Latvia: Opportunity to receive tax holidays of the Corporate Income Tax

From the beginning of the year 2011 are renewed tax holidays of the Corporate Income Tax for the large investment projects.

In April, 2011 the Cabinet of Ministers approved the rules determining the procedure for the order of submission and evaluation of the applications of projects for obtaining the status of the approved investment project.

The deadline for submission of the projects is till October 1, 2013. The Government shall make an appropriate decision till the end of the year 2013, and the investors shall have time - 3 years - till the end of the year 2016, to realize the project.

Investors have the opportunity to combine the tax holidays for the large investments with EU Structural Funds, but not with the venture capital investments. 

As large investment shall be considered the contribution with the total amount of $ 2,5 million or more (previously from January 1, 2001 till December 31, 2005 it was $ 5 million).

It is provided that for investments from $ 2,5 million to $ 17,5 million, the amount of the tax holidays is 25% of the Corporate income tax sum. (Corporate income tax is 15%). Investing more that $ 17,5 million – just 15% of the tax sum.

In comparison with the previously applied tax holidays – 40% of the large investment projects, the amount is considerably lower – only 25% and 15%.

The tax holidays can be used to decrease the Corporate income tax for the next 16 years.

Such special tax holidays might be received by limited range of industries – food industries (except agriculture and fisheries), wood products manufacture, chemical and pharmaceutical product manufacture, computer, electrical and optical equipment manufacture, as well as metal and complete metal product manufacture, except several specific areas.

The investment project shall be subject to detailed evaluation before it reaches the Cabinet of Ministers. Applicants must take into consideration certain bureaucracy, moreover, after a positive Government decision, to manage to implement the proposed project within 3 years. 

Valters Gencs

Tax Attorney & Founding Partner

Gencs Valters Law Firm, Riga

Email: valters.gencs@gencs.eu

Tel: +371 67 24 00 90