Latvian startups to get better access to government support

Take note – story published 3 years ago

The Latvian parliament conceptually supported amendments to the startup law that would lengthen the term during which startups can qualify for government support, in addition to other changes that would make it easier for startups to access support, according to the Saeima Press Service on April 30.

“In three years only five startups have received government support, which is very little, even though such companies develop rapidly and increase their economic contribution, investments and number of employees,” said Economics Minister Ralfs Nemiro (KPV LV).

When the amendments are adopted, startups that have been operating for up to seven years will be able to apply for government support, instead of the current five. The bill's author's at the Ministry of Economics say it can take more than five years to develop a startup business idea. A majority of startups face hardships during this period, but can rapidly grow if this threshold is overcome, leading to higher profits and more taxes for the government at a later date.

Many startups look toward the global market from creation, and many are registered abroad in attempts to secure capital abroad. The changes will also grant these startups access to government support.

The amendments also tackle education requirements. Currently, according to the law, 70% of employees must have a master's degree or doctorate, but this would bring that threshold down to 50%. This would bring it more in line with reality, where 54% have a master's degree and only 4% have a doctorate.

Many startups begin as a hobby or side-job as they don't always immediately turn a profit. The changes will get rid of the ban on access to support for startups where employees have two jobs. Startups will also be able to re-apply for support.

“Every year around 50 startups begin operations, so we need to give these companies the opportunity to develop and provide easier access to government support,” said the economics minister.

There are currently more than 400 startups registered in Latvia. The startup law was passed in 2017 with the goal of supporting the creation of these rapidly growing businesses, promoting research development and product commercialization.

The amendments will take effect once they are passed in the second and third readings.

As previously reported, Saeima adopted a law on support for startups as part of the set of laws related to the 2017 budget. The goal was to have twenty new startups annually, creating 120 new jobs. The law defines what a startup is and what support programs will be available to startups. Startups that have attracted risk capital of at least €30,000 will qualify for state support.

The support measures laid down in the law include fixed social contributions for employees paid up to €4,050 a month. If an employee's monthly salary exceeds €4,050, the solidarity tax is also applied. The fixed social contribution replaces the regular social contributions and personal income tax that the employer would otherwise have to pay for the employee. Startups are also able to attract highly qualified employees with the state co-funding their salaries. 

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