Startup in Latvia
According to the Law on Aid for the Activities of Start-up Companies in Latvia, a startup is a company in the form of a limited liability company (SIA) or joint stock company (AS), which has a high growth potential and the basic activity of which is related to development, production or improvement of scalable business models and innovative products.
An innovative product is understood as a product or service with a high added, inter alia, technological value, which ensures development of a specific new product or service, or a significant improvement of the existing product or service.
State support for startups in Latvia
Latvia offers state support for a significant reduction in labour costs for technology companies that create or develop innovative solutions.
As part of receiving government support, a startup has a right to reduce taxes on salaries of its employees in the following amount:
- up to the amount of the fixed payment of Social Tax (“Fixed Payment”), which is calculated from the amount of two minimum wages established by the Cabinet of Ministers of Latvia. In 2021, the minimum wage is € 500 / month. Thus, the amount of the Fixed Payment per month will be equal to 35.09% x 2 x 500 EUR = 350.9 EUR.
- do not pay income tax at all.
A startup has the right to apply for an aid program to attract highly qualified Employees and receive from the state a refund of 45% of its expenses on salaries paid to employees and taxes paid from salaries.
- Since 2018, Latvia has introduced a 0% tax on reinvested corporate profits, that is, corporate income tax is paid only when dividends are distributed.
- Foreigners – founders of a startup can apply for a special residence permit (the so-called “startup visa”), which entitles them to move with their family to Latvia.
- Foreigners – highly qualified specialists of start-ups are entitled to obtain a residence permit with the right to employment – EU Blue Card (persons who have completed higher education in accordance with at least three years of training in the relevant speciality or have at least five years of relevant professional experience).
- For IT specialists, Latvian legislation also provides some relief, for example, the requirements for the minimum wage (and, accordingly, the taxes paid from it) have been reduced.