2020 International Tax Competitiveness Index Latvia

Latvia Is The 2nd Best in Tax Competitiveness Index

2020 International Tax Competitiveness Index Latvia
Via Christian Lue / Unsplash

Tax system in a country is very important for companies and businesses running in that country. States define their own tax systems and taxpayers conform to the system. While for some countries it is really difficult to say that tax system is fair, it is fairer, more competitive and more neutral for some other countries. Latvia, at this point, is one of the countries that have neutral and competitive tax system.

One of the most important criteria that evaluate tax systems of countries is International Tax Competitiveness Index (ITCI). This index evaluates tax systems of countries based on objectivity and competitiveness. Latvia is the second best country in the world among all countries that have the best tax system according to the evaluation by ITCI. This situation is the answer to the question why investors and entrepreneurs prefer Latvia.[1]

 

How Is Tax Competitiveness Index Determined?

International Tax Competitiveness Index is determined based on different factors. It should be noted that it is not only based on tax levels or similar factors in a country. In order for the index to be determined, more than 40 variables are analyzed and the result is simply based on all these variables.

For ITCI, firstly tax rates and taxing structure in a country are taken into account. Apart from that, many other tax types like corporate tax, individual income tax, property tax, consumption tax, tax for income earned in other countries etc. are considered.

Latvia Is The 2nd Best in Tax Competitiveness Index
Image Source: TaxFoundation

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Latvia Is The Second In OECD When Tax I Considered

Latvia managed to be the second best among OECD countries with its tax system and determined application of the system. Latvia has proven that it has much more competitive tax system compared to many other countries like USA, England, Canada, Germany and United Kingdom.

For foreign investors, one of the most important factors of a country is to have a competitive tax system. Because, if existing conditions don’t offer any advantage, it is almost impossible for investments to be successful. In such a case, nobody wants to invest money in that country. Consequently, that country becomes unable to attract foreign investors and starts struggling economically. Latvia, on the other hand, is one of the most attractive countries for investors recently after its success in this context.

According to the International Tax Competitiveness Index, TOP10 countries are as below:

  • >>> Estonia,
  • >>> Latvia,
  • >>> New Zealand,
  • >>> Switzerland,
  • >>> Luxembourg,
  • >>> Lithuania,
  • >>> Sweden,
  • >>> Czechia,
  • >>> Australia
  • >>> Slovakia

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Features of Latvian Tax System That Ease Competitiveness

Latvia is one of the countries that attract attention of investors and entrepreneurs. It has many advantages like recently being an EU member, being close to big markets and having the opportunity to reach long-distance markets via seaway. Additionally, it has incentives offered to investors and other convenient offerings as well.

On top of the list for incentives offered to investors by Latvia, tax deduction exists. As it is known, there are 5 important trade zones in Latvia. They are Rigafree port, Ventspils free port, Liepaja free port, Latgale SEZ and Rezekne SEZ. When investors invest in one of these 5 zones, they get the chance to benefit from the incentives below:

  • >>> Up to 80% deduction in property tax
  • >>> Up to 80% deduction in withholding tax
  • >>> Up to 80% deduction in corporate tax

Rather than the mentioned ones, there are different tax advantages and incentives as well. As a result, Latvia offers a competitive tax system for investors. With this tax system, new investors can reach their target levels and by producing there, they can get into the biggest markets around the world.

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