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Latvia Encourages the Creation of Small and Medium-Sized Companies

Latvia-Encourages-Small-and-Medium-Sized-CompaniesThe Latvian Parliament, Saemia, voted to maintain the small business tax relief and to review the eligibility criteria. The relief applies to small companies in Latvia and consists in a 9% corporate tax for the first three years from the incorporation.

What are the conditions for the small business tax relief in Latvia?

The tax relief applies to Latvian companies with a maximum number of five employees and a maximum annual turnover of 100,000 euros or 190,000 US dollars. The corporate tax rate for these companies would be reduced to 9% for the first three years only if the companies pay their social security obligations.

The tax relief was adopted in 2013 and the Parliament voted to abolish it over 2014 to 2017 and to introduce instead a 15% corporate tax rate. However, the Saemia decided to keep the relief for now with prospects to amend it. The tax relief will be further debated and may, in the future, to be applied to certain Latvian industries only.

This decision may also be based on last year’s decision to allow Latvian companies to deduct three times the amount of expenditures invested in research and development companies from the corporate tax.

What other tax reliefs do Latvian companies benefit from?

Foreign investors opening small and medium-sized companies in Latvia are strongly encouraged to apply for the Horizon 2020 program. Small and medium sized companies can collaborate in joint projects as a consortium or may benefit from support through a SME instrument for innovative small companies. No matter the way companies want to access the program, the government has made available approximately 80 billion euros for the Horizon 2020 initiative. Latvian companies will benefit from a maximum funding amount of 70% to 100% of the costs. The Horizon 2020 will extend over a period of seven years.

Latvia is also part of the Eurostars program which is the first European funding and support initiative for small and medium-sized companies in the research and development sector. The Eurostras program focuses on the needs of small and medium sized enterprises in the EU.

For information about the eligibility criteria for the Horizon 2020 and the Eurostars programs, please contact our lawyers in Latvia.