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Top 5 things to consider when doing business in Latvia

Top 5 things to consider
when doing business in Latvia

Top things to consider when doing business in Latvia - IT & Technology

Highly skilled, language-equipped and cost-effective industryprofessionals, supportive government policies, strategic geographiclocation and Western business culture with proximity to and knowledgeof the Russian market are just a few of the benefits offered bythe Latvian IT and Technology market. As part of its membership tothe EU, Latvia provides its potential investors a variety of benefitsranging from free trade of goods and roaming tariff-free cell phonesubscriptions to considerable accesses to the EU-funded structuralinvestors for the business developments.

 1  Highly advanced internet developments

Latvia ranks among the top ten countries globally by the average measured internet connection speed. In 2012, the so called Baltic Highway, a modern data transmission network, was launched. Whilst increasing the access speed to international web-based content, it has allowed the development of internet-basede-services in the East and West directions. The high capacity infrastructure offered by theBaltic Highway provides considerable investment opportunities for the national data-intensive companies, and also offers a robust and low latency bridge to all Baltic States, as well as the Russian and Asian regions.

 2  E-services

National government policies have been promoting the use of electronic services (e-services)., For instance, the Electronic Declaration System (EDS) for the State Revenue Service allows companies and individuals to submit tax, informative-content documentation and a variety of applications to the national revenue services. In line with that, the well-developed and user-convenient services include electronic income tax books, information on public procurements and revenue reports, such as the tax payment statuses. Documentation can also be submitted electronically to the Commercial Register. The former, for instance, including the registration of new businesses, changes in its data and applications for liquidation proceedings. E-services are also being used to improve the service quality in the health-care sector. Governed by the national Law on the Electronic Documents and giving the legal effect equivalent to paper-form documentation, the eSignature allows users to sign the contracts, bills, complaints, applications and letters in a paper-free form.

 3  Means of data protection

Already a member ofof the special data exchange system - the Schengen Information System (SIS), Latvia willl fall under the governance of the General Data Protection Regulation (GDPR) fromMay 2018. (http://www.eugdpr.org/) This will offer cost-effective cross-border access to new markets to businesses, especially SMEs, that would normally need deal with more than 25diverse national data protection laws. The GDPR extends its jurisdictional scope to all the corporations processing personal data of peopleresiding within the EU, regardless of the company’s location.

 4  Start-up friendly environment

In order to provide a dedicated start-up support law, Latvian Parliament has passed the national Law on Aid for the Activities of Start-up Companies, aiming to foster the creation of rapidly developing tech companies in the jurisdiction. The Law provides a favourable tax regime provided the start-up meets the requisite criteria, such as being less than five years-old, earning below the cap of EUR 200,000 in revenues during the first two years post registration, having earned less than five million Euros in revenues during the first five years post-registration, not having paid dividends and securing the tax debt for the company below the cap of EUR 150, whilst providing an innovative product and service. Additionally, the start-ups are required to have secured EUR 30,000 or above in the early-stage venture capital funding. Furthermore, the government has facilitated the Start-Up Visa fast-tracks that simplify and alleviate immigration issues. For those coming outside the EU, the program allows organizations to receive a pro-longed residence permit whilst also having a quicker processing procedure.

 5  Green technologies

In line with the other highly developed tools in the IT and technology sector, Latvia has been advancing the green-thinking products and services, such as the contribution of the National Ministry of Economy and the Green Industry Innovation Center to the Norwegian production program of Green Industry Innovations. Namely, a technology incubator has been set up within Latvia focusing on supporting and encouraging businesses involved in green industry innovation. The incubator facilitates the support of products and services development, focusing on renewable materials, energy sources and effciency, whilst eliminating emissions and wastes. Crucially, the business incubator is one out of the many supporting hands for the further development and support of innovation to newcomers in the national business environment.

