What is shared service center?
A shared service center is specially created unit in the legal structure of the companies group, to which a certain business function or several functions are transferred throughout the organization, such as accounting, human resource management and etc.
The shared service center has its own staff, responsible for managing the cost and quality of services. Actually, the transfer of functions to the shared service center is similar to the outsourcing company, where certain functions of the company are transferred to a third-party company, but in this case, the organization is included in the company itself.
The main benefits from establishing a shared service centers are as follows:
- Cost reduction
- Improvement of the service quality
- Standardization of the services, data and processes
- Consistent control
Shared service centers can be categorized:
- Based on a geographical criteria, as local, regional or global shared service centers
- By the scope of the customers the shared service centers could be divided into front offices (external services), which are facing activities like order entry, resolving customer queries and back offices (internal services) that are responsible for the finance, accounting, human resources, IT services etc
What a shared service center does?
The group may transfer to the shared service center one or several functions, the typical functions could include the following:
- Purchasing of goods and services for the purpose of the group
- Logistics and trade coordination
- Warehousing and logistics services
- Inventory and supply management
- Research & Development
- Sales and marketing support
- Sales force coordination
- Processing of orders
- Customer support
- Technical assistance
- Call centers.
Finance and accounting
- Accounts payable and accounts receivable
- Treasury, cash management and cash flow (e.g. cash pooling)
- Application selection and development
- Implementation and maintenance of different applications
- E-Business solutions and telecommunications
IT support activities
- Human resources support
- Policy and procedure development
- Payroll processing
- Registration and payment for the travel and expenses
- Training of the personnel
- Career planning coordination
Many of these applications are transaction-oriented services that require specialized, functional expertise. There is also possibility of mixing different activities to maximize an outcome.
The reasons for selecting Latvia as a location for the shared service centers are skilled personnel, low costs, geographic location and developed infrastructure.
- Skilled personnel: The labour force in Latvia is well-educated and motivated, besides most of the Latvian individuals are able to communicate in three languages (Latvian, Russian and either English or German).
- Cost Effectiveness: Latvia offers competitive workforce at very competitive cost compared with the older EU countries. Furthermore, the tax regime is quite competitive, with one of the lowest corporate income tax rate of 15%
- Geographic location: Geographical location of Latvia provides strategic advantage for business operations with developed economies of the European Union and emerging markets of the East.
- Developed infrastructure: Latvia offers all of the services needed to operate at the European standards, such as, telecommunication system, developed transportation network and all of the other infrastructure the business may need.
How we can help?
- Assisting in your business restructuring, including establishment of the entity in Latvia, providing services required for the start-up.
- Advising all of the Latvian taxes: corporate income tax, VAT, personal income tax and social insurance.
- Our international practice and experience allows us to provide Tax compliance and efficient Accounting services for the branches, permanent establishments and subsidiaries of the foreign investors and ensure the compliance for expatriates working in Latvia.
- Preparation of the Transfer pricing documentation to verify cross-border transaction compliance with the arm’s length requirements.