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Saturday 23.06.2018 | Name days: Līga

Economic Diary. Government to create a “jug” for investors

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvia has officially entered a negotiations phase with Organisation for Economic Co-operation and Development, also known as the rich countries club. This process may take up to two years. According to Prime Minister Valdis Dombrovskis, this is more than enough for Latvia.

Latvia joins the rich

What kind of activities will be accompanying this process these next two years? First of all, Latvia’s authorities will need to submit a memorandum that would present the country’s position in regard to 250 legal mechanisms of the organisation. This will be followed up by a series of technical information collection missions. Representatives of this organisation will gather information about such areas of economy as – bribery, investments, international business transactions, corporate governance, financial markets, insurance and private pensions, competition, taxes, environment, chemicals, public management, regulatory policy, statistics, economics, education, employment, labour and Social Affairs, health, trade and export credits, fisheries, science and technology, IT and communications, and policies of consumer rights protection.

Latvia’s Prime Minister Valdis Dombrovskis allows for the possibility of inspectors finding elements in Latvia’s legislation that will need to be changed.

Latvia had received the invitation to begin negotiations this May. There are 34 countries currently holding membership in OECD. The man goals of OECD include the development of recommendations regarding state regulations and approaches to resolving all kinds of economic, social and ecological problems.

The last time OECD expanded to another country was in 2007: green light was given to Estonia, Slovenia, Israel, Chile and Russia. Aside from Latvia, OECD will launch negotiations with Columbia this year.

Membership in this club is not free of charge. Members of the bloc need to make annual contributions. Mount of contributions depends on a country’s GDP and is calculated as percentage of the organisation’s budget. Latvia’s amount has yet to be calculated.

Tax rate subject to review

The launch of negotiations with this influential organisation does not mean Latvian officials can avoid “dirty work” back home. Economy Ministry has prepared proposals on the planned increase of MET. This tax is meant for firms that hold status of micro-enterprises. It replaces multiple taxes (PIT and corporate income tax, social insurance fee and venture risk). The 9% rate of MET was introduced during the crisis to encourage entrepreneurship.

The ministry’s plan provides for retaining the 9% rate for entrepreneurs whose annual turnover does not exceed EUR 15,000. If annual turnover exceeds 15,000, entrepreneurs are to pay 10%. Those companies that have annual turnover above 70,000 will need to pay 12%.

According to the State Revenue Service (SRS), there were 30.1 thousand micro-enterprises registered in Latvia at the beginning of September.

State Revenue Service to go to the people

As for SRS itself – it has decided to become closer to the people. This will be done to the extent of resident being allowed to submit declarations at stores, as reported by acting head of SRS Inara Petersone.

Discussions have been launched with Healthcare Ministry and Education Ministry. Discussions cover recommendations how to make information submission as easy as possible.

Furthermore, declaration submission, consultation or information can be requested at Maxima and Rimi stores. According to Petersone, this will be provided by putting special mini-branches of SRS in Maxima and Rimi supermarkets. It is planned to test this innovative approach with a couple of supermarkets. If everything goes well, such branches will be opened across the whole country.

Give the country some money

Foreigners who would like to receive residence permits in Latvia in exchange for investments could have a tougher time acquiring the former. This week, Saeima approved a new regulation of the so-called investor visa. One of its most important aspects will be the creation of the Economic Development Fund. This institution will be used to fund different entrepreneurship support projects.

Wealthy citizens of CIS and China (the majority of participants of the investor visa programme) have the right to receive residence permits in Latvia by purchasing real estate property or by investing money in a Latvian company.

According to the official version, this new regulation will allow relocating some part of these funds into real economy. This can be achieved by two methods. The first method involves the increase of direct investments of participants of the programme into enterprises’ main capital. The second method includes the use of the Economic Development Fund: its creation is already stated in amendments developed by Economy Ministry.

Several sources will fill this “jug”. Starting with January 1, 2014, foreigners who submit applications for residence permits after buying real estate property will also be required to donate EUR 25,000 to this fund. Another option is to donate EUR 50,000 directly to this fund without any additional requests.

According to Economy Ministry, the funds that will be added to this fund will be made available for the state budget. While the coalition was looking for a compromise, the plan lost its shape. Currently, amendments submitted for the first review state that the money of the fund will be made available to the state budget via State Treasury’s special budget. These funds are to be managed by Economy Ministry, unless the Saeima decides otherwise. In reality, this money can be spent on anything.


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