The tax law has been developed by the Ministry of Economics in collaboration with Latvian startups, represented by Latvian Startup Association. According to the new legislation, a startup is a company with strong growth potential. The government aims to foster development of rapidly growing technological companies or startups and commercialization of research and innovative ideas, products, or processes. That is supposed to stimulate creation of new startups in the country, thereby support research and innovation.
This law refers to new startup employee taxation, relieving the tax cost for qualifying startups. A flat monthly tax of € 252 per employee will enable startup employees drag on a well-qualified workforce recruitment scheme. The government will remunerate all social tax, at the same time abandoning individual income tax for employees and corporate income tax for startups.
Apart from being less than 5 years old, candidate companies should obtain have less than € 200,000 in revenues in their first 2 years of existence, to have already affirmed € 30,000 in venture funding, to have already released an “innovative” product or service, and not be paying dividends.
The new law seems a great step forward and will definitely help startups in Latvia live out in a competitive market. The majority of an IT startup’s costs are salary, therefore this will double the effectiveness of investments, which will further encourage to invest more.