Immigration to Boost Latvian Economy

August 30, 2010 Taxation in Latvia

Latvian flagIn order to bolster economy activity and government revenues Latvia has relaxed several of its immigration restrictions in an attempt to bring in greater levels of foreign capital and skilled employees into the country.

In July 2010 the Latvian Government amended its immigration policies to make it easier for non-European Union investors to obtain legal residency within the country. Under the new rules, non-EU residents can be granted a five-year residency permit if they meet any of the pre-set conditions. Currently the options include investing at least LVL 25 000 (approx. EUR 35 300) in a local business, purchasing real estate exceeding LVL 100 000 (approx. EUR 141 225), or depositing at least EUR 300 000 in a national savings account. The residency conditions are considered to be perfectly targeted toward addressing the country’s current economic woes. The potential of receiving large deposits is anticipated to loosen credit conditions and downplay national banks’ current propensity against lending for local developments and businesses. The property investment clause is also predicted to aid Latvia’s sliding real estate sector. Additionally, it is expected that the new residents will provide highly skilled individuals for the national workforce, potentially counteracting the recently increased levels of emigration.

According to the International Monetary Fund (IMF), in 2009 Latvia suffered one of the most severe recessions in the world for the current year, with a GDP decline of nearly 18 percent, a tax revenue drop of 26 percent and unemployment levels reaching above 20 percent. However, in February 2010 the IMF predicted that the initial stages of a recovery would be seen by the end of 2010. On August 5th the Latvian Finance Ministry released a statement claiming that the post-recession economic declines are already slowing faster than expected. The national GDP level is now predicted to fall by only 3.5 percent in 2010, compared to earlier estimates of 4 percent. The 2011 growth estimate has already been raised to 3.3 percent, and 4 percent in 2012.

Recently, the Latvian Government made statements which have led economists to believe that attracting wealthy overseas investors with residency opportunities will play an important role in the economic recovery. On August 26th Aivis Ronis, Latvia’s Foreign Minister, stated that the country’s economic wellbeing and global economic competitiveness will be the primary concern in its international political relationships, leading analysts predict that greater emphasis will be now be placed on actively utilizing foreign investors to spurn an unexpected recovery.

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