illegal purposes and no commercial activities are performed, since money laundering or swindling VAT returns by means of a chain of fictitious companies has been a real problem for years.

However, the procedure also aims to restrict the right of natural persons to engage in legal business activities if they personally (or companies under their management) have tax debts of a certain amount set by law or if they break other tax law provisions. The State Revenue Service will decide whether a person is a risk person and will hold a register of risk persons. For example, a person will be entered in the Register of Risk Persons on the basis of a decision of the State Revenue Service if their tax debts resulting from individual commercial activity amount to 7000 EUR and the debt has not been paid. Similar provisions apply if a person is or has been an executive of a company which owes tax of 15 000 EUR or more.

If a person is entered in the Register of Risk Persons, then the Register of Enterprises will reject or postpone their appointment as an executive of a company or a subsidiary. The rules also apply to subsidiaries of foreign companies.

Source: Amendments to the Law on the Commercial Register of 6 November 2013; Amendments to the Law on Taxes and Duties of 6 November 2013

Julija Kolomijceva
Contact in Riga
Jūlija Kolomijceva
Phone: +371 67 77 05 04

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