By Uglobal Staff
Boasting some of the fastest internet speeds in the world and a capital often called the Paris of the North, Latvia has much to offer. The Baltic country is located in northern Europe and is a Schengen member country, giving investors free travel and visa-free stay in much of Europe.
Latvia was number 14 on the list of Henley & Partners 2017 Global Residence Program Index, which evaluates world residence programs based on reputation, quality of life, taxation, visa-free access, processing time and quality of processing, compliance, financial requirements, total costs, time to citizenship, and citizenship requirements.
While investors may be enticed by countries like Portugal, there are many reasons to consider Latvia. Alīna Kalviša, an associate at Sorainen, a leading regional business law firm with offices in Estonia, Latvia, Lithuania and Belarus, notes advantages such as its predictable legal and regulatory environment, developed port and railroad infrastructure, its capital Riga as a key business hub, financial incentives mainly as tax deductions and subsidies and favorable environment for running service centers for foreign businesses.
She also notes the benefits of temporary residence permits for financial investment, investment in real estate or in company share capital and special temporary residence permit for establishing start-ups.
“There are several ways you can apply for a temporary residence permit on the grounds of investment: real estate purchase, bank deposit, company investment, government bonds acquisition,” says Denis Ivanov an attorney at Baltic Legal in Latvia.
One option of obtaining a residence permit in Latvia is investing into a business in the country. A foreign investor, including spouse and children under age 18, can get a five-year temporary residence permit by establishing a business in Latvia and investing 50,000 euros into a company and paying a one-time fee of 10,000 euros to the state budget.
Ivanov says the option has strict requirements though. He said it is allowed to invest in a company with under 50 employees with an annual turnover of less than 10,000,000 euros. Up to 10 investors can invest in a single company. After the investment is complete, he says, investors will receive a residence permit, but that there are requirements for an annual extension.
“Over the next one-year period the company must genuinely generate and pay at least 40,000 euros in annual taxes – salary taxes, corporate income tax, excise tax etc. – plus, monthly taxes may not be lower than 3400 euros, otherwise all investors will lose their residence. This requirement must be fulfilled every year in order to keep residence extended. For a newly established business in a foreign country, such requirements form the first month may be quite a challenge,” says Ivanov.
Investors, legal spouse and children under 18, will receive a temporary residence permit for five years. The card is issued for one year and must be renewed annually, which requires an annual visit to Latvia. After five years the temporary residence permit can be converted to a permanent residence, says Ivanov.
Another, more popular, option is buying real estate in Latvia. The real estate investment option requires purchasing real estate in the amount of 250,000 euros plus a five per cent government fee and receiving a temporary residence permit, valid for five years.
Ivanov says this option “is currently the most effective way to acquire a residence permit on the grounds of investment in Latvia.” Requirements include that the property must be purchased from a citizen of Latvia or EU, or a legal entity resident in Latvia or EU, and the cadastral value state appraisal must not be lower than 80,000 euros, and no empty land plots or forest plots are allowed to be purchased, says Ivanov.
“It is possible to purchase commercial or residential premises. It is also allowed to rent them and return investment partially. After five years, a temporary residence permit may be converted to permanent residence,” says Ivanov.
Ivanov said most applicants have chosen the real estate option, with 489 applicants in 2017.
William Hough, an attorney in the Latvia office of Hallowell Law Firm, says Latvian residency has been successfully received by citizens of Russia, Kazakhstan, China, Georgia, Ukraine, Jordan, and several other nations.
He says during the world financial collapse of 2008 and ensuing years when Latvia experienced a severe economic downturn, the construction industry collapsed causing the loss of thousands of jobs and hitting the Latvian banks who had lent money to construction and real estate projects.
He says the investment program has led to a decided uptick in the construction industry, particularly in Riga and along the Baltic Sea coast.
“A year after the investment program was introduced, housing projects that had stood half completed were humming with activity,” says Hough.
Kalviša says as the Baltic countries develop, the service sector is becoming an even more important player in their economies.
“Less knowledge-intensive services, such as transport and tourism, still make up the largest share in the export structure, however, more knowledge-intensive services are increasingly important,” says Kalviša.
Kalviša says Latvia takes a leading position with financial services, insurance and pension services, telecommunications, and computer and information services. She also noted that some categories of service exports have also been expanding rapidly, such as professional and management consulting services as well as technical and trade-related services.
“The business environment in the Baltic countries is expected to benefit from the Rail Baltica project, which aims at delivering a rapid, safe and environmentally friendly rail connection to Europe,” says Kalviša.