Tax incentives available to Latgale entrepreneurs

Companies intending to develop their economic activity in Latgale region as from January 2, 2017 may apply for tax credits in Latgale special economic zone (Latgale SEZ).
Following the initiative of the Ministry of Environmental Protection and Regional Development (VARAM), an intensive work on the creation of an additional support instrument in Latgale was held during 2016, which would allow this cultural heritage to develop equally to other regions of Latvia. The basis of the development of each territory is closely linked to the development of the business environment, so that in order to promote the development of Latgale region, attracting investments for the development of production and infrastructure and creating new jobs, a draft law of the Latgale Special Economic Zone was developed in cooperation with Latgale planning region, which was supported by the Saeima at the final reading on 19 May 2016.
During the time period from the approval of Latgale SEZ Law until the actual commencement of its work on 2 January 2017, the Latgale Planning Region has carried out extensive work in the design and coordination of documentation for the operation of Latgale SEZ.
“Latgale SEZ benefits are intended for both local entrepreneurs who intend to expand and diversify their production capacity and products, as well as foreign investors who intend to start their business in Latgale territory,” says Alīna Gendele, President of the Development Council of Latgale Planning Region.
In order to commence THE work OF LSEZ, the Latgale Planning Region Development Council established Latgale SEZ administration consisting of monitoring Commission and executive. According to the provisions of the Latgale SEZ, the first meeting of the monitoring committee was convened, which took place on 28 December 2016 in Riga. At the meeting, the leaders of Latgale municipalities (A. Gendele - Ludza District Council, Upenieks - Kraslava municipality council, J. Lāčplēsis - Daugavpils City Council, A. Vaivodds - Livana municipality council, M. Schvarcs - Rēzekne municipality council), as one of the first tasks, approved a package of documents necessary for entrepreneurs to qualify for tax credits in Latgale SEZ territory.
Unlike other special economic areas of Latvia, the local governments of Latgale planning region do not determine the location of each maximum area and the area to which SEZ status may be granted. Latgale SEZ's total area in Latgale is up to 72 735 ha, or 5% from the region's total area. In order to be flexible and able to adapt to the business environment demand, the areas to be included in Latgale SEZ may be located in virtually any place of Latgale, according to the company's insights and needs.
THE boundaries of THE LSEZ territories will be confirmed ON the basis of the draft decision submitted by Latgale SEZ.
At the same time, the Latgale SEZ Board is entitled to revoke the status of that zone for a particular territory, if THE territory is not suitable for the performance of commercial activities within the time period specified by THE LSEZ administration, in accordance with the spatial plan of THE local government, the relevant local government does not have a favourable effect and has no economic return or, within a year after the decision to include SEZ, the local government area between the manager of Latgale SEZ and the capital company has not been entered into a contract regarding the performance of investments in the relevant territory.
Companies wishing to qualify for direct tax relief, namely corporate tax and real estate tax rebates (up to 80%), will have to enter into a contract with Latgale SEZ under the Law on taxation in free and specialised economic areas.
Latgale SEZ capital companies will receive direct tax discounts from the accumulated investment amount, applying maximum allowable aid intensities for investments:

• 35 % – a capital company corresponds to a category – a large capital company;
• 45 % – a capital company corresponds to a category – a medium-sized capital company;
• 55 % – a capital company corresponds to a category – small or small (micro) capital company.

The application of a fixed percentage of aid (35%, 45% or 55%) is used for corporate tax relief and for the total amount of real estate tax credits.
In accordance with the Law on the Application of Taxes in Free Ports and Special Economic Zones, long-term investments are supported:

• “tangible investments” - buildings and plants, machinery and equipment;
• “intangible investments” - costs for obtaining patents and technology acquisition.

The requirements laid down in the Law, which are to be met by the investments made, in applying for SEZ direct tax relief, as well as more information regarding the operating rules of Latgale SEZ and the documentation to be submitted may be found on the Internet sites: http://latgale.lv/lv/lsez/pieskirsanas_kartiba and http://invest.latgale.lv/lv/latgales-sez/sez_statusa_pieskirsanas_kartiba or contact Latgale SEZ manager: email: lsez@latgale.lv, tel.: 26511047.
The information was prepared by:
Oscars Zugickis,
Latgale Planning Region Public Relations Specialist
Phone: 65423801
email: oskars.zugickis@latgale.lv