An EU subsidiary in Latvia for your UK company
Since Brexit, a UK Ltd trading into the single market runs into customs paperwork, VAT friction, hiring limits and payment blocks. An EU-based subsidiary settles that. Figures reflect early 2026.
Why a UK company needs an EU entity after Brexit
A UK company is now a third country to the EU. The friction shows up in the day-to-day of any business that sells, buys or hires across the Channel.
Declarations and duty
Goods moving into the EU need customs declarations and often incur duty.
UK VAT no longer works
Your UK VAT number no longer works for intra-EU trade, so B2B invoicing carries friction your European competitors do not have.
EU clients prefer EU suppliers
Some EU clients prefer to contract with an EU-registered supplier, and a handful of platforms and payment processors treat a UK entity differently from a European one.
An EU subsidiary gives you a legal entity inside the single market with its own local VAT number, its own EORI number for customs, and a European IBAN. From there you can invoice EU customers cleanly, register for import VAT locally, hire EU staff on local contracts, and hold euro balances without conversion drag. You keep your UK company running exactly as before, and the subsidiary becomes your European arm.
The remaining questions are where to base it, how to structure it, and who executes the setup end to end. That is the rest of this page.
Branch or subsidiary
These two routes look similar on paper and behave differently in practice.
A branch is an extension of your UK company registered in an EU country. It is not a separate legal person, so the UK parent carries the branch's liabilities and its profits fold back into the UK. A subsidiary is a new company, owned by the UK parent but legally distinct, with its own liability, its own tax residence and its own balance sheet.
| Factor | EU branch | EU subsidiary |
|---|---|---|
| Legal status | Extension of the UK company | Separate legal entity |
| Liability | UK parent is fully liable | Limited to the capital invested |
| Local tax residence | Taxed as a permanent establishment | Own residence, own regime |
| Own VAT and EORI | Possible, but tied to the parent | Yes, fully its own |
| Local credibility | Reads as a foreign company | Reads as a local EU company |
| Access to local tax regime | Limited | Full (for example Latvia's 0% on reinvested profit) |
Branch
- Quicker to open, no second set of shareholders.
- Enough for a light local presence, such as a small sales office feeding orders back to the UK.
- The parent stands behind everything the branch does.
Subsidiary
- Ring-fences risk away from the UK parent.
- A clean local entity that partners and banks treat as European.
- Opens the local corporate tax regime. The right call for almost everyone who plans to trade, invoice, hold cash, hire, or reinvest inside the EU.
Our own service is built around the subsidiary route: SIA company formation gives the UK parent a genuine EU company rather than a bolt-on office.
Choosing the EU country
Corporate tax is the deciding variable. Each option carries a trade-off for a UK owner.
| Country | Corporate tax | The trade-off for a UK owner |
|---|---|---|
| Ireland | 12.5% | Higher running costs, real substance expected |
| Netherlands | Around 25% | Good reputation, but tax is paid every year |
| Germany / France | Around 25% to 30% | Heavy admin, high effective tax |
| Cyprus | 15% (from 2026) | Rate rose, distance from your market |
| Hungary | 9% | Low headline, but tax due on all profit each year |
| Latvia | 0% on reinvested profit | You pay 20% only when you distribute |
Latvia's cash-flow tax model
Since 2018 Latvia has run the cash-flow tax model: profit that stays in the company is taxed at 0%, and corporate tax of 20% (a 20/80 calculation on the net amount) applies only when you distribute a dividend. For a growth company that reinvests earnings, that comes out ahead of Ireland's 12.5% and Hungary's 9%, because those regimes tax every year's profit whether you take it out or not. Latvia is a full EU, Schengen, eurozone, OECD and NATO member, so there is none of the tax stigma that comes with an offshore base. The detail sits on our why Latvia page.
A quick way to choose. If you are reinvesting to grow, Latvia's 0% on retained profit is hard to beat. If you plan to strip out most profit as dividends every year, compare the all-in rate after distribution across a few countries, because the reinvestment advantage matters less to you. If you mainly need a distribution hub close to a particular market, weight location over headline rate. For most UK founders who are building rather than extracting, the reinvestment regime is the deciding factor.
