Cost Effectiveness

Latvia offers significant cost advantages to investors, including competitive labour and real estate expenses, as well as competitive tax rates. Coupled with strong productivity in manufacturing and services, Latvia provides investors with a highly cost-effective environment for business, producing compelling returns on investment.

Five Latvian cities ranked in top 10 in a variety of categories of the annual fDi Intelligence report, “fDi European Cities and Regions of the Future 2018/19 Rankings”. The capital of Latvia - Riga, along with Jelgava, Rezekne, Valmiera and the port city Ventspils convincingly occupy top spots in the categories for cost-effectiveness, connectivity and foreign direct investment (FDI) strategy.

Latvia offers international competitive workforce at every level of expertise and at very competitive costs. Latvia is among the leading European countries in regards to wage adjusted labour productivity (apparent labour productivity by average personnel costs). (Eurostat, 2016)

Labor expenses: Latvia’s labour costs are very competitive, especially compared to those in older EU-member countries (4th lowest labour costs per hour in EU. Source: Eurostat). For example, Germany’s labour costs are approximately four to five times higher than Latvia. Average salary rates by industry and job title can be obtained by contacting LIAA Investment Promotion Division.

Real estate: Overhead costs have decreased significantly in recent years, particularly for construction, office space and industrial real estate.

Free economic zones: Latvia has 5 free economic zones (Riga, Ventspils, Liepaja, Rezekne and Latgale) for the benefit of entrepreneurs. In the study “fDi Global Free Zones of the Year 2017” the Freeport of Ventspils is highly appreciated and the Freeport received three special awards – Logistics, Infrastructure Upgrades and award for Crossborder Collaboration. At the same time Rezekne SEZ was also recognised and received a special award for Expansions.

Tax rates: : From 1 January 2018 Latvia has a new corporate income tax (CIT) under which retained earnings are exempt from CIT and only distributions are taxed. The CIT rate on gross profit distribution is 20%. As of 1 January 2018 Latvia also has a progressive personal income tax (PIT). Income below EUR 20 004 a year is subject to PIT at the rate of 20%. Income from EUR 20 004 to EUR 55 000 a year is subject to PIT at the rate of 23%. The part of income exceeding EUR 55 000 a year is subject to PIT at the rate of 31.4%.PIT for income from capital and capital gains is 20%.