Investment in the Baltic States

148 Pages·2011·2.19 MB·English

Investment in
the Baltic States
A comparative guide to investment
in Estonia, Latvia and Lithuania
KPMG in the Baltics
© 2011 KPMG Baltics SIA, a Latvian limited liability company and a
member fi rm of the KPMG network of independent member fi rms
affi liated with KPMG International Cooperative (“KPMG International”),
a Swiss entity. All rights reserved.
Preface
Investment in the Baltic States is one of a series of booklets published by KPMG
member fi rms to provide information to those considering investing or doing business
in various countries.
This publication has been prepared by KPMG in Estonia, Latvia and Lithuania to assist
those contemplating investment or commencing operations in the Baltic states.
KPMG in the Baltics provides audit, tax and advisory services for local and multinational
companies, government entities and inward investors.
The information in this booklet is of a general nature and should be used only as
a guide for preliminary planning purposes. Because of the continually changing
legislative environment in the Baltics, the complexity of corporate, tax and social laws
and regulations in each country and the steadily evolving nature of the respective
economies, comprehensive professional advice and assistance should always be
obtained before implementing any plan to invest in or immigrate to the Baltic states.
KPMG with more than 300 staff in the Baltic states can provide such assistance and
would be pleased to provide more detailed information on matters discussed in this
publication.
Every care has been taken to ensure that the information presented in this edition is
correct and accurate as of 1 May 2011.
Revised edition
Riga, May 2011
© 2011 KPMG Baltics SIA, a Latvian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
Contact us
In Estonia
KPMG Baltics OÜ
Narva mnt 5 Turu 2
Tallinn 10117 Tartu 51014
Estonia Estonia
T: [phone] T: [phone]
F: [phone] F: [phone]
E:
Contents
Chapter 1
Country profi le 10
Estonia
General information 10
Geography and climate 10
Population and language 11
Political system in Estonia 11
Overall investment environment 12
Key economic indicators 16
Infrastructure 16
International membership 18
Latvia
General information 18
Geography and climate 19
Population and language 19
Political system in Latvia 19
Overall investment environment 20
Key economic indicators 23
Infrastructure 25
International membership 27
Lithuania
General information 27
Geography and climate 28
Population and language 28
Political system in Lithuania 28
Overall investment environment 30
Key economic indicators 30
Infrastructure 34
International membership 35
Chapter 2
Business law 36
Estonia
How to invest 36
Corporate legal entities 36
Incorporation and capital requirements 37
© 2011 KPMG Baltics SIA, a Latvian limited liability company and a member fi rm of the KPMG
network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Management 38
Branch of foreign company 39
Representative offi ces 39
Mergers 40
Cross-border mergers 40
Going public 40
Insolvency proceedings 41
Bankruptcy proceedings 41
Settlement with creditors 41
Rehabilitation and compromise 42
Reorganization 42
Latvia
How to invest 43
Corporate legal entities 43
Incorporation and capital requirements 44
Management 46
Branch of foreign company 46
Representative offi ces 47
Mergers 47
Cross-border mergers 48
Going public 48
Insolvency proceedings 48
Legal protection proceedings 49
Insolvency proceedings of a private individual 50
Lithuania
How to invest 50
Corporate legal entities 51
Incorporation and capital requirements 52
Management 52
Branch of foreign company 53
Representative offi ces 54
Mergers 54
Cross-border mergers 55
Going public 55
Insolvency proceedings 56
Chapter 3
Business taxation 58
Estonia
Tax residency 58
Corporate income tax 58
Value added tax 61
Excise duties 64
Real estate tax, land tax 65
Other 65
© 2011 KPMG Baltics SIA, a Latvian limited liability company and a member fi rm of the KPMG
network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Latvia
Tax residency 65
Corporate income tax 65
Value added tax 69
Excise duties 71
Real estate tax, land tax 71
Other 71
Lithuania
Tax residency 72
Corporate income tax 72
Value added tax 79
Excise duties 81
Real estate tax, land tax 81
Other (local taxes) 82
Chapter 4
Individual taxation 83
Estonia
Tax residency 83
Personal income tax 83
Social security tax 86
Unemployment insurance 86
Pension insurance 86
Capital taxes 86
Inheritance and gift tax 86
Tax calculation example 86
Latvia
Tax residency 87
Personal income tax 87
Social security tax 90
Unemployment insurance 90
Capital taxes 90
Inheritance and gift tax 90
Tax calculation example 91
Lithuania
Tax residency 91
Personal income tax 91
Social security tax and 94
health insurance contributions
