The Latvian Startup Law, Honestly

The Latvian Startup Law lets a qualifying company replace the normal payroll tax stack with one flat monthly payment per employee, and lets that employee stop paying income tax on the salary. It is a large saving for a company paying well above the minimum wage, it is bounded at 5 years, and its own public register names 127 companies since 2017.

This describes the rules as the law and its regulations state them, with a link to each. It is not advice, and whether the arithmetic favours your company is a question for someone who can see your payroll.

What Is the Latvian Startup Law?

The Latvian Startup Law runs two programmes for qualifying startups: a fixed monthly payment per employee that replaces the normal payroll tax stack and exempts that employee from income tax, and a grant of up to 45% of a highly qualified hire's pay. A company can use either or both, for up to 5 years.

Almost everything written about this law blurs two separate things together. They have different mechanics, different money behind them, and you can hold one, the other, or both.

The rest of this page is mostly about the fixed payment, because that is the one most companies mean and the one with the trade-off nobody mentions.

How Much Is the Startup Law Fixed Payment?

The fixed payment is the 34.09% contribution rate applied to 2 minimum monthly wages, which is EUR 1,560 today, whatever the employee earns, so it is the same every month for every supported employee. With the minimum wage at EUR 780, it saves nothing on a salary of two minimum wages and saves more the higher the salary.

That is the whole economics of the programme. Two minimum wages is EUR 1,560, and 34.09% of that is EUR 531.80 a month.

So the programme is worth nothing at all on an employee paid two minimum wages, and grows from there. It is a senior-salary subsidy wearing the language of startup support. If you are hiring juniors, it does close to nothing for you.

The employee's side is larger still, because their income tax goes from 25.5% to nothing. That is money in their pocket rather than yours, which is worth understanding before you present it as a benefit you are conferring.

The table is one salary at a time. The calculator runs yours, adds what the arrangement costs the employee, and sizes the liability the programme leaves on your balance sheet while you are in it.

What Does the Startup Law Cost Employees?

An employee under the fixed payment stops paying income tax on the salary but accrues sickness, unemployment, and pension entitlement only on 2 minimum monthly wages. They must top up their own pension by at least 10% of the gap, and they lose the non-taxable minimum, dependant allowances, and expense deductions on that income.

This is the reason the law makes you put the arrangement in the employment contract.

The state pays sickness, unemployment and pension benefits in proportion to what was contributed. Under the fixed payment, what is contributed is calculated on 2 minimum monthly wages, not on what the person earns. So for the whole time they are in the programme, an employee on a senior salary accrues sickness, unemployment and pension entitlement at the rate of someone earning far less.

The law compensates for part of this and is explicit about the rest:

• They must top up their own pension. At least 10% of the gap between their real pay and the fixed payment base, either into state pension insurance or a private scheme. They choose once, for the whole support period.
• They lose the annual non-taxable minimum, except against pension income.
• They lose the allowance for dependants, and cannot themselves be counted as someone else's dependant.
• They lose the deductions for education, medical costs and the other justified expenses, on the startup income.

And you must tell them. The law requires the startup to inform a candidate in writing, when the contract is signed, that it is a startup, that a fixed payment is made for them, and that they carry the pension obligation. That disclosure goes into the employment contract itself.

A senior engineer who understands the trade will often take it, because the income tax saving is immediate and large and the entitlement loss is distant. That is their call to make with the facts, not yours to make quietly.

Who Qualifies for the Latvian Startup Law?

A Latvian company qualifies if a qualified venture investor put at least EUR 30,000 into it in the previous 24 months, or EUR 15,000 from an accelerator or angel, or if it shows the Commission an innovative product. It must also have tax debt no higher than EUR 150 and no insolvency proceedings.

Three conditions, all of which must hold on the day you apply and throughout the support period:

1. Money or innovation. Either a qualified venture capital investor, not related to you, put at least EUR 30,000 into the company in the previous 24 months (or at least EUR 15,000, where the investor is an accelerator, an angel, or a vehicle owned by angels), or you show the Commission that you are developing an innovative product.
2. Tax debt no higher than EUR 150.
3. No insolvency proceedings.

The second route in the first condition is the one most write-ups still miss. It has been in the law since 2020, and it means "you need VC money" is no longer true. What replaces it is a judgement call: you submit evidence of an innovative product, and the Commission may ask organisations representing startups for an opinion on whether you are one. That is softer than a bank transfer, in both directions. It opens the door to bootstrapped companies and it makes the outcome much harder to predict before you apply.

Being an investor is itself a defined status. A fund needs a track record of at least three early-stage investments of EUR 30,000 or more; an accelerator, ten of at least EUR 15,000; an angel, two, totalling at least EUR 60,000 over five years. Each carries a cap on how much of the company the investor may hold. If your investor is not already on the published list, their qualification gets assessed alongside your application. The funding guide covers where that investment comes from.

How Long Does Startup Law Support Last?

A support period lasts 12 months, or 24 months where a qualified investor has put at least EUR 150,000 into the company. A company can re-apply after meeting its obligations, up to 5 years from its first grant. It applies to LIAA, which says it evaluates within a month, and the Commission decides.

You apply to LIAA through its portal, with a business plan and confirmation of the investment. LIAA says it evaluates within a month. The Commission decides, and the decision is published: the law requires a public register of every supported startup, with company name, registration number, address, decision date and which programme was granted.

A support period is 12 months. It is 24 months if you asked for that and a qualified investor has put at least EUR 150,000 into the company within 24 months of the application. You can re-apply after fulfilling your obligations, and on re-applying you may lean on the same investment that qualified you the first time, provided the new period starts within 24 months of the last decision. Total time in the programme is capped at 5 years from your first grant.

