Latvia vs Malta. Comparison of investment attractiveness.
28 March 2017 · ORDO Group
Today Malta is a country, that holds the presidency of the Council of the European Union, and for many businessmen is a significant point of interest. In order to determine – if investment climate is as pleasant as Maltas geography, we compare Malta with Latvia by four factors: Residential Permit, Tax System, yields from properties, and business environment.
The investor in Malta may obtain the residence permit status, if the cost of property purchase in Malta is from €220,000 (on the island of Gozo and south of Malta) up to €275,000 (in other areas). Tenants who rent housing for more than €8,750 – €9,600 per year (depending on the location) can also obtain a residence permit in Malta.
Since September 1, 2014 Latvia increased rates and tightened immigration rules affecting, first of all, the citizens of the Russian Federation. From now on, it is possible to obtain a five-year residence permit when buying real estate (1 object) worth at least €250,000. Also, the buyer is obliged to pay a one-time charge to the State of Latvia amounted 5% of the purchasing price. Object’s cadastral value should not be less than €80,000. Thus, taking into account all payments, the cost has increased up to €270,000 (plus the services of lawyers, notaries and various fees).
In this way with a small privilege, Malta has better conditions for acquiring residential permit than Latvia. LATVIA – MALTA 0:1
Malta’s tax system is beneficial for entrepreneurs, wealthy individuals and investors who are looking for a stable, safe and attractive business environment. A very interesting and welcome legacy of Malta’s British colonial past is the remittance-based tax system. It sounds complicated but it isn’t: the crux of the matter is that foreigner can get a very beneficial tax treatment by becoming a resident of Malta. As a foreigner, you can qualify for one of the special residence schemes and as a consequence, the remittance basis of taxation will apply. This means that foreigners resident in Malta are only taxable in Malta on two types of income: Maltese sourced income and capital gains and foreign sourced income but only to the extent that it’s remitted to Malta.
The Latvia's taxation system is affected by both the Latvian legislation and the requirements laid down by the European Union. It can be described as average, because every tax payer contributes to the budget 30 % of his/her income. Besides, the Latvia's diverse system of tax rates, tax relief and allowances enables every tax payer to choose the optimum sector for their occupation and management of funds. The Republic of Latvia has the lowest effective (average) tax rate in the European Union. There are several areas of trade business with individual tax privileges – payments that are lower by 80% to 100%: for example, cities like Liepaja and Rezekne have special economic zones, but free ports of Riga and Ventspils can grant tax relief.
Despite the fact, that there are privilege taxes in both countries, PWC ranks Latvia 15 places higher than Malta (18 vs 33) in the global taxation report. LATVIA – MALTA 1:1
Rental yields in Malta increased in 2016 comparing with 2015. Larger investment apartments in the favourite expatriate areas such as Sliema, St. Julians and Swieqi have average prices per square metre of around €3,200 to €3,500. In these areas, one can expect to earn an average rental return of around 4.4%. According to the Central Bank of Malta, residential prices in Malta are rising now.
In the centre of Riga, a 45 m2 apartment returns a 5.2% rental yield. Renting costs of 45 m2 apartment is around €500 per month, but purchasing costs is around €115,000. The suburbs of Riga included in our research are Purvciems, Teika, Mezaparks and Vecmilgravis. Purchasing costs of 50 m2 apartment in these areas is around €78,000, but by renting it out you could earn around €343 monthly. Property owners thus enjoy rental yields of 5.2%. The property market´s recovery began in 2010 and accelerated in 2011, but since then the market has been much the same.
And with the score 5.2% vs 4.4%, Latvia wins. LATVIA – MALTA 2:1
The Maltese economy depends on foreign trade, manufacturing (especially electronics and pharmaceuticals), and tourism. The labour force in Malta equals to €1,021 that is almost 50% smaller than average in a Europe (€1,508). Due to favorable climate conditions there are low utilities costs, for 85 m2 premises the total utilities costs (Electricity, Heating, Water, Garbage) equals to €121. The average internet speed in Malta equals to 11 Mbps that is lower than average in Europe. In Malta English is second official language which makes Malta attractive for investors.
Latvian economy focuses on re-export of the commodities like refined petroleum and gas, and export of different types of wood, hard liquor and wheat. The labour force in Latvia is one of the cheapest in the European Union - €703 per month after taxes. Basic monthly utilities costs for 85 m2 premises equals to €202. Significant advantage of the country is its internet speed. With average speed of internet of 16.9 Mbps Latvia is in top ten countries by this indicator. Only 46% of Latvian population knows English, however in average Latvians know 2.7 language (Latvian, Russian, English) that is one of the highest ration in the Europe.
As a result, we can conclude that the attractiveness of business environment depends on the industry, so the score goes to both countries. LATVIA – MALTA 3:2
Sources: pwc.com, globalpropertyguide.com, nomoretax.eu, doingbusiness.org
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