Analytics, Financial Services, Investments, Latvia, Taxation

From 1991 and until the end of 2016, foreign direct investment in Latvian companies amounted to EUR 7.21 billion, which means that foreign citizens and companies currently own about 29% of the total share capital of Latvian companies that have not been liquidated.

Compared to 2015, foreign direct investment accumulated in Latvia has decreased EUR 211.59 mln. One of the main reasons was the decision by Swedbanki to reduce its share capital by EUR 367.85 mln as part of optimization of Swedbank Group's capital structure.

Lursoft indicates that the annual amount of foreign direct investment in Latvia has been decreasing for the past several years. Back in 2009, foreign direct investment in Latvian companies' share capital increased EUR 1.05 bln, while in 2014 foreign direct investment rose EUR 150 mln and in 2015 - EUR 190 mln.

Lursoft report says that it remains to be seen whether the situation will change for the better in 2017, but there seem to be no grounds for optimism. This is also confirmed by a recent Stockholm School of Economics in Riga study, which indicates that the situation with investor protection in Latvia did not improve last year. Half of investors interviewed for the study said they were not planning additional investment in Latvia at the moment.

Lursoft board member Daiga Kiopa comments that foreign investors have repeatedly pointed to Latvia's unpredictable tax policy and delays with reforms to insolvency regulations.

"Take what we were seeing the past few months - the 2017 budget confirmation process when we could see how chaotic and badly thought out changes were being made to the tax policy, and the back-and-forth decisions about the status of insolvency administrators. These are just a few examples that show once again that investors' criticisms about unpredictability and political indecision are not without a reason," said Kiopa.