Advantages of obtaining a property in Latvia
- Visa free travel into 179 countries, including US and Canada.
- Long standing partner of NATO, the EU, the EUR Zone Schengen since accession.
- GDP per capita of Latvia is 18,000 USD per year.
While property prices in Latvia are still below 1,000 EUR, new properties in the capital city can cost anywhere from 2,000 to 7,000 EUR/m2. Yields are not particularly high, averaging around 4%, but investing in Riga's Old Town may bring in annual yields of 6-7%.
Despite the pandemic, Latvia's GDP has remained stable and the country's economy is performing well. In fact, it only dropped by 3.5%, which is much better than most West-European countries. Over the last few years, salaries have increased from 600 to 860 EUR.
National debt in Latvia is around 50% of GDP, and tourist numbers are growing steadily. The process of buying real estate in Latvia is simple and regulated, making it a fast process for potential buyers.
Residence permits on the grounds of owning real estate
To obtain a residence permit through investment in Latvian properties, an investment of at least 250,000 EUR is required. It's important to note that agricultural land, woods, and forests cannot be purchased for this purpose. Additionally, each property acquired must be valued at a minimum of 80,000 EUR, with a 5% state tax and a 2% state duty added. Dependents such as spouses, minor children, and parents can also be granted residence permits.
The residence permit is initially granted for a period of 5 years, and must be renewed annually thereafter.
Residence permits on the grounds of company formation
Obtaining a residence permit through company formation is not recommended for taxation reasons, especially if you are already applying for a residence permit through property purchase.
Taxes & Rental income tax
Dual citizenship is allowed, but global income is subject to taxation. The personal income tax rate is 31%, the corporate income tax rate is 20%, and the value-added tax (VAT) is 20%. Social security tax is 35.09%, and taxes are levied on worldwide income.
The cost of purchasing real estate is relatively low, with affordable buy-sell costs. New builds are subject to a 21% VAT, while older buildings incur a 2% stamp duty and 0.5% notary fee. The sales party pays a 3% tax.
There are no inheritance, city, or wealth taxes, and capital gains tax (CGT) rates range from 20% (up to 20,004 EUR) to 31% (above 64,000 EUR), with generous deductions allowed. Alternatively, a flat fee tax of 10% is available, with no deductions.
Property taxes are higher than in Lithuania or Estonia, but lower than in Western Europe.
Which residence permits offer a path to permanent residency and citizenship?
To clarify, in Latvia, you can apply for citizenship after holding a permanent residence permit for five years, but you are required to have actually resided in the country for a total of at least ten years. The residence permits that can lead to permanent residency and citizenship in Latvia include, but are not limited to, employment, studies, investment, family reunification, and refugee status.
Restrictions & Challenges
- A 21% VAT rate is applied to new builds in Latvia's real estate market.
- The population of Riga and Latvia has been decreasing, which may not be a positive indicator for investing in the real estate market. This trend is different from the other Baltic capitals of Vilnius and Tallinn.
- Foreign buyers account for up to 70% of real estate purchases in Riga, which may pose a risk of market depression if they liquidate their investments.
- Latvia's unemployment rate is relatively high.