Market perspective of the Latvian-based international companies - IT & Technology

Market perspective of the Latvian-based international companies

“[..] Tieto looks for excellence, and Latvia has the dynamics and talent for being an attractive placefor serving customers across Europe and developing world class software products.”
Elmars Gengers | Tieto Latvia’s chairman of the board

“One key benefit we had as an investor in the high technology sector in Latvia was obtaining a veryprofessional resource pool that is experienced in both technology and customer management,while still relatively less expensive than either European or US-based software developers. Also, thefact that the Latvian business infrastructure is very modern is a significant factor since travel,hospitality, and communications are very important in order to use the Latvian technical resourceseffectively. Finally, Latvia is an EU country and enjoys all the benefits of a European businessenvironment, while still being a ‘near-shore’ location suitable for resource outsourcing. This is asignificant factor for some of our customers, particularly in the finance sector.
”Greg Shenkman | Managing Partner, Return on Intelligence / Exigen Services Latvia

Top things to consider when approaching LV market - Media & Entertainment

Media and entertainment industry is one of the most creative and innovative sectors in the country. Whilst being a relatively small jurisdiction, Latvia offers more than 240 newspapers to its market endusers, amongst them national and international dailies as well as convincingly strong industry players providing Russian-language products. In line with the competitive radio sector and well-developing cinema industry, Latvia has more than 20 national and regional television enterprises. With the global expansion in the use of mobile products, the national companies specializing in the advertisement industry have been attracting significant investments directed towards the web-based commercials and video advertising in the mobile devices.

 1  Publishing sector

The publishing sector is governed by the national Law on the Press and Other Mass Media. In line with the rules regulating the status and operations of the mass media, the Law encompasses provisions which guidethe organizations specializing in particular services, such as the rights and obligations of the journalists. The Law on the Press and Other Mass Media propose the right of mass media to not provide indications on the source of information. Exceptions regarding this right can only be exercised by the court or prosecutors in the cases of protection of fundamental interests of an individual or society in accordance with the principle of proportionality.

 2  Broadcasting permits

The National Council for Electronic Media handles broadcasting and re-transmission permits, development, monitoring, compliance, compilations, collections and information analyses on electronic media activities. For the purposes of production and distribution of a programme, one must fulfil the requisite of having the broadcasting rights. The competition announcements on the broadcasting rights, being open to natural persons, legal entities and associations (of natural and legal persons from either Latvia, EU or EEA), are advanced in Latvia by The National Council for Electronic Media. In turn, the businesses willing to engage in broadcasting services will adhere to the regulations of the national Law on Electronic Media which includes the framework for special registration procedures, permits for the production and broadcasts of information and programmes. In order to perform the re-transmission functions of the programmes through the means of public electronic communication networks, one has to obtain a permit from the owner, i.e. the holder of the re-transmission program, as well as the consent of The National Council for Electronic Media.

 3  Copyrights

The national Copyrights Law provides a protecting framework forcopyrighting. It also determines what is protected by the copyright , and governs the rights on the claims of royalties. The collective management of the economic rights, effective protection of copyrights and royalties falls within the scope of The Latvian authors’ society AKKA / LAA (Copyright and Communication Consulting Agency/Latvian Authors Association) and Latvian Performers’ and Producers’ Association (LaIPA).

National and foreign authors are the subjects of the former; their rights are administered in Latvia (http://old.akka-laa.lv/eng/), whereas the latter – LaIPA, is a collecting society which represents Latvian and foreign performers as well as phonogram producers (http://old.akka-laa.lv/eng/).

 4  Royalties and taxes

Royalties are considered to be a taxable revenue in Latvia. Both the beneficiary and the person paying the royalties are liable to satisfy the provisions relating to the taxes and mandatory contributions, with the supervision of the State Revenue Service. 

Royalty payments are exempt from any taxes in the particular State provided that the beneficial owner of the payment is a company or a permanent establishment in another Member State. Exemption of tax on royalty payments under these circumstances work in accordance with the European Union Council Directive on a Common System of Taxation Applicable to Interest and Royalty Payments made between Associated Companies of Different Member States 2003/49/EC, widely known as the EU Interest & Royalties Directive, royalty payments shall be exempt from any taxes in the particular State provided that the beneficial owner of the payment is a company or a permanent establishment in another Member State.

 5  Advertising

The national Advertising Law regulates the production and dissemination of advertising. The Advertising Law also determines the rights, obligations and liabilities of persons involved in the production and dissemination of advertising, with the supervision of the compliances made by: the Consumer Rights Protection Centre, the Food and Veterinary Service, the Health Inspectorate, the National Electronic Mass Media Council and the Competition Council.

