Latvian Immigration Law establishes numerous grounds for obtaining a temporary residence permit.
However, the most popular ground is real estate acquisition.
According to official statistics published by the Department of Citizenship and Migration, as of January 1, 2014, 6,007 people were registered who obtained a residence permit based on real estate ownership (these are property owners and their family members).
KOM-INVEST company offers to analyze the reasons why real estate acquisition is the most advantageous ground for obtaining a residence permit (even after September 1, 2014).
As an alternative, we will consider an option that at first glance seems less expensive than real estate acquisition.
Obtaining a residence permit through investment in company share capital
Paragraph 28 of Part 1 of Article 23 of the Immigration Law establishes that a residence permit for up to 5 years may be requested by an investor who has invested at least 35,000 euros in the share capital of an existing Latvian company (or founded a new Latvian company).
The investment amount seems small. However, there are certain requirements for the company. If it is an existing company, it must employ no more than 50 employees. At least 40,000 euros in taxes must have been paid for the previous year.
Furthermore, a foreigner must not simply buy company shares for 35,000 euros; the nominal (i.e., registered in the commercial register) value of the shares must be 35,000 euros.
- The first problem may arise here - the share capital of most Latvian companies is 2,800 - 3,000 euros. Consequently, if a foreigner makes a contribution to the share capital of such a company, the company must proportionally increase its share capital.
If there are other founders in the company (besides the foreigner), when increasing the share capital, they must "demonstrate payment" of their increased shares. "Demonstrating payment" can be done in two ways - by transferring a monetary sum to the company's account, or by contributing equipment or property to the capital and providing a certified appraisal of the fair market value of the contributed equipment or property.
If the first problem can be solved and a company is found that paid at least 40,000 euros in taxes during the previous year (January 1 - December 31), and the foreigner invests 35,000 euros in such a company, he can submit documents to the Department of Citizenship and Migration to obtain a residence permit and receive one. Family members (spouse or minor children) may also obtain a residence permit.
- However, there is a second problem related to the need for regular tax payments of 40,000 euros per year. The residence permit must be renewed every year.
In this case, every year a certificate from the tax service must be submitted confirming that the company paid at least 40,000 euros in taxes over the past year.
That is, if a foreigner submits renewal documents on October 1, 2014, the company must pay 40,000 euros in taxes during the period from October 1, 2013 to October 1, 2014.
It is quite obvious that few companies will be able to guarantee compliance with this requirement over five years. If the company does not pay the required amount of taxes, the residence permit is not renewed and is annulled.
Thus, an investment of 35,000 euros in the share capital of an existing company is a risky option.
- The third problem is the return of the invested 35,000 euros after 5 years. If the company still met the tax payment requirements over five years, after five years the foreigner can request a temporary residence permit for another five years, or not request one. In that case, the temporary residence permit status will be annulled. However, the foreigner will need to resolve with the company the issue of full or partial return of the invested 35,000 euros.
- The fourth problem is business risks. Under Latvian law, a company is liable for its obligations with all of its share capital. If a company is recognized as insolvent, creditors may demand the return of funds in the amount of the share capital. In such a case, the foreigner may lose the invested 35,000 euros.
If the company's insolvency is not related to intentional illegal actions by the company's management, the foreigner has no right to demand repayment of the invested 35,000 euros from the company's management.
Obtaining a residence permit through company establishment
Returning to the aforementioned article of the Immigration Law - it also establishes that a new company may be established with share capital of 35,000 euros.
- Choosing this option, a foreigner must establish a company with share capital of 35,000 euros. Then he must draft and certify with a sworn auditor a business plan that provides for tax payments of 40,000 euros (during the first year).
- Then the foreigner can submit documents to the Department of Citizenship and Migration to obtain a residence permit and receive one.
- However, a year later, when renewing the residence permit, a certificate from the tax service must be submitted confirming that the company paid at least 40,000 euros in taxes over the past year.
- That is, if a foreigner submits renewal documents on October 1, 2014, the company must pay 40,000 euros in taxes during the period from October 1, 2013 to October 1, 2014.
- Given that a new company in its first year of operation may not achieve such results (due to high competition, lack of established reputation and clients), the foreigner risks that a year later the tax requirement will not be met, and the residence permit will be annulled.
The complexity of the described option is also evidenced by low statistical data - as of January 1, 2014, 679 people were registered who obtained a residence permit based on company investment (these are investors and their family members). Look at the statistical data again - 6,007 people (real estate) and 679 people (company investment).
Obtaining a residence permit through real estate acquisition.
For more detailed information on the requirements, see
- The main requirements are as follows: the real estate purchase price is 250,000 euros, plus a one-time payment (5% of the real estate purchase price) is transferred by the buyer to the state budget. That is, if the purchase price is 250,000 euros, the one-time payment is 12,500 euros.
- The amount of 12,500 euros may seem large. But first, it is only five percent of the purchase price. Second, the residence permit is issued for 5 years. Consequently, this is 2,500 euros per year. Third, after 5 years the property owner has the right to request a temporary residence permit again for 5 years.
Moreover, real estate acquisition has many other advantages compared to investment in company share capital:
- Easily predictable and regular income if the property is rented out. Business income, on the other hand, depends on many factors - work with clients, the situation in the business sector, etc.
If you contact our company, we will help you select apartment purchase options that will be most advantageous in terms of rental income to maximize the return on your investment.
- Absence of risks (real estate can be insured against damage or deterioration), while business risks cannot be insured.
- Stability of annual residence permit renewal. The only documents required are a certificate of real estate tax payment, a bank certificate confirming living funds, and insurance for all family members. Obtaining this set of documents is much easier than obtaining a certificate of the company's tax payments of 40,000 euros.
- If necessary, real estate can be sold more easily and quickly than a business.
- An analysis of the price growth of real estate purchased by our clients over the past 4 years can be found here.
KOM-INVEST company specialists will help you obtain a residence permit through any method you choose.
Have questions? We look forward to hearing from you by email or phone!
Phone number: +371 29774775
Email: info@kominvest.com
Skype: KOM-INVEST