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Reizniece-Ozola is asked to improve Latvia’s attractiveness for venture capital funds

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RULatvian Economy Minister Arvils Aseradens has turned to Finance Minister Dana Reizniece-Ozola with a written request to change the ministry’s established practice to apply PIT on pension fund income from participation in venture capital funds.

Economy Ministry notes that Latvia’s tax legislation does not provide for that, and Finance Ministry’s practice makes Latvia less attractive in the eyes of venture capital funds.

«We have to immediately look for solutions to make Latvia more attractive. Leaving this matter unattended will result in investors choosing to invest in countries with better legislation. This negatively impacts Latvian residents’ pensions and their deposits in the national economy and impedes the inflow of foreign investments in Latvia and their availability for start-ups and rapidly-growing companies. This impacts not only national growth plans, but also the goal for Latvia to become Nr.1 choice for investments in Baltic States,» said Aseradens.

The minister explains that the first effects from Finance Ministry’s regulation have already appeared. BaltCap Growth Fund decided to register in Estonia in spite of the previous decision to establish a foothold in Latvia. Following the registration of BaltCap Growth Fund in Estonia, Latvia’s venture capital industry has lost around EUR 40 million. BaltCap is the leading venture capital investor in Baltic States.

Economy Ministry believes this decision by BaltCap may serve as a signal for other investors to stay away from Latvia.

As the main reason for its decision to register the fund in Estonia, BaltCap Growth Fund mentions the practice employed in Latvia to apply pension funds participating in venture capital funds with PIT, not CIT. Finance Ministry’s used legislation creates a situation when successful pension deposit funds have to pay tax and compensate transactions that do not bring profit from their own wallets. This means funds have to pay taxes even if they work with losses, Economy Ministry states.

Edgars Pigoznis, chairman of Latvian Venture Capital Association, says: «If we apply pension fund deposits in venture capital with PIT, we will not only cut off part of the people who sustain the risk capital industry, but also reduce our own pensions and slow down Latvia’s economic development.»

He says pension funds are traditionally the main investors in venture funds. «Venture capital investments contribute to the creation of growing and innovative companies, which, in turn, improves the country’s national economy and competitiveness. If we as a society want to live better and earn more, we should invest in companies that work with high added value and pay better wages and taxes,» Pigoznis continues.

Economy ministry also says Finance Ministry’s position will also create difficulties for Altum 2014-2020 planning period’s selected venture capital managers. «Latvian and foreign pension funds are the most important investors for the country’s venture capital funds, and the country’s current tax legislation in its current interpretation makes it difficult for them to attract private investments.»

To prevent unfavourable conditions and outflow of venture capital funds from the country, Economy Minister Arvils Aseradens invites Finance Minister Reizniece-Ozola to start an immediate dialogue.

Ref: 224.109.109.0961


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  1. Zerry says:

    As long as grey economics and corruption remains this level there is no need to think where are all investors.

    Thumb up 0 Thumb down 0

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