Those willing to engage in the use of trademarks in the advertising environment =are aware of the regulations of the national Law on Trademarks and Indications of Geographical Origin. The regulations prohibit the use of another party’s trademark on advertising context, except for comparative advertisement campaigns. Certain criteria must be met when advertising under these regulations such as producing non-misleading information and a comparison of goods or services provided for the same needs and purposes. Other criteria for advertising includes producing intrinsic and verifiable features of the respective goods and services, and avoiding any uncertainty with the market participants regarding the advertiser or competitor, or the related trademarks et cetera.

Market perspective of the Latvian-based international companies - Media and Entertainment

Market perspective of the Latvian-based international companies

Return on Intelligence / Exigen Services Latvia
A global technology services firm

The business perceives the professional competence, high-quality standards and the technological knowledge as the key factors to approaching the telecommunication industry in Latvia. Crucially, the company acknowledges the national business infrastructure itself as a noteworthy reason to commence the operations relating to the use of national technical resources and communications. Besides the modern infrastructures, Latvia enjoys the benefits of the EU-membership and hence offers its businesses the remarkable availability to the European business environment.

TELE 2 | Information technology, telecommunications and financial management support company

Tele2 recognizes the cost-effective labor force, amongst them skilled individuals in the IT sector, financial services and customer operations as one of the strongest aspects for the business development within the jurisdiction.

Top things to consider when approaching LV market - Transport & Logistics

Latvia is ranked amongst the top 50 countries in the Global Logistical Ranking. Due to Latvia’s favourable location between the EU and the large markets to the East, the transport and logistics industry has been one of the most important sectors in the country. Latvia’s proximity to the EU’s external border with Russia and Belarus, the Schengen membership and its well-developed infrastructure within the country have all significantly contributed to the national GDP by roughly10% in previous years.. As well as existing railway connections, the Rail Baltica project has been launched, envisaging a rail link between the Baltics and Poland. In addition, the Via Baltica transport corridor traversing Latvia, provides connections with the cities in Scandinavia, Russia and Eastern Europe, another significant advantage. Latvia is also recognizable for its contribution as part of Pan-European transport corridors, including UN AGR and Ten-T road networks, the AGC rail network, the EASA transport corridor as well as its membership in global transport associations and international conventions, such as the CMR.

 1  Movement of non- EU goods

As part of the EU membership, goods imported into Latvia ( and for the movement within the Union) falls under the scope of procedures of the Regulation EU Customs Code (UCC). This includes the submission of a Single Administrative Document (SAD) irrespective of the preference on the transportation method used for such goods. The Article 79(2) of the UCC instructs the release of goods into free circulation, including the same import duty to be applicable for imports into any EU Member State according to the Common Customs Tariff, depending on the origin, classification and economic sensitivity of the product.

 2  Customs Control Checks

Goods imported and exported out of the EU fall within the customs control events performed by national customs institutions of the State Revenue Service of the Republic of Latvia. Such supervisory events include measures on the authenticity of goods and its documentation, control of the enterprise accounts, review of the vehicles and luggage goods et cetera.

 3  Freight of specific goods

In line with the customs control checks, transportation of certain commodities would fall under the scope and revision of national Border Control Department. Namely, import of food-related products, for instance, would have to satisfy the safeguarding measures relating to food additives and flavoring controls, dietetic food import controls and related aspects.

 4  Special Economic Zones

Latvia encompasses five areas holding the status of Special Economic Zone (SEZ), namely, the ice-free Riga and Ventspils Free Ports, Liepaja, Rezekne and Latgale Special Economic Zones, which promote favourable business conditions. The free zone regime in Rezekne, for instance, amongst the special customs control measures and import-duty- free permits, includes indirect tax incentives (0% rate on the VAT) applicable for the supply of goods within the zone for the further exportation of the commodities.

 5  Carriage of dangerous goods

In accordance with the UN recommendations and European level agreements and regulations (European Agreement concerning the International Carriage of Dangerous Goods by Road 2017), certain jurisdictional laws are applicable with regard to the carriage of dangerous goods in Latvia. The laws set requirements on the minimum safety equipment for transportation, vehicle labeling rules, and certain licenses (i.e. safety advisories) necessary for the merchants involved in the cargo of dangerous goods. (Law on the handling of dangerous goods, Road Traffic Law, Law on Carriage by Road of the Republic of Latvia and related regulations by the Cabinet).

Market perspective of the Latvian-based international companies - Transport & Logistics

Market perspective of the Latvian-based international companies

KVIST INDUSTRIES
Suppliers of high-quality furniture in wood for the furniture industry

In line with the appreciated qualified and skilled workforce in the region, the company admits the general economic conditions to be one of the main benefits for its operations in the transport and logistics industry in Latvia.