Riga, Latvia
What it costs and how long it takes
The service side depends on your setup, so we quote per case. Here is the full structure.
| Cost item | What it covers |
|---|---|
| Share capital | EUR 2,800 for a standard SIA, or EUR 1 for the small-capital form. This is your money, held in the company. |
| State registration fee | Paid to the Latvian Register of Enterprises |
| Formation service | Articles of association, filing, VAT and EORI application |
| Registered address | A professional Riga address, mail handling included |
| Accounting | Monthly bookkeeping, annual accounts, VAT returns |
On timing, the entity itself is fast. The bank account and, where relevant, real substance are what set the true go-live date.
SIA registered at the Enterprise Register
The entity itself is entered fast, owned by your UK Ltd.
Intra-EU VAT number issued
The number that lets you invoice B2B cleanly across the union.
Business bank account opened
The European IBAN goes live once the KYC file clears.
Fully operational setup
Entity, VAT, EORI and banking in place, ready to trade.
For a figure tailored to your situation, see our tax optimisation service or ask on a call. We give a written quote with no hidden fees before anything is signed.
VAT, EORI and customs
Once the subsidiary exists, it registers for Latvian VAT and receives an intra-EU VAT number.
Intra-EU VAT number
Compulsory once turnover passes EUR 40,000 over a rolling 12 months, voluntary below that, and often worth doing straight away for B2B work. The standard Latvian rate is 21%.
EU EORI number
The identifier customs uses for every import and export. With an EU EORI tied to your subsidiary, goods clear as an EU entity rather than a third-country importer, cutting the paperwork and the surprises at the border.
One Stop Shop
If you sell to EU consumers, the One Stop Shop scheme lets the subsidiary account for VAT across member states through a single return.
We handle the VAT and EORI applications as part of the formation, so the entity arrives trade-ready rather than as a shell you then have to activate.
Opening an EU business bank account as a UK-owned subsidiary
This is the step most guides pass over quickly, and the one that decides your true go-live date.
A UK-owned entity opening an EU account is a fresh KYC file to a bank that has never dealt with you. Traditional banks want to understand the ownership chain up to the UK parent, the business activity and the expected flows. Approached without preparation, this is where setups stall for weeks.
A Latvian subsidiary gives you a real European IBAN recognised across the 36-country SEPA area. Your EU clients pay you by standard SEPA transfer exactly as they would a German or Dutch supplier, and you send euro payments to EU suppliers without conversion drag. That is a different proposition from leaning on a US account, which can be closed without notice and gives you no SEPA access, or on Wise and Revolut alone, which are electronic money institutions with limits rather than full banks.
We work with traditional Latvian banks and with European neobanks, and we prepare the KYC file so the ownership chain is presented cleanly the first time. The full picture is on our bank account opening page. Funds at an EU-regulated bank are protected up to EUR 100,000.
Riga old town
Remote setup for non-residents
Your UK company can own the EU subsidiary 100%, and the directors do not need to be EU residents.
The Latvian register runs on a digital system, and with a power of attorney we prepare, the formation is done remotely. You sign from the UK, we file in Riga. No relocation is required to own or direct the company. An early trip of a day or two can help with certain banking formalities, but it is not the rule.
Substance is the one real requirement. A subsidiary that exists only on paper, with no local activity and every decision taken from London, invites a challenge that it is really being managed from the UK, which would pull its profits back into UK tax. How much substance you need depends on your activity and scale. For a light-touch structure it can be a registered address, local accounting and proper board records. For a larger operation it means real presence: an office, local staff, decisions genuinely taken in Latvia. We size this to your case rather than selling a single answer, and it is a core part of what we plan on the first call.
Latvia keeps this credible and affordable. Office and staff costs in Riga run well below Dublin or Amsterdam, and the country carries none of the reputational baggage of an offshore jurisdiction.
Repatriating profit to your UK parent
Retained profit stays untaxed at 0% in Latvia. Distribution is the moment corporate tax applies.
When you do want cash back in the UK company, the subsidiary distributes a dividend. In Latvia that is the moment corporate tax applies: 20% on a 20/80 basis on the distributed amount, with 0% having applied while the profit was retained. So a growth company that reinvests can defer corporate tax to zero for years and only face it when it chooses to pay out.
