Already since January 1, 2017 there is a law in place in Latvia attracting investors with several advantages to start-up companies. It is unique in Europe and allows to efficiently grow venture capital investors’ money in young Latvian start-ups. The adopted law creates a special tax regime for start-up companies in Latvia and the first years’ experience shows good results.

The Act on Aid for Start-up Companies provides advantages for start-up companies registered in Latvia to hire employees and pay them good salary without having to pay too much taxes. That makes Latvia a very competitive place in EU to register a start-up company.

The law foresees two tax plans:

• A special flat tax regime, currently 252€ /month per employee, regardless of salary paid, for minimal social benefits (in case monthly salary exceeds 4 050€, there is additional solidarity tax applied for the excess amount).
• A special flat tax regime for more highly qualified employees with a doctor’s or master’s degree or 5+ years of experience, a regime where all their social and personal taxes are covered by the state from EU funds, and they receive full social benefits.

To qualify, a start-up needs to meet following criteria:

• Be less than 5 years old – the start-up company can´t be carrying out commercial activities for more than 5 years.
• Have revenue under 200 000€ during the first two years since registration, and under 5 000 000€ during the first five years of its registration.
• Not pay dividends.
• The product or service offered has to be innovative.
• The company has to have at least 30,000€ of investments from qualified venture capital investor/s, etc.

The goal with these exemptions is to get at least 20 new start-ups each year in Latvia and 120 new jobs annually. During the first year of the new law being in force, the number of start-ups in Latvia grew by 80 according to Labs of Latvia.

Latvia has already a lot going on to help supporting the claim of a being a growing start-up ecosystem and being a great place for developing start-ups. This new tax regime only continues to encourage it.

1Office helps to start, run and grow businesses in 6 EU countries, Latvia being one of them.