Every year, thousands of French entrepreneurs look for alternatives to France's heavy tax burden. Latvia, a full EU and eurozone member, is attracting a growing share of these profiles. Not because it is trendy, but because the numbers speak for themselves. This guide covers everything a high-income European entrepreneur needs to know about Latvia in 2026: taxation, the France-Latvia tax treaty, practical setup steps, real costs, and daily life in Riga.
Why French entrepreneurs are leaving France
The calculation is straightforward. In France, an entrepreneur generating €150,000 in profit who wants to pay themselves faces stacked levies that typically leave only 40 to 45% of the original amount in their pocket.
Here is the breakdown:
- Corporate income tax (IS): 25% on net profit (reduced rate of 15% on the first €42,500 under certain conditions).
- Social contributions for self-employed (TNS): approximately 45% of the director's compensation (URSSAF, pension, CSG-CRDS).
- CSG-CRDS: 9.7% on employment income and capital income.
- Flat tax on dividends: 30% (12.8% income tax + 17.2% social levies).
In practice, on €150,000 profit, if the entrepreneur takes €60,000 as salary and distributes €40,000 in dividends, the total tax and social burden regularly exceeds €80,000. The effective overall rate hovers between 55 and 60%.
But the problem goes beyond the numbers. The French administrative environment is heavy: quarterly URSSAF filings, monthly DSN reports, CFE contributions, VAT returns, frequent audits. And regulatory instability adds uncertainty: annual tax reforms, changing thresholds, new reporting requirements.
Why Latvia, and not the "usual" destinations
When tax optimisation comes up, the same names keep surfacing: Dubai, Portugal, Cyprus. Each has advantages, but also limitations that many entrepreneurs discover too late.
Dubai
Not an EU member, no tax treaties with most European countries. European clients may be wary of invoices from the Emirates. The visa requires regular renewal, the cost of living is high (housing, health insurance), and the six months of summer are barely liveable without constant air conditioning. The 9% corporate tax introduced in 2023 has also reduced the fiscal advantage.
Portugal
The NHR (Non-Habitual Resident) regime that attracted so many expatriates was abolished at the end of 2024. Portuguese CIT is 21%, with surcharges often pushing it above 25% for SMEs. The cost of living in Lisbon has increased significantly in recent years.
Cyprus
Cyprus is not in the Schengen area. Its reputation for tax compliance is not spotless, which complicates banking relationships and audits. CIT is now at 15%. The limited local market and geographic distance create practical constraints.
Latvia: what makes the difference
Latvia ticks every box that the destinations above fail to tick simultaneously:
- EU, Schengen, OECD, and eurozone member. Your invoices are in euros, your European clients see no difference.
- 0% CIT on reinvested profits. The Estonian model, applied in Latvia since 2018, means that as long as you do not distribute, you pay nothing.
- Tax treaty with France, signed in 1997, in force since 2000. A solid and proven legal framework.
- French-speaking support. Balt Partners is based in Riga and handles the entire process in French.
- 2h45 flight from Paris, with direct connections via Air Baltic and Ryanair.
The France-Latvia tax treaty: key points
The double taxation treaty between France and Latvia is the legal backbone of any fiscal relocation to Riga. Signed on April 14, 1997 and in force since May 1, 2000, it sets clear rules on how taxing rights are divided between the two countries.
Article 4: determining tax residency
This is the most important article for entrepreneurs. Tax residency is determined according to several hierarchical criteria: permanent home, centre of vital interests, habitual abode, nationality. In Latvia, the most common criterion is the declared address (deklarétá dzīvesvieta), which formally establishes tax residency.
Article 10: dividends
Dividends paid by a Latvian company to a French resident may be taxed in both states. However, withholding tax in the source state (Latvia) is capped: 5% if the beneficial owner holds at least 10% of the capital, 15% in other cases. This withholding is then creditable against tax owed in the state of residence.
Article 7: business profits
The profits of a Latvian enterprise are taxable in France only if the enterprise has a permanent establishment there. If your SIA has no office and no employee in France, your profits are taxed only in Latvia.