BRABANTIA
Amongst other businesses, supplier of innovative household products

Not only the strong tradition in metalworking in Latvia has been underlined by the business, but also the country’s membership in the Union, availability of ports and a business-friendly environment has been a convincing benefit for its local operations.

TAXI KURIR
Operators of taxis for personal and package transportation and deliveries

Taxi Kurir admits the cost-effectiveness amongst the key contributors to its services within Latvian market.

(http://www.liaa.gov.lv/en/success-stories/kvist-industries)
(http://www.liaa.gov.lv/en/success-stories/brabantia)
(http://www.liaa.gov.lv/en/success-stories/taxi-kurir)

Top things to consider when approaching LV market - Food & Beverages

The food and beverage industry is the second largest industrial sector in Latvia, producing around a fifth of the value added into manufacturing. More than 900 corporations and registered private merchants are actively involved in the food processing industry.

The export proportion of the total industry turnover in previous years reached 35.5%, whereas the U.S. exports of the sector products to Latvia reached the benchmark of USD 90 million. The local demand for U.S. production is partially driven by the increasing openness to non-traditional foods, the growing interest in healthy products, organics and niche market segments.

 1  Excise tax

The importers, such as traders, distance sellers and representatives are aware of the Excise duty legislation which regulates excise duties on alcoholic beverages, tobacco, coffee, non-alcoholic beverages and other related products. The Procedures for the Circulation of Excisable Goods of the Republic of Latvia prescribes the rules for the issuance, re-registration, cancellation and utilization of special permits (licenses) and related State fees and payment procedures.

 2  Customs duties

The goods imported into Latvia outside the European Union fall within the range of imposed customs duties, with rates varying depending on the type of product. Specific requirements for commodities and related tax duties and necessary documentation can be found in the unified TARIC database:

https://ec.europa.eu/taxation_customs/business/calculation-customsduties/ what-is-common-customs- tariff/taric_en

http://ec.europa.eu/taxation_customs/dds2/taric/taric_consultation.jsp

 3  GMO

The Law on the Supervision of the Handling of Food of the Republic of Latvia envisages that commodities containing genetically modified organisms, or those manufactured from them, may be distributed in Latvia. However, the relevant permits must have been obtained from institutions that supervise food surveillances, authorizations and border controls. This must be in accordance with the Law on Circulation of Genetically Modified Organisms and its regulatory requirements on import, market placing and circulation of GMO products within Latvian jurisdiction.

 4  National food and beverage regulation

The Regulation EC no 178/2002 of the EP and EC 28 January 2002, produces general principles and requirements on food law and safety. Importers and traders adhere to the prescribed jurisdictional requirements regulating specific groups of food products, with certain designated quality and classification requirements imposed by the Cabinet, as well as the conformity assessments on such requirements. The aforementioned national regulation and the national Law on the Supervision of Handling of Food together with the national Food and Veterinary Service constitute the regulations on food handling and labelling, as well as the hygiene and production requirements of such commodities.

 5  Border Control

The Border Control Department is the responsible body for the control of product conformity from third countries prior to its entering into the Latvian market. It’s responsibilities include the inspection of identity, cargo documents, and physical inspections of the product samples. In accordance with the requirements imposed by the European regulations, the national Food and Veterinary Service supervises compliance and safeguard measures related to food additives and flavoring control import, food supplements control import, dietetic food control import and co-related aspects.

Market perspective of the Latvian-based international companies - Food & Beverages

Market perspective of the Latvian-based international companies

BUCHER
Amongst other businesses - harvesting, producing and packaging healthy foods

Industry segment in Latvia appealing with the availability of qualified workers, fine-level entrepreneurial conditions, great support from the port authorities and local municipalities, associated benefits with the free economic zone; proximity to the neighborhood markets and the frequent sea-traffic.

BRABANTIA
Amongst other businesses - food storage and food preparation

Besides the membership in the EU, appeal to Latvian market described with its availability of ports and business-friendly environment within specific sector.

 

Toms Puriņš

Senior Associate

Email:toms.purins@eversheds-sutherland.lv
Tel: +371 6728 0102

Māris Vainovskis

Senior Partner

Email: maris.vainovskis@eversheds-sutherland.lv
Tel: +371 6728 0102