Latvia to move against use of fake company addresses

Take note – story published 7 years ago

Latvia requires firms to obtain a permit to be registered at a particular address, a requirement for setting up an official company. Cases of possible fraud have been on the increase, with one address reportedly hosting a whopping 596 companies. The Justice Ministry is eyeing solutions to the problem, reported Latvian Television's De Facto Sunday.

Latvia's most busy addresses by number of companies registered

Working on stories on Value Added Tax (VAT) fraud schemes, De Facto has routinely encountered companies registered where they in fact haven't and could not have been operating.

Boriss Mosevičs, the landowner of Starta iela 7, the most 'busy' location in Latvia, told De Facto that he's routinely questioned by the police about the companies supposedly operating on his property.

As an owner's permit is required to register a company in a particular address, it could be presumed that many of the forms handed to the Enterprise Register regarding Starta iela 7 are counterfeit. 

According to data by Lursoft, 53% of the companies registered there have foreign capital, mostly coming from Belarus, Russia, and Lithuania. Citizens of these countries are often made bosses of fictitious companies used in VAT fraud schemes. 

The Justice Ministry is working on Business law amendments that would allow for a more easy liquidation of companies that cannot be reached at their official address. 

Another possible solution is eschewing the landowner's permit altogether, while the Enterprise Register was lukewarm in receiving Mosevičs' suggestion of moving the process of obtaining a permit online where there could be little to no possibility of fraud.

According to De Facto, providing firms with fake addresses is also a sort of a business niche, with numerous classifieds offering to provide an address for you to set up your company. Prices start at €150-€200 a year, paired with services like scanning and forwarding mail.

The Enterprise Register said that in 2015 there were 2,911 warnings issued to companies not located in their official address, while the same year the police received about 650 complaints regarding counterfeit owner's permits.

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