Latviski English По-русски
Sunday 18.03.2018 | Name days: Ilona, Adelīna

Economic diary. Investors are more than welcome

(No Ratings Yet)

Аuthor: PantherMedia/SCANPIXThe Latvian government seems to have adopted a clear course for attracting foreign businessmen. The adoption of a holdings regime and the issue of residence permits is not enough now. This is why the special working group has begun to reconstruct the Immigration Law once again.

There is no limit to perfection

This time amendments are being developed to regulations that provide for the issue of residence permits in exchange for capital investments. The currently popular way of obtaining residence permits in Latvia is purchasing real estate property. There is also an option to invest in subordinated bank capital for no less than 200 thousand LVL and different investments in a company’s share capital.

Representatives of Unity believe: in spite of the achieved results (more than 201.3 million LVL invested in housing in three years) the system can be improved further. It would prove to be more effective if the minimum transaction amount is linked to the average cadastral value of real estate in specific regions. This would allow for an equal approach for investors across the whole of Latvia’s territory. Current regulations allow for the situation when the cadastral value of an apartment in the outskirts of Jekabpils is 5 thousand LVL on average. But no one would purchase 10 apartments there in exchange for a residence permit. Riga’s real estate prices, on the other hand, are higher than the cap set by regulations. Therefore, demand is higher as well.

The Reform Party (RP) proposes to employ the practice used in some countries, when residence permits are provided in exchange for acquiring shares in the state investment fund that invests money in communal or real businesses.

There is no agreement within the working group right now. However, they will need to come to an agreement in the next two months. It will become clear what opportunities foreign investors can hope for.

Tricks of the Trade

The holdings regime is worth mentioning in this context. It is being continuously implemented since January 1, 2013. According to experts, it can become a useful instrument not only for foreign, but also domestic companies.

The simplest of examples: an individual (entrepreneur A) has a profitable company, and he wants to invest some of his money for the creation of a new business. If he takes the money directly, he will need to pay a dividends tax of 10% of the withdrawn amount. But the entrepreneur has full rights to save money on treasury payments by putting a holding between himself and the profitable company. This combination is nothing new, however. Dividends between Latvian legal persons have been free of budget fees in the past as well. According to specialists, many entrepreneurs are still not aware of this method.

There are other methods as well. By selling real estate or other property, firm A pays 15% corporate tax. However, starting from 2013, there is now an option to sell not the asset itself, but the company that owns it. In this case, the earnings from this transaction are not taxable.

There is one more area this method can be used in – cross-border trade, especially with countries that do not have a signed agreement on avoiding double taxation.

Too low a threshold

It seems that domestic companies are more interested in more grounded matters than the effective use of the holdings regime. The Latvian Employers Confederation (LEC) and the Latvian Chamber of Commerce and Industry (LCCI) have criticized the current system of automatic registering of companies in the public Debtor Register if their debt exceeds 100 LVL. Representatives of these organizations believe that the threshold should be increased. Any company may experience short-term financial constraints at any moment. This increases the risk of them being included in the black list. The latter could even make a company lose the ability to participate in public contests and ruin relations with investors. Furthermore, even after a debt is paid there could be problems with exiting the list.

Nevertheless, Finance Minister Andris Vilks still supports the introduction of restrictions for participating in state procurement projects. According to statistical data for the beginning of April, the aforementioned list contained information about 53.59 thousand companies.

Banks want more

Representatives of the financial sector also fear for their businesses. The Latvian parliament has supported the amendments to the Civil Law. These amendments limit the opportunities of imposing sanctions by creditors against non-payers. Amendments are to be applied for a wide range of enterprises, including banks. President of the Latvian Commercial Banks Association Martins Bicevskis expressed concerns about the changes during his meeting with the President of Latvia Andris Berzins. Banks cannot be faced with the same restrictions as the fast credit companies, he said.

During his meeting with the head of the state, he also mentioned the amendments to the Insolvency Law. The changes provide for the cancellation of the regulation that does not allow the initiation of insolvency procedures in regard to individuals that have used at least 30% of the acquired credit for inappropriate means. According to Mr Bicevskis, the approval of these amendments would limit the abilities of banks to issue large credits to the country’s residents.

The current activity in the individuals’ sector remains low, he said. In total, households usually return more than they take.


Leave a reply

Remembrance day of Latvian Legionnaires passes with shouts and two arrests

The Legionnaires’ remembrance procession in Riga on Friday, 16 March, passed peacefully. Nevertheless, several conflicts did take place among differently-minded people near the Freedom Monument. Two individuals were arrested by police.

Influenza intensity in Latvia – moderate when compared to other European nations

A comparison of influenza activity in Europe shows that it is high or very high in several countries. Latvia’s influenza intensity is considered moderate, as noted by epidemiologist Raina Nikiforova.

Hourly labour costs in Latvia grew 7.3% in 2017

Compared to Q4 2016, in Q4 2017 hourly labour costs rose by 54 cents or 7.3 %, reaching EUR 8.02. Seasonally adjusted data show identical changes – rise of 7.3 %.

Rietumu Banka claims it has not worked with high-risk clients for years

Rietumu Banka has been steadily rejecting high-risk clients for years and has significantly reduced the volume of transactions, as mentioned by the bank’s representatives.

Lithuanian and Estonian businessmen are ahead of Latvia in terms of investments

In Latvia, 36% of small and medium-sized companies have plans to invest in the development of their business this year. In Estonia and Lithuania, on the other hand, the proportion of businesses with development plans is 42% and 46%, respectively, according to results of a recent study performed by SEB Bank.

