Reviewing the priority measures for the 2024 state budget—specifically, the allocation of additional funding—the Cabinet of Ministers approved a proposal by the Ministry of Economics to provide an additional 6.4 million euros in state budget funds for investment and export promotion measures, as well as for start-up support.
At the same time, satisfaction is drawn from the agreements already reached in the early days of the government regarding other instruments that facilitate economic growth, including tax instruments. Examples include allowing employers to cover the costs of employees obtaining higher education in Latvia without subjecting these expenses to payroll taxes, simplifying the application of the 25% micro-enterprise tax rate, and increasing the VAT registration threshold for domestic transactions. All these measures will help our entrepreneurs increase their competitiveness and, consequently, their export capacity,” emphasises Minister of Economics Viktors Valainis.
To promote the export of Latvian services and attract investment, the government has decided to allocate additional funding of 6 million euros in the 2024 state budget, with an identical sum earmarked for 2025 and 2026.
“To continue stimulating Latvian companies to invest in the development of new products and thus promote the growth of the Latvian economy and the increase of export volumes, it is necessary to continue purposeful state investment in the national economy. To provide support to Latvian companies, thoughtful and long-term oriented state support activities are required, which are directly related to additional assistance for making investments, market reorientation, and the development of new and innovative products and services, thereby promoting economic activity in the regions of Latvia as well,” emphasises Minister of Economics Viktors Valainis.
Within the framework of this funding, it is planned to implement measures to promote the export of transactions and events in Latvia by supporting activities such as the organisation of strategically important and large-scale projects/events in Latvia, and international-level activities (seminars, conferences, congresses, exhibitions) in Latvia. The support measures will promote high value-added exports and Latvia's international recognition, which is a crucial factor for building the country's image, attracting investment, and fostering international cooperation. Furthermore, it should be emphasised that by 2027, significant support will be provided for increasing the productivity, digitalisation, export capacity, and competitiveness of our entrepreneurs through the Recovery Fund and EU Structural Fund multi-annual budget investments.
Meanwhile, for start-up support, additional funding of 400,000 euros is planned in next year's state budget, with the same amount of funding also provided for start-up support in the 2025 and 2026 budgets.
“Start-ups play a significant role in the overall innovation ecosystem because they ensure an inflow of innovative business ideas and facilitate a faster change in the economic paradigm towards a knowledge-based economy. Start-ups have the greatest potential to transfer the discoveries and innovations of our scientists into the national economy, including in deep tech. Furthermore, start-ups create a new business culture, focusing on sustainable business models, the circular and digital economy, clean energy, industrial innovation, and climate change goals. We must be more ambitious and we can do more to ensure the availability of financial support for faster start-up growth and development,” explains Minister of Economics Viktors Valainis.
Support for start-ups will be channelled through organisations representing the start-up ecosystem operating in Latvia and partners of the memorandum on the Implementation of the Strategy for the Development of the Latvian Start-up Ecosystem—the TechChill foundation, Riga Technical University, the TechHub foundation, the Latvian Business Angel Network association, the Latvian Startup Association, and the Latvian Private Equity and Venture Capital Association—for the realisation of the joint Start-up Development Strategy 2022-2025. It is planned to implement activities such as international-level events (conferences, seminars), individual consultations for early-stage start-ups regarding available investments and investor pitching sessions, etc. The implementation of these activities is essential for the regional and international development of Latvia.
As is known, the goal of the Start-up Ecosystem Development Strategy 2022-2025, approved in the autumn of 2022, is to promote the development of a strong and unified start-up ecosystem, implement activities, and attract talent to start-ups. To promote the formation of rapidly growing technology companies, or start-ups, in Latvia, by facilitating the development of research and the commercialisation of research products, the Law on Support for Start-up Activities was developed. A temporary residence permit for start-up founders has also been created, which allows citizens of third countries to receive residency rights in Latvia for the purpose of founding a start-up, working on the development of their product, and attracting investments from a qualified venture capital investor. Start-ups also have access to funding for loans, in business incubators and acceleration funds, as well as in the innovation voucher programme.
It is important to emphasise that the total tax payments made by start-ups exceed the total approved amount of state support by more than 7 times, which confirms the utility of state support, as well as the significant fiscal impact of the companies themselves on the Latvian national budget in the long term.