Employ Candidates Compliantly in Latvia

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  1. Overview: Latvia
  2. Global HR Compliance
  3. Global PEO and Payroll
  4. Work Permit for Hiring Expats via PEO
  5. Expand without a company set up
  6. Contractor vs. Employee: Which Is Better?
Other counrtries

The Global Expansion Guide: Hire, Onboard, Pay Talent without Entity Set Up in Latvia

Become an international business and gain a presence in Latvia without the risk or expense of setting up a company.

Many legal requirements for employment are unique to this country, and navigating the process can be daunting if you’re unfamiliar with them. Hiring local workers can also be challenging if you want to expand your business into Latvia. That’s where global PEOs (Professional Employment Organizations) come into play. With PEO partners, you reduce administrative time, legal issues, and financial concerns of setting up a legal entity in Latvia; or the hassle of achieving tax residency status and banking in a foreign country.

Partnering with global employment experts, your project eliminates unnecessary work and gives you access to a scalable global workforce — so why not make things easier with some outsourcing? Global professional employer organizations (PEOs) and Employers of Record (EOR) can help you minimize the risk of getting caught up in potential legal issues while expanding your company in Latvia.

Streamline Your Global Journey with PEO & EOR Services in Latvia

Acumen International PEO provides access to multiple locations, workforces, and talent pools while ensuring 100% compliance with laws in Latvia. A Global Employer of Record and PEO provides the legal framework and resources needed to remove your employment liability and compliance risks of hiring international employees.

We offer a cost-effective solution for agencies and employers without the capital to expand or larger organizations that are not ready for a long-term commitment overseas. Our flexible pricing model can accommodate any number of employees and projects, with fees based on the amount of work performed.

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In this guide you’ll learn how to:

  • Attract and compliantly pay commission-based sales reps
  • Develop international sales and extra revenue opportunities, without setting up own companies overseas
  • Enter more markets, test the markets before getting established there, and easily withdraw from the unattractive countries
  • Avoid legal and compliance risks
  • Design an efficient system of international sales with a strong team of global salesforces

Learn How You Can Expand Your Business Globally Through Employment Fast, Easily, And Risk-Free!

Permanent Establishment Risk: Addressing the Concerns

You may think you can get away with conducting business overseas without registering a legal entity, but you would be wrong. You might need to register your business even if you're only sending an employee on a temporary assignment or establishing a small promotional office. Failing to do so can result in severe consequences.

Different countries have different laws regarding taxes, and a multinational company must take all of these into account when conducting business. The tax authorities of a particular country can determine which elements of the company's economic activity take place in a particular country and how much profit is attributable to them. This can be a complex process, but ensuring that the company complies with all applicable laws is essential.

Flying Under the Radar of Local Tax Authorities in Latvia

An organization's physical presence in a country over a sustained period can trigger a taxable presence, or a "permanent establishment" (PE), in that country. This may occur if the organization generates revenue directly from activities in that country or if the organization's activities contribute to the revenue of a group entity in that country.

As an organization operating overseas, it is essential to be cautious of triggering a Permanent Establishment (PE) under local laws, as this can expose your company to unexpected tax liabilities, fines, and reputational damage. Failure to properly register a PE can have severe consequences for your business, so it is crucial to understand the requirements of each country in which you operate.

Although the Organisation of Economic Co-operation and Development's (OECD) base erosion and profit shifting (BEPS) project has had many far-reaching outcomes, one of the most significant is the modification of the definition of a permanent establishment. This change has important implications for businesses operating in multiple jurisdictions, as it may affect their tax liability.

The OECD is using Action 7 of BEPS to tackle common tax-avoidance strategies used by multinational corporations to avoid paying taxes in the countries where they do business. The organization is trying to stop companies from sidestepping local tax authorities by establishing related distributors rather than agencies or commissionaires.

Triggering Permanent Establishment Risk 

A business is taxed based on the geographic location of its income-earning activities. To ensure Fair Taxation of the Digital Economy, on 21 March 2018, the European Commission proposed new rules to ensure that digital business activities are taxed in a fair and growth-friendly way in the EU. The penalties for noncompliance are steep (20% penalty on top of the 3% tax, plus fines).

As businesses look to expand into new markets, they must be aware of their tax liability in each country where they have a customer base. They must also be aware of the compliance obligations in each country where they sell their products. Suppose you are selling digitally and don't already have this in-house expertise or don't work with a global PEO & EOR partner. In that case, you need to start thinking about how to address this challenge immediately.

As it turns out, the trigger of a taxable presence in another country is not just an abstract challenge but a real non-compliance risk. Business in another country can come with hidden risks -  like inadvertently triggering a taxable presence. 

Acumen International has experience dealing with this problem – we were approached by a client who had unwittingly violated PE laws abroad. Two of the company's employees were placed in one of the EU countries, working from home. However, since they weren't generating much revenue directly in that country, the company decided to do their payroll registration instead of registering a complete corporate legal entity.

