Latvia reduces tax burden on startups

The new law, which comes into force on January 1 2017, imposes a flat tax on startups of $267 per employee per month for qualifying companies.

Latvia’s parliament has approved legislation intended to reduce the tax burden on startups and encourage the retention of highly-skilled employees, according to Geektime.

The new law, which comes into force on January 1 2017, offers startups a flat tax of €252 ($267) per employee per month no matter what the employee earns in salary.

The Latvian state will also fund all salary taxes and social contributions for employees who hold doctorate or master’s degrees to encourage retention of highly-skilled workers, according to publication EU Startups.

To qualify for these tax changes, companies must be less than five years old and have already secured €30,000 in venture funding.

In addition, they must have introduced a product or service, and their revenues in their first two years of operating must be less than €200,000. Companies paying dividends are not eligible.

Andris K. Berzins, founder of advocacy group Latvian Startup Association, said: “When investors decide to risk money backing a startup in Latvia, almost half of their money goes to pay social and personal income taxes.

“So together with the Ministry of Economics, we decided to tackle this cost directly and the result is this new tax regime. This tax regime will have the effect of almost doubling the runway that a startup has, for the same amount of investment money."

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