French CFC rules (Article 209 B CGI)
Critical point. If a French tax resident holds more than 50% of a foreign company located in a low-tax state, the French tax authority can tax that company's profits in France. The key to avoiding this: establish real economic substance in Latvia (office, genuine activity, management decisions made from Riga) and, crucially, transfer your tax residency to Latvia. Once you are a Latvian tax resident, Article 209 B no longer applies.
Exit tax (Article 167 bis CGI)
If you hold shareholdings worth more than €800,000 in total or representing more than 50% of a company's profits, transferring your fiscal domicile out of France triggers taxation on unrealised capital gains. An automatic deferral of payment is granted for departures to an EU country like Latvia, but you must declare the gain and meet reporting obligations for 2 years (or 5 years if shareholdings exceed €2.57 million).
Practical steps to set up
Here is the typical path for an entrepreneur relocating to Latvia. Total duration: 4 to 8 weeks, from initial decision to a fully operational business.
Step 1: tax audit (week 1)
Before anything else, analyse your current situation: legal structure, income distribution, assets, shareholdings. An audit allows you to precisely simulate achievable savings and identify potential obstacles (exit tax, contractual commitments, ongoing leases).
Step 2: SIA formation (week 2)
The SIA (Sabiedrība ar ierobežotu atbildību) is the Latvian equivalent of a limited liability company. Formation takes 3 business days at the Latvian commercial register. The minimum share capital is €1 (compared to €2,800 for the "standard" version). Formation costs run to approximately €300.
Step 3: bank account (weeks 2-4)
Several options are available. Local banks (Swedbank, SEB, Citadele) offer stability but require more documentation. Fintechs (Wise, Revolut Business) allow faster opening with multi-currency accounts. Many entrepreneurs use both: a local bank for credibility, a fintech for daily operations.
Step 4: tax residency (week 3)
To become a Latvian tax resident, you must declare your address with the municipality (deklarét dzīvesvietu) and register with the social security system. A rental agreement or property certificate is required. This process is straightforward and takes only a few days.
Step 5: activity transfer (weeks 3-6)
This is often the longest step. You need to notify clients of the billing change, update contracts, and redirect financial flows to your new entity. For digital businesses (SaaS, e-commerce, consulting), the transition is generally smooth because the service itself does not change.
Step 6: accounting and compliance (ongoing)
Once operational, you must maintain accounting records in compliance with Latvian standards, file monthly VAT returns (if VAT-registered), and submit an annual report. A local accounting firm costs between €150 and €400 per month depending on transaction volume.
How much you actually save
The figures below compare the total tax and social burden in France and Latvia, for an entrepreneur paying themselves the Latvian minimum wage (€700/month) and distributing part of the profits as dividends.
Scenario A: €100,000 profit, €30,000 distributed
- France: CIT (~€18,000) + social charges (~€22,000) + flat tax on dividends (~€5,000) = approximately €45,000
- Latvia: CIT reinvested (€0) + charges on minimum wage (~€2,900) + CIT on distribution (€7,500) = approximately €10,400
- Annual saving: approximately €34,600
Scenario B: €200,000 profit, €60,000 distributed
- France: CIT (~€38,000) + social charges (~€30,000) + flat tax on dividends (~€12,000) = approximately €80,000 to €95,000
- Latvia: CIT reinvested (€0) + charges on minimum wage (~€2,900) + CIT on distribution (€15,000) = approximately €17,900
- Annual saving: approximately €62,000 to €77,000
Scenario C: €500,000 profit, €100,000 distributed
- France: CIT (~€118,000) + social charges (~€45,000) + flat tax on dividends (~€25,000) = approximately €190,000 to €240,000
- Latvia: CIT reinvested (€0) + charges on minimum wage (~€2,900) + CIT on distribution (€25,000) = approximately €27,900 to €30,000
- Annual saving: approximately €160,000 to €210,000
These estimates include corporate tax, social charges, and dividend taxation. Do not forget to factor in the ancillary costs of operating in Latvia: accounting (€150-400/month), registered address, travel. Even adding €10,000 to €15,000 in annual costs, the savings remain very significant from €80,000 profit upward.
Pitfalls to avoid
Relocating to Latvia works, but it can go wrong if certain mistakes are made. Here are the most common ones.