Unemployment insurance 94
Capital taxes 94
Inheritance tax 95
Tax calculation example 95
© 2011 KPMG Baltics SIA, a Latvian limited liability company and a member fi rm of the KPMG
network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Chapter 5
Accounting and auditing 96
Estonia
Acounting 96
Auditing 98
Latvia
Acounting 9
Auditing 105
Lithuania
Accounting 105
Auditing 107
Chapter 6
Employment 108
Estonia
Employment contracts 108
Remuneration 109
Working time 109
Termination of employment 110
Expatriates and immigration law 110
Trade unions 112
Latvia
Employment contracts 112
Remuneration 13
Working time 113
Termination of employment 113
Expatriates and immigration law 114
Trade unions 114
Lithuania
Employment contracts 115
Remuneration 16
Working time 116
Termination of employment 117
Expatriates 17
Immigration law 118
Trade unions 119
Chapter 7
Real estate 120
Estonia
Registration 120
Movable and immovable property 120
Acquisition 120
© 2011 KPMG Baltics SIA, a Latvian limited liability company and a member fi rm of the KPMG
network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
Real estate contracts 121
Mortgage 121
Latvia
Registration 122
Movable and immovable property 122
Acquisition 122
Real estate contracts 124
Mortgage 124
Lithuania
Registration 124
Movable and immovable property 124
Acquisition 125
Real estate contracts 125
Mortgage 126
Chapter 8
Other Legal Considerations 127
Estonia
Competition law 127
Intellectual property 129
Consumer protection 129
Anti-money laundering 130
Litigation and arbitration 130
Latvia
Competition law 130
Intellectual property 132
Consumer protection 132
Anti-money laundering 133
Litigation and arbitration 133
Lithuania
Competition law 134
Intellectual property 135
Consumer protection 136
Anti-money laundering 136
Litigation and arbitration 137
App Index A
Tax treaties 139
App Index B
Useful links 142
App Index C
KPMG in the Baltics 144
© 2011 KPMG Baltics SIA, a Latvian limited liability company and a member fi rm of the KPMG
network of independent member fi rms affi liated with KPMG International Cooperative (“KPMG
International”), a Swiss entity. All rights reserved.
10 | Investment in the Baltics
Chapter 1
Country profi le
Estonia
General information
Estonia is a forward thinking, ambitious nation with a rich heritage, melding western
infl uences with an eastern hunger for success. Currently, Estonia is very pro-business
with one of the most liberal trade and investment policies in Europe. It was the fi rst
country in Europe to introduce a fl at tax which ushered in an era of prosperity. Since
then, many other countries have followed Estonia’s lead.
Estonia is an attractive investment location in the Baltic Sea region and has been
successful in attracting foreign direct investment (FDI). This development of FDI stock
vividly demonstrates the economic potential of Estonia. Countries that are more
successful at attracting FDI will achieve more rapid convergence towards the EU’s
average economic development level. An infl ux of FDI involves a technological and
management know-how transfer into the fi rms and industries being invested in.
In addition, Estonia’s status as an EU member state translates into long term stability.
As of 1 January 2011, Estonia is a member of the euro area, which will further enhance
the country’s trade and tourism.
The Estonian economy is highly integrated with the Scandinavian countries. Finland
and Sweden have had positive infl uences on Estonian economic development.
Scandinavian countries are well-known for their technological and telecommunication
innovations. Due to the integration with Scandinavian countries, Estonia is advanced in
terms of the level of telecommunications infrastructure in Central and Eastern Europe.
Geography and climate
Estonia is located on the eastern coast of the Baltic Sea, sharing borders with Latvia in the
south and Russia in the east. Its nearest overseas neighbors are Finland and Sweden.
The territory of Estonia is 45,226 square km, which is slightly larger than the
Netherlands, but with only 10 percent of the population. There are over 1,500
islands and a comparable number of rivers and lakes. The terrain of Estonia is varied;
approximately 40 percent is forested and an additional 20 percent has swamps and
bogs. Estonia also possesses some mineral resources.
Estonia lies in the transitional zone between a continental and maritime climate.
The proximity of the Baltic Sea infl uences the weather conditions. The warmest month
is July, with an average temperature of 20oC, and the coldest month is January with an
average temperature of -6oC.
© 2011 KPMG Baltics SIA, a Latvian limited liability company and a member fi rm of the KPMG network of independent member fi rms affi liated with
KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.