On the cross-border leg, one Brexit detail governs how the dividend is treated. Before Brexit, the EU Parent-Subsidiary Directive removed withholding tax on dividends between associated EU companies. A UK parent no longer sits inside that directive, so the governing instrument is the bilateral UK-Latvia double tax treaty rather than the directive. Latvia has a wide treaty network, and the treaty sets out how the dividend is treated between the two countries. The exact treatment depends on your holding and structure, which is the kind of thing to confirm on a call rather than read off a generic table.
In practice: retained profit stays untaxed at 0% in Latvia, distribution triggers the 20/80 corporate tax, and the UK-Latvia treaty frames the flow up to the parent.
From UK Ltd to a live EU subsidiary, with Balt Partners
End to end and mostly from your desk. Here is how it runs for a UK company.
Map your case
Branch or subsidiary, how much substance you need, which bank fits, target go-live.
Articles and power of attorney
We draft the articles of association and the power of attorney. You sign digitally from the UK.
File with the Register of Enterprises
The SIA is registered in about 2 business days, owned by your UK Ltd.
Apply for VAT and EORI
We apply for the intra-EU VAT number and the EORI number so the entity is trade-ready.
Submit the bank KYC file
We prepare and submit the bank KYC file, presenting the UK ownership chain, and your European IBAN goes live.
Build the substance
Registered address, local accounting, staffing and board process sized to your activity.
We are a boutique firm based in Riga, not a broker forwarding your file to a stranger. One dedicated contact runs your setup from the first call to the final documents, and the same team handles the ongoing accounting afterwards. That matters most on the two things larger firms fumble for UK owners: getting the EU bank account actually opened, and getting the substance right so the structure holds.
If you are weighing Latvia against the other obvious Baltic option, our Estonia vs Latvia comparison lays out where each one wins.
Frequently asked questions
Not always, but most that trade with the EU benefit from one. If you sell goods, invoice EU business clients, hire EU staff or need a European IBAN, an EU subsidiary removes the customs, VAT and banking friction a UK entity now faces as a third country. If you only occasionally serve EU customers, a branch or nothing at all may be enough. A short call settles which applies to you.
A branch is an extension of your UK company, so it is not a separate legal person and the UK parent carries its liabilities. A subsidiary is a new company, legally distinct, with limited liability, its own tax residence, and its own VAT and EORI numbers. A subsidiary also gives you full access to the local tax regime, such as Latvia's 0% on reinvested profit, which a branch does not.
It depends on what you do with your profit. Ireland (12.5%), Hungary (9%) and Cyprus (15% from 2026) tax every year's profit whether or not you take it out. Latvia taxes reinvested profit at 0% and applies 20% only when you distribute. For a UK company reinvesting to grow, Latvia is usually the most cash-efficient EU base, and it is a full EU, Schengen and eurozone member with no tax stigma.
Yes. Your UK company can own the subsidiary 100%, directors do not need to be EU residents, and the formation is done remotely using a power of attorney. You sign from the UK and we file in Riga. You should still put appropriate substance in place so the company is genuinely managed where it is registered, and we size that to your activity.
The SIA is registered in about 2 business days, the VAT number follows in 5 to 10 business days, the bank account in 5 to 10 days, and a fully operational setup takes around 3 weeks. Cost breaks down into share capital (EUR 2,800 standard, or EUR 1 for the small-capital form, which is your own money), the state registration fee, the formation service, a registered address, and ongoing accounting. We give a written quote with no hidden fees before you commit.
For B2B trade in the EU, yes to VAT. Latvian VAT registration is compulsory above EUR 40,000 of turnover over a rolling 12 months and voluntary below it, which is often worth doing at once. If you move physical goods, you also need an EORI number for customs. We apply for both during formation so the entity is ready to trade on day one.
Yes. A Latvian SIA can be wholly owned by your UK Ltd, with the UK parent as sole shareholder. There is no local ownership requirement and no need for an EU-resident co-owner.
The subsidiary pays a dividend to the UK parent. In Latvia that distribution triggers the 20% corporate tax on a 20/80 basis, having been 0% while the profit was retained. Because a UK parent is no longer covered by the EU Parent-Subsidiary Directive, the cross-border treatment is governed by the UK-Latvia double tax treaty. The exact figures depend on your structure, so we confirm them for your case.