1. Failing to establish real economic substance
Creating a SIA in Riga without any real presence exposes you to the risk of French CFC rules being applied. You need to be able to demonstrate that management decisions are made in Latvia, that the company has a physical address, and that the business is effectively directed from Riga.
2. Keeping French bank accounts as your primary accounts
If most of your financial flows pass through French accounts, the French tax authority can argue that your centre of economic interest remains in France. Your professional income should flow through your Latvian accounts.
3. Not declaring your departure to French tax authorities
The transfer of tax residency must be declared to the French tax office. Without this declaration, you remain considered a French tax resident and taxable in France on your worldwide income.
4. Underestimating the first six months
Setting up takes time and energy: administrative procedures, adapting to a new country, establishing new processes. Plan for a transition period where your productivity will be lower.
5. Thinking everything can be done remotely
Some procedures require physical presence: opening a bank account at certain banks, signing at the notary, address registration. And beyond formalities, regular presence strengthens the credibility of your Latvian tax residency.
Daily life in Riga
Beyond taxation, the practical question is legitimate: is Riga a good place to live?
Cost of living
Riga is significantly cheaper than Paris. A two-bedroom apartment in the city centre costs between €500 and €800 per month. Restaurants are 30 to 50% cheaper than in Paris. Groceries are comparable to French prices, sometimes slightly lower. The total monthly budget for a couple (rent + utilities + food + leisure) falls between €1,800 and €2,500.
French community
Approximately 500 French nationals reside in Latvia, a figure that is growing steadily. The community is active, with regular events organised by the Franco-Latvian Chamber of Commerce and the French embassy. The French entrepreneur network in Riga is still small enough to make genuine connections easy.
Transport
Direct Paris-Riga flights are operated by Air Baltic and Ryanair, with a flight time of 2h45. During peak season, daily flights are available. A round-trip ticket typically costs between €80 and €200 when booked in advance.
Language
English is very widely spoken in Riga, especially in professional settings and central shops. Latvian is needed for some administrative procedures, but support from Balt Partners eliminates this barrier. Learning basic Latvian is still recommended for social integration.
Healthcare
As a European resident, you benefit from the European Health Insurance Card. The Latvian healthcare system is functional, with quality private clinics in Riga. Supplementary private health insurance costs between €50 and €150 per month depending on coverage.
Quality of life
Riga is a safe, clean city with fast internet (Latvia ranks among Europe's best-connected countries). Nature is 30 minutes away: Baltic beaches, forests, national parks. The city offers a rich cultural scene (opera, museums, Art Nouveau architecture) and an underrated local cuisine. Winters are cold (-5 to -15 °C in January), but summers are pleasant (20-25 °C) with very long days.
Frequently asked questions
Can a French entrepreneur start a company in Latvia?
Yes. Any EU citizen can form a SIA (Latvian limited liability company) in Latvia. The process takes 3 business days and requires a minimum share capital of €1. No prior residency requirement applies to company formation.
How much does a French entrepreneur save in Latvia?
On €150,000 of profit, a French entrepreneur pays roughly €80,000 to €90,000 in taxes and social charges in France. In Latvia, with the same profit and partial distribution, the total tax burden drops to between €15,000 and €25,000 depending on the amount distributed.
Do I have to live in Latvia to have a company there?
You can own a SIA in Latvia without residing there. However, to benefit from Latvian personal taxation on dividends and income, you need to establish tax residency in Latvia: declared address, centre of vital interests, or presence exceeding 183 days per year.
Does the France-Latvia tax treaty protect against double taxation?
Yes. The treaty signed in 1997 and in force since 2000 eliminates double taxation on business income and provides reduced withholding tax rates on dividends. It sets clear criteria for determining tax residency.
How long does it take to set up in Latvia?
From initial decision to a fully operational company, expect 4 to 8 weeks. SIA formation takes 3 days. Bank account opening takes 1 to 3 weeks. Residency registration and accounting setup complete the process.
What are the tax risks of relocating to Latvia?
The main risks are: non-compliance with French CFC rules (Article 209 B CGI) if you fail to demonstrate real economic substance, exit tax on shareholdings exceeding €800,000, and failure to declare departure to French tax authorities. Professional guidance helps avoid these pitfalls.