One thing to price in before you start. If you lose the right to the programme mid-period, you have one calendar month to recalculate and pay every tax for the whole support period under the ordinary rules, with late payment interest on top. The fixed payments you already made are credited against it. That is a contingent liability sitting on your balance sheet for as long as you are in the programme, and it grows with every month you stay.

The salary grant has a separate constraint: it is European project money with an end date. LIAA puts the allocation at EUR 2,625,000, of EUR 1,247,621.11 still unallocated when it last published the figure, running to 29 February 2028. It is granted as de minimis aid, which LIAA caps at EUR 300,000, and there are excluded sectors. Applications close when the money runs out rather than on a fixed date, so the remaining balance is the number to watch.

How Many Companies Use the Latvian Startup Law?

The Startup Law's public register held 127 companies as at 19 August 2026, counting every company supported since 2017. Of those, 93 have used the fixed payment and 45 the salary grant, and 77 appear more than once, so the programme reaches a small group that renews.

Because the register is public, this is countable rather than arguable, and the count is a total across the whole life of the programme, not a yearly figure.

Some texture on that number:

• 77 of the 127 appear more than once, the busiest thirteen times. So the register describes a small group renewing, not a wide funnel. Counting decisions instead of companies would nearly treble the apparent reach.
• 93 have used the fixed payment and 45 the salary grant. The fixed payment is the main programme by some distance.
• First-time entrants peaked at 37 in 2021 and fell to 8 in 2024, recovering somewhat since. The 2026 figure covers only part of the year.

Now the part we can add that nobody else can. 80 of the 127 are on this map, which is 63% of every company the law has ever supported. Read the other way, 80 of our 600 companies, or 13.4%, have used it at some point.

Both numbers are worth sitting with. The programme has reached roughly one in eight of the companies here, over that whole period, which is more than the raw count suggests and far less than the branding does. And a directory of Latvian startups turns out to contain about two thirds of everyone the Startup Law has ever touched, which tells you the law is aimed at a genuinely narrow population.

You can see the companies themselves.

Is the Latvian Startup Law Worth Applying For?

Only if you pay senior salaries. The fixed payment saves nothing unless an employee earns well above two minimum wages, so a company hiring juniors gains almost nothing. A company with institutional investment and several well-paid engineers can save tens of thousands a year, and a bootstrapped company with an innovative product can now apply too.

The decision rule, in the order the questions actually arise:

If you have no employees paid meaningfully above two minimum wages, no. The fixed payment saves you nothing on contributions at that level. Your employees would still get the income tax exemption, which is real, but it is a benefit to them, not a reduction in your costs, and it comes with the entitlement trade they need to agree to.

If you have raised from an institutional investor and are paying senior salaries, run the numbers. This is who the programme is for. On a handful of engineers the annual saving is in the tens of thousands, and the application is a business plan and a confirmation rather than a research project.

If you are bootstrapped with an innovative product and senior staff, it is now worth an application in a way it was not before 2020. Expect a judgement call rather than a checklist, and expect to make the case in writing.

If you want the salary grant specifically, check the remaining balance first. It is a fixed pot with a deadline, and the answer to whether it is still worth applying is a number LIAA publishes.

What Tax Advantage Do Latvian Companies Get Without the Startup Law?

Every Latvian company, supported or not, pays corporate income tax only when profit is distributed, so a company that reinvests its profit pays none. That needs no application, commission, or register, and for most companies it is worth more than either of the Startup Law's programmes.

How that works, and what it costs when you do distribute, is the subject of its own guide.

Frequently Asked Questions

What Is the Latvian Startup Law Salary Grant?

It is a grant of up to 45% of a highly qualified employee's pay for hours actually worked, funded with European regional development money. LIAA puts the allocation at EUR 2,625,000, of which EUR 1,247,621.11 was unallocated when last published, running to 29 February 2028.

Do You Need Venture Capital to Qualify for the Startup Law?

No. Since 2020 a company can qualify by showing the Commission that it is developing an innovative product instead of raising qualified investment. The Commission may ask organisations representing startups for an opinion, which makes the outcome harder to predict before applying.

Do Employees Pay Income Tax Under the Startup Law?

No. An employee covered by the fixed payment pays no income tax on the startup salary, which would otherwise be 25.5%. In exchange their social insurance entitlement is calculated on 2 minimum monthly wages, and they must top up their own pension.

What Happens If a Company Loses Startup Law Support Mid-Period?

It has one calendar month to recalculate and pay every tax for the whole support period under the ordinary rules, with late payment interest on top. The fixed payments it already made are credited against that bill.

Which Investors Count as Qualified Under the Startup Law?

A fund needs at least three early-stage investments of EUR 30,000 or more, an accelerator ten of at least EUR 15,000, and an angel two totalling at least EUR 60,000 over five years. Each carries a cap on how much of the company the investor may hold.

Sources

• Jaunuzņēmumu darbības atbalsta likums, the Startup Law. Article 4 has the qualifying criteria and the innovative product route. Article 5 defines a qualified investor. Article 6 has the fixed payment and the employee's pension obligation. Article 8 has the income tax relief and what it costs the employee. Articles 10 and 11 have the periods and the cap. Article 19 has the obligations, including the recalculation on losing eligibility.
• Cabinet Regulation No. 644 of 7 November 2023, for the salary grant and its aid intensity.
• Par valsts sociālo apdrošināšanu for the contribution rate, and the minimum wage regulation for the figure the fixed payment is built on.
• LIAA's programme page, for the budget, the remaining balance and the register of supported startups.
• The register of supported startups itself, joined to the companies on this map, for the counts in this guide.