Latvian Startup Law. Perks of launching in Latvia.
Read this before launching a startup in Latvia. Before getting the solution out of the room to the world, you got to know where you are doing this. What is the legislation? Is there any helping or disturbing programs? What about taxes? What about investor protection? And more questions will arise, so let`s get a small insight into the benefits and requirements of launching the startup in Latvia.
If you are a startup, you can apply to two different benefits.
Benefit Scenario A
- Flat Social Tax
Computed as 2 minimal gross salary (EUR430 each) x social tax rate (35.09%)= EUR 301.77 regular social tax: gross salary x social tax rate (35.09%).
- 0% Individual Income Tax regular individual income tax: 20%, 23% , 31.4% depending on your gross salary.
- Social tax paid (EUR 301.77) is the basis for ALL your social welfare benefits
- Additional 10% from gross salary minus two minimal gross salaries -> contributions for pension fund-
- If employee’s income > EUR 62,800/year -> subject to solidarity tax (35.09% from excessive amount)
- The information about fixed social tax and contributions for the pension insurance shall be included in the employment contract
- Cannot be a board member of any other company
- Cannot be employed in another company
- Cannot be a state or municipal official-
- Must be directly involved in the R&D activities-
- No right to claim non-taxable minimum and relief for dependent persons
- Cannot be a dependent person
Benefit Scenario B
45% Co-financing of Talent
The government pays back 45% of the wage +paid taxes for the highly qualified startup employee ( has an MSc degree or higher (in natural sciences, mathematics, information technology, engineering and technology, manufacturing & processing, design), OR minimum three years of experience in the field).
- Cannot be a board member of any other company
- Cannot be employed by another company
- Cannot be a state or municipal official
- Must be directly involved in R&D activities
- EU program, special regulation #692 applies-> more thorough compliance and reporting process-
- A highly qualified employee receives a higher-than-average-in-country salary (calculated by the Central Statistical Bureau)
I was not surprised to see the benefits developed by LIAA for Latvian startups. I enjoyed the presentation as I am the founder myself, and also I am working as a CFO in the startup, which already receives Benefit Scenario A for its startups. It works quite well, but you have to comply with all the requirements you can find on the official page of LIAA. For me, this topic was somewhat motivational and confirmation of the startup importance nowadays. Small countries like Latvia have to enable startups to attract highly-qualified ex-pats coming from different countries, as in the long-run, it would contribute to the economy and infrastructure of the country. It is also vital that LIAA works on legislation to pass the startup package benefit on the government level. It will make the benefit considerably more comfortable to apply for and to receive and thus might motivate founders not to leave the country. I also want to appraise LIAA for supporting the Latvian entrepreneurship eco-system and nurturing it with different acceleration programs, incubation programs, lectures, workshops, cooperation between countries and cities.