Russia pledges maximum pressure on UK amid ex-spy poisoning row

Russian top diplomat in the UK has envisaged on Friday, March 16, that the Kremlin would use maximum pressure on London as Moscow insists it has not been involved in the poisoning of a former Russian-British double agent with a Russian-made chemical weapon, as has been found by British investigators.

Latvia’s ministry: Crimea’s annexation is illegal

18 March 2018 will mark four years since the Russian Federation violated Ukraine’s sovereignty and territorial integrity by annexing the Crimean Peninsula and causing military aggression in the country’s eastern region. With its actions the Russian Federation has violated international law and basic principles of international relation, says Latvia’s Foreign Affairs Ministry.

Building gas pipe to Finland, Estonia to organise works for EUR 135 million

Continuing the works on the Balticconnector gas pipeline between Estonia and Finland, the Estonian natural gas network company Elering has stated that around 135 million euros, including a 98-million-euro funding from the European Union, will be invested in the project.

Replacement of cash registers rejected by SRS would cost half a million euros

The State Revenue Service has declined 18,000 cash registers as unfitting for requirements established by the Cabinet of Ministers. Fixing the problems found in them would cost half a million euros, as reported by LNT News.

Latvian Anti-Nazi Committee presented with protest restrictions on 16 March

Administrative District Court has compiled a shortened ruling, in which it rejected Latvian Anti-Nazi Committee’s application and preserved the decision imposed by Riga City acting CEO on 13 March 2018 on establishing restrictions on the planned gathering and protest act for 16 March unchanged.

U.S. introduces Russian sanctions for election meddling and cyber-attacks

Washington has introduced sanctions against 19 Russian individuals and five entities blaming them for attempts to sway the 2016 U.S. election and perceived cyber-attacks.

Slovakian PM Fico replaced with fellow party member

Slovakian head of government Robert Fico has stepped down after the murder of a journalist shed light on corruption in Slovakia, prompting nationwide protests. The long-standing Prime Minister had offered to resign earlier this week if the ruling coalition was allowed to finish its term.

Weekends will be cold and sunny in Latvia; next week will have volatile weather

Starting with Sunday, 18 March, air temperature in Latvia will rise above zero in most of the country, as reported by State Environment, Geology and Meteorology Centre.

Lithuania’s ruling LFGU party remains unscathed by scandals

It seems that, for now, Lithuania‘s ruling Farmers and Green Union has been nearly damage-proof despite the lambasting.

Latvian Civic Alliance: non-government sector should aim towards cooperation

Latvian Civic Alliance has invited the management of Latvia’s Chamber of Commerce and Industry to meet to discuss ongoing cooperation between organizations representing the business sector and the NGO sector.

Saeima rejects National Alliance’s proposal to make 16 March an official remembrance day

Latvia’s Saeima has decided to reject the proposal submitted by the National Alliance on making 16 March an official remembrance day.

43.6% of Latvian households have difficulties with making ends meet

In 2017 the share of households admitting that pay for usual necessary expenses with difficulty or great difficulty constituted 43.6 %, which is 1.5 percentage points more than in 2016.

Saeima voices support for Rail Baltica project’s progression

On Thursday, 15 March, the Saeima made a decision to support Rail Baltica project’s progression. In its decision, the parliament invited Latvia’s Cabinet of Ministers to provide all the necessary support for the project’s successful realization to ensure the project is realized in accordance with established terms and does not lose funding or support from the European Union, as reported by Saeima’s press-service.

Fast snow shovelling linked to cardiac fatalities, Finnish study finds

In Finish doctoral study, it has been concluded that snow should be shovelled calmly, not provoking stress and increased adrenaline in human blood that could lead to cardiac arrest.

Riga’s mayor spent at least eight million euros of residents’ money to promote himself

Over the course of the past three years, at least EUR 8 million of residents’ money has been used to promote the image of the Mayor of Riga Nils Ušakovs. This money was used to buy media, employ young members of Harmony, and finance ‘in-house protestors’ and using social networks, as estimated by Re:Baltica research journalism center.

Slovenia's head of government resigns amid protests and struggling railway investment

The Slovenian head of government Miro Cerar has stepped down from office in reaction to troubles with an expensive railway project and mounting opposition by trade unions.

NAF Commander: Latvia and Estonia have joint military procurements planned

Latvia and Estonia have joint military procurements planned, Commander of Latvia’s National Armed Forces Leonīds Kalniņš told journalists after his meeting with Commander of Estonia’s Defence Forces Riho Terras.

Estonia's switch to free higher education proved right choice, says Ratas

The switch to free higher education made by Estonia in 2013 has proved to be the right choice for a small country, even though critics have pointed to potentially less motivated students, has stated the Estonian Prime Minister Jüri Ratas.

President: we will not give away our scientists’ ideas for free

It is necessary to concentrate all resources on research performed by Latvian scientists with patent potential. This will help secure returns for Latvia’s national economy, said President of Latvia Raimonds Vējonis during his meeting with rector of Riga Technical University Artūrs Zeps.

Members of the European Parliament propose avoiding «trade wars»

MEPs emphasized in debates regarding the trade restrictions imposed by USA that European Union should not get involved in a trade war, and be ready to protect its citizens, as BNN was told by EP Information office in Latvia.

Newest comments