Before Latvia adopted a market economy, the main source of foreign direct investments was represented by privatization. Today, foreign investments in Latvia come mainly from re-investments and merger and acquisitions. Among the most prolific industries attracting foreign investments in Latvia, one can count: telecommunications, real estate, retail, banking and oil pipelines. Estonia and Sweden followed by Denmark and Germany are representatives for Latvia’s attractiveness in terms of FDI.
Latvia does not have a specific legal framework regulating foreign direct investment, but it has several principles that together represent the government’ support and interest to promote the country as an investment destination. The Latvian government also adopts policy planning documents that support foreign investments in the country.
The Investment and Development Agency (LIAA) is the main governmental institution in charge with attracting foreign investments in Latvia. The collaboration between the Ministry of Economics and LIAA resulted in the creation of the POLARIS process that was developed to promote investment in certain Latvian industries. Among these industries are:
Latvia has also signed numerous bilateral treaties with over 40 countries worldwide for the promotion and protection of foreign investments and also has an extended network of double taxation agreements that protects foreign investors from being taxed twice on the same income.
A specific regulation for foreign investors refers to applying for residency in Latvia. For this purpose, the government has launched the business migration program in 2010. According to this program, foreign businessmen may obtain temporary residence permits, if they make certain equity investments in Latvian companies, credit institutions or if they buy real estate in this country.
Latvia has four special economic zones that offer considerable tax relief to foreign investors. Enterprisers investing in telecommunications, IT, logistics, manufacturing, pharmaceuticals and chemicals must set up a new company, modernize or expand a company’s activities in order to benefit from tax relief.
Investors may also benefit from work related incentives, such as finding qualified personnel through the State Employment Agency. This entity will also manage the training of unemployed individuals at the Latvian company’s request. Small and micro enterprises may also benefit from information technology trainings for their employees provided by the State Employment Agency in collaboration with LIAA.
For detailed information about other incentives available for foreign investments, you can contact our lawyers in Latvia.
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