Special Economic Zones (SEZ) in Latvia
There are four Special Economic Zones (SEZ) in Latvia - Riga Free Port (www.freeportofriga.lv), Ventspils Free Port (www.portofventspils.lv), Liepaja Special Economic Zone (www.portofliepaja.lv) and Rezekne Special Economic Zone (www.rsez.lv) (see map for exact locations). Established in 1997 for 20 years (until 2017) to promote entrepreneurial activities within the regions, all of them offer very favourable business incentives.
The main benefits for companies operating in the Free Ports and SEZ are as following:
• 80% rebate on real estate tax (RET) which is 1,5% in Latvia (0,3% rate is applied within SEZ territory until compensation of 50% of the amount invested (65% for SME’s));
• 80% rebate on corporate income tax (CIT) which is 15% in Latvia (5,0% rate is applied within SEZ territory as the tax is calculated from the former 25% CIT) on activities carried out within the zone until compensation of 50% of the amount invested (65% for SME’s);
• 0% VAT for most goods and services provided to enterprises in free zones or exported out of them;
• 0% VAT for most goods and services supplied in the free zones, including construction services.
Relevant sections from the law On the Application of Taxes in Free Ports and Special Economic Zones:
- Section 7. Enterprise Income Tax Relief
(3) A zone capital company, when paying dividends, and remuneration for management and consultancy services and payment for intellectual property to a non-resident, shall withhold enterprise income tax from such payments with an 80% rebate of the tax amount calculated.
(4) A zone capital company or a licensed capital company shall reduce income subject to enterprise income tax by the investments in such infrastructure or social sphere sites as belong to the State or local government and are located in the territory of a special economic zone or free port, if such investments have been made in accordance with an agreement which has been concluded with the zone authority or free port authority.
- Section 8. Restrictions on the Application of Direct Tax Rebates for Large Investment Projects
For large investment projects by a SEZ company within the scope of which the planned costs of the investments to be made exceed 50 million Euros, the following conditions shall be applied:
1) The percentage of the accumulated amount of investment of 50% shall not be applied, but the Cabinet of Ministers shall decide regarding the maximum allowable percentage which does not exceed:
a) 50% of the accumulated amount of investment in investment projects up to 50 million euro or a total of EUR 25 million,
b) 25% of the accumulated amount of investment in the project part from 50 to 100 million euro or a total of EUR 12.5 million, and
c) 17% of the accumulated amount of investment in the project part, which exceed 100 million euro;
2) if the planned costs of the investments to be made exceed 100 million Euros and the amount of the direct tax rebate to be applied for such an investment project exceeds 28 million 125 thousand euro, the European Commission shall be notified separately regarding the planned large investment project and the implementation of the investment project shall commence only after the receipt of a decision by the European Commission regarding the compatibility of the aid with Article 87 of the Treaty establishing the European Community.
Special Laws on Free Port of Riga/Ventspils and on Liepaja SEZ determine the principles of operation and management procedures for the Free Ports and the Special Economic Zone in order to promote the participation of Latvia in international trade, attract investments, develop manufacturing and services, as well as create new jobs.
• Tax relief and special customs control measures determined by the Law apply to companies which have entered into a contract with the Port Authority regarding entrepreneurial activity under a free zone regime, and have obtained permission in accordance with the procedures set out in the Law for the carrying on of such an activity, as well as with the Port Authority.
• State and local government land within the territory of the Free Port may not be sold, gifted or otherwise alienated. The land in the Free Port owned by natural persons and legal persons may be sold, gifted, exchanged or otherwise alienated only for the benefit of the State or local government. Accordingly land in the possession of the Free Port is leased.
• The loading, supply, storage, processing of goods (freight) and other services, and the production of goods under a free zone regime can be carried out by undertakings which are registered in the Republic of Latvia, have entered into a contract regarding entrepreneurial activity under a free zone regime and have obtained a permit from the Port Authority for the carrying out of such activities.
• The profile of activities and the development prospects of the company shall conform to the development program of the Free Port which has been approved by the Board of the Port; and the founders and the shareholders of the undertaking (company) shall have a good reputation, a stable financial position and experience in the field of entrepreneurial activities
• For obtaining the permit an applicant shall submit a program of operations, including an investment program. A decision regarding the entering into of a contract with an applicant shall be taken by the Board of the Port.
As the Free Port Authority and SEZ are decision takers for leasing out State or local government land in the port territory and granting free zone regime permits, they welcome investments, which conform to development strategy of ports and are related to port activity.
Riga Port is mainly looking for investors, whose activity is related to sea cargo handling or high added value logistics services.
Ventspils and Liepaja Ports, besides companies that are engaged in sea cargo handling and logistics, also welcome export oriented manufacturing investment projects