One year after, the local state tax authorities came knocking to say that an employee's job title containing the word "sales" meant the company should have registered in-country as a business, resulting in higher employer payroll taxes. In the end, the company owed over €20,000 in back taxes and fines.

Non-compliance with local PE requirements can produce dire consequences for businesses. The company took steps to try and mitigate the damages, but the message is still pretty clear: adhere to the requirements or face some serious repercussions.

How A Global PEO and EOR Can Save Time and Money When Expanding to Latvia

Latvia has been growing quickly as a desirable place to do business in recent years. Acumen International’s EOR solution in Latvia will help you expand your business in this exciting market, considering the three key elements of cost-efficiency, expertise, and time. Acumen International’s solutions not only help you drive the business in the right direction but also help overcome any barriers related to language, culture, and local regulations. Latvia provides excellent growth opportunities for businesses worldwide, and Acumen International PEO (Professional Employment Organization) and EOR (Employer of Record) are here to provide you with the best possible support. Acumen International will make your expansion into Latvia a smooth process by handling end-to-end human resources management in compliance with local laws and regulations.

Employment Contracts in Latvia

When starting a business in Latvia, knowing the different employment contracts is essential. Acumen International PEO can help you create an employment contract that meets your needs and expectations, reducing the need for onboarding procedures in Latvia. To ensure your employees are correctly compensated, ensure you understand all the mandatory benefits and salary breakdowns included in your contract. Acumen International PEO can accelerate your global HR and payroll processes by working with local experts in Latvia. By reducing your dependence on local infrastructure and experts in these areas, you can cut your expansion costs by 90% and hiring time by 80%.

Avoid Employee Misclassification Risk

The global marketplace has many opportunities for businesses looking to expand their reach, but accessing the Latvian market can be risky. Many businesses struggle with the complex and convoluted employment legislation that Latvia has. It is important to be aware of all tax liabilities in payroll and contributions payments that may cause fines and penalties, so companies must thoroughly understand the laws before making any employment decisions. There is an enormous risk of misclassification for companies employing employees as independent contractors, as if the tax regulators or courts view the engagement of professionals as regular employment, then the company and the individual could face severe penalties, liabilities, and backpay taxes. Employees of an EOR have a guaranteed level of protection from misclassification and corresponding risks. This can cost you a PEO or EOR fee, but following appropriate procedures and adhering to Latvia’s employment laws helps you avoid financial risk. Businesses should have little trouble expanding into Latvia with a Global PEO/EOR partner.

Risk-free Business Expansion to Latvia with Easy Exit

After you’ve decided to expand in Latvia, one of the next steps is to hire people who will represent your company there. Employee onboarding and payroll in Latvia bring certain formalities and norms that need to be followed by both employers. The legal procedure for a company set up in Latvia typically takes around three months. You must consider a few important things before withdrawing from the market. One is liquidation – this might be needed if you find the market unattractive and want to withdraw. Outsource your employment in Latvia to Acumen International, a global PEO and EOR solutions provider, which will act as the legal employer of your workforce in Latvia and manage employment-related processes (payroll, tax, and benefits administration) on your behalf. We can sponsor work permits and visas for your expatriate personnel who you need to send and have employed in Latvia. As the original (factual) employer, you will maintain the substantive work relationship, making all decisions on compensation, position duties, projects, and termination. Our global PEO/EOR solution allows you to dedicate all your time to developing your business in the target country without a costly and time-consuming entity set up in Latvia. You only need to find the candidates (or decide to convert current freelancers/independents into employees), and we will do the rest. We can help you recruit the candidate in addition to PEO employment.

Legal Guidance by Acumen Global PEO Experts in Latvia

As a business owner operating across national boundaries, you must know the employment-related aspects of business in a foreign country. There are multiple layers of regulation governing employee activities, which can be costly and time-consuming to navigate, particularly for small businesses. Ensuring the correct application of these laws will help reduce your company’s risks and costs – and ensure that you comply with the labor regulations. Acumen provides business advisory services to companies planning to expand into the Latvian market and assists global organizations in setting up, maintaining, and transitioning their operations in Latvia.

Comprehensive EOR & PEO Packages and Budget-friendly Rates

Acumen International can offer secure, efficient global HR services to manage Global Payroll, HR & Benefits Administrations for businesses that need international talent but don’t have the resources or skills to handle it themselves. Acumen International’s unique and integrated approach to global employment allows us to offer a comprehensive array of PE and EOR functions in Latvia, including:

  1. Processing Immigration requirements
  2. Visa applications & extensions
  3. Work permit sponsorships
  4. Streamline onboarding, benefits, payroll, PTO
  5. Local labour law compliance
  6. Audit-proof compliance requirements
  7. Employee benefit management
  8. Handling employment contracts, terminations, and compensation
  9. Processing medical insurances and benefits
  10. Payroll, including year-end tax statements
  11. Relocation services & housing
  12. Benefit management
  13. Special needs or requirements  
  14. Multi-country employment without limitations
  15. Handling contract worker and ex-pat workforce management
  16. Compliant employment or termination within 72 hours.
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