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Dear clients and cooperation partners,
In this Corporate Newsflash, we review a new strategy to promote foreign direct investment in Latvia that will be implemented by the end of November 2011. This strategy has been developed with the aim of boosting foreign direct investment in Latvia by the Ministry of Economics alongside the Latvian Investment and Development Agency (LIAA).
The POLARIS process – a new strategy to promote foreign direct investment in Latvia
The Ministry of Economics alongside the Latvian Investment and Development Agency (LIAA) has developed a new strategy called the POLARIS process. Unlike the previous approach to foreign direct investment, which focused primarily on supporting investors who had already decided to invest in Latvia, the POLARIS process puts more emphasis on a proactive and more systematic approach to attracting potential foreign investors.
In order to achieve this, the new strategy introduces a number of novelties. For example, in addition to measures intended to support implementation of particular investment projects, promote collaboration between various stakeholders and generally improve the investment environment, the new strategy identifies key industry sectors where Latvia could have unique selling propositions for the foreign direct investor. Within these key industry sectors, the LIAA is given the task of compiling information on potential investment projects and to market and offer these investment possibilities directly to potential foreign investors.
However, the new strategy does not stop there. As a part of the POLARIS process, further investment incentives and state support measures are likewise underway. Although at this stage it is still premature to estimate what exactly these state support measures might look like as they are only being developed, the current intention is to link state support with the following activities:
1. Creation of new workplaces in key industry sectors
It is intended that financial support would be available to entrepreneurs who create at least 30 new workspaces or invest at least EUR 5 million in key industry sectors such as the food, wood, chemical, electrical, optical appliances, information and communication technology, metalworking and machinery, transport and logistics industries as well as industries which export at least 70% of production or which concern office, head office, professional, scientific and technological services. In order to be eligible for support, the level of remuneration in newly established workplaces has to be at least 20% above the national average.
The potential amount of support would be either 30% (if 30 to 50 new workplaces are created) or 50% (if more than 51 new workplaces are created) of salaries (excluding applicable taxes) paid by the entrepreneur in relation to newly established workplaces during the first 24 months from implementation of an investment project, but no later than 1 September 2015. However, the maximum amount of support is limited to LVL 12,000 (approx EUR 17,075) for each workplace.
2. Investments in key industry sectors which increase value added and exports in the short and mid term
It is intended that financial support would also be available to entrepreneurs who invest at least EUR 10 million in key industry sectors such as the food, wood, chemical, electrical, optical appliances, information and communication technology, metalworking and machinery, transport and logistics industries as well as industries which export at least 70% of production. In order to be eligible for support the investment has to be in fixed assets and relate to acquisition of equipment, construction or reconstruction of buildings or premises, commencement or expansion of lines of business, production diversification or material change of production processes. Eligible costs for construction or reconstruction of buildings and premises cannot exceed 30% of total project investments and in any event no more than EUR 3 million for each project.
3. Research and development, introduction of new technologies
Finally, it is also intended that state support would be available for investors who invest in centres of competence or research centres of national importance. Details of support are still to be clarified.
It is expected that all financial incentives and state support measures to be introduced as a part of the POLARIS process will be implemented by 30 November 2011 at the latest. We will continue informing our clients and contacts of developments. In the meantime more information on the POLARIS process can be obtained from the POLARIS process website, from LIAA or by contacting your legal advisor. |
