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Law on Support for Start-up Companies

November 25, 2016   •  09:28

On Wednesday, 23 November, 2016 Saeima adopted in the final reading a draft law establishing a support program for start-ups, thus promoting their creation.

The new law defines what a start-up is, as well as lays down the eligibility requirements for start-up companies to participate in state aid programs. 

The new law stipulates that eligibility for state aid shall be granted to start-ups that have attracted investments of at least EUR 30,000 from qualified venture capitalists for the company’s equity in each year of applying for support, thus showing the viability of the proposed business idea. 

Two types of state aid measures will be available to start-ups for their first five years in business as of the date of registration in the Commercial Register. One of these measures is a flat payment which is a monthly final payment of mandatory state social insurance contributions that the employer makes to the state social insurance special budget on behalf of an employee. The payment shall be in the amount of two minimum monthly contributions; in 2016, that is EUR 252.26 for salaries not exceeding EUR 4050 per month. If the employee’s monthly salary is above EUR 4050, the solidarity tax shall also have to be paid. This flat payment replaces mandatory social insurance contributions and personal income tax for the relevant employee. 

The other aid measure available to start-ups is aimed at attracting highly qualified employees. This measure may be used if the employee does not agree to the flat payment being made on their behalf. Likewise, a reduction in corporate and personal income tax will be available under specific conditions. 

The new law also stipulates the duration for which start-ups will be able to receive state aid, as well as relevant restrictions. A special committee, approved by the Ministry of Economics, is set to decide on whether a company is accepted into the state aid program. The rights and obligations of the committee, its decision-making procedure, as well as the procedure for maintaining a special start-up register are also set forth in the new regulations. Furthermore, the law stipulates the obligations of start-ups, as well as the procedure for removing  a company from the state aid program.

The state aid program for start-ups is scheduled to begin on 1 January 2017.