Dienas Bizness: The Latgale Special Economic Zone (Latgale SEZ) has been operating successfully in the Latgale region for nine years, promoting investment, modernization of production, and the creation of new jobs. Latgale SEZ currently brings together 38 companies with special status that are actively developing their operations in the region. In total, 94 investment agreements have been concluded, with a combined value exceeding EUR 111 million.
We spoke with Aldis Adamovičs, Chairman of the Development Council of the Latgale Planning Region, about the advantages of the Latgale SEZ and what entrepreneurs gain from it.
How does the Latgale SEZ promote business development in the Latgale region?
The Latgale Special Economic Zone is a state support instrument that provides entrepreneurs—both manufacturers and service providers—with the opportunity to receive state-guaranteed tax incentives when investing in the Latgale region’s economy. Our main objective is to promote the creation of new jobs and the development of entrepreneurship in Latgale.
The advantages of the Latgale SEZ are available both to local entrepreneurs who plan to expand and diversify their production or range of services, and to foreign investors who wish to establish business operations in the Latgale region. This represents significant support for companies seeking to become more competitive in both the Latvian and international markets. At the same time, the Latgale SEZ makes an important contribution to the development of the region and the country as a whole by promoting tax revenue growth and overall economic development.
What tax incentives does the Latgale SEZ offer?
Investments attributable to SEZ projects include material investments made by companies in buildings and production facilities, machinery and equipment, as well as intangible investments, such as the acquisition of patents and technologies, and investments related to job creation. For several years now, entrepreneurs—including service providers—have also been able to apply for support for investments in newly created jobs.
Currently, the Latgale SEZ offers two main types of tax incentives.
First, companies may receive up to a 100% real estate tax rebate, applicable to production or service provision facilities where business activities are carried out.
Second, an 80% rebate on corporate income tax is applied at the time of dividend distribution. This means that if a company does not distribute profits as dividends, the profits are considered reinvested and no corporate income tax is payable. When dividends are paid, the company pays 20% of the distributable amount, in accordance with the standard tax regime.
What are the main advantages of the Latgale SEZ compared to other special economic zones in Latvia?
The key difference between the Latgale SEZ and other special economic zones in Latvia is that it does not have a defined, legally restricted territory. This allows entrepreneurs to choose any location within the entire Latgale region for their business activities.
In addition, the Latgale SEZ offers flexibility during a company’s growth phase. When planning and allocating their financial flows, entrepreneurs can expand their activities beyond the initial SEZ-supported investment. Companies from other regions of Latvia also have the opportunity to join the Latgale SEZ without establishing a new legal entity, which significantly reduces administrative barriers.
What other benefits are available to Latgale SEZ participants?
Entrepreneurs are not required to pay any fees for submitting investment projects to the Latgale SEZ administration. There are also no membership or participation fees for joining the Latgale SEZ.
Importantly, by signing an agreement with the Latgale SEZ, companies do not incur financial risks—if an investment project is not implemented for any reason, no sanctions are applied.
Equally significant is the benefit of recognition. Latgale SEZ status enhances a company’s credibility and strengthens its image as a stable, state-supported market participant. Entrepreneurs highly value this form of state support, as it provides a sense of security and positively impacts their reputation.
Furthermore, the Latgale SEZ actively cooperates with local governments and various Latvian and European institutions, providing entrepreneurs with opportunities to participate in international conferences, exchange experience, and expand their business networks abroad.
Which industries are currently investing the most in the Latgale SEZ?
Latgale is a geopolitically sensitive region, and since the start of the Russia–Ukraine war, attracting investment has become more challenging. Despite this, we continue to actively develop and expand tax incentive instruments and promote entrepreneurship in the region.
At present, the Latgale SEZ is particularly attractive to companies producing high value-added products, especially in the fields of electronics and optical fiber manufacturing. These technologically complex and capital-intensive industries account for the majority of the investment agreements concluded within the SEZ.
Who are the largest investors in the Latgale Special Economic Zone, and what motivates foreign investors to choose Latgale?
The primary factor attracting investors to the Latgale SEZ is the availability of tax incentives. However, many investors also highlight the region’s strong industrial traditions as a key advantage. Latgale has long been an industrial region, and its workforce has extensive experience in manufacturing complex products.
In cities such as Līvāni and Daugavpils, many specialists come from families of engineers and possess high levels of professional competence and practical manufacturing skills. Investors are also attracted by the region’s relatively lower average wage level, which enhances competitiveness compared to neighboring countries such as Lithuania and Estonia.
At the same time, it is important to note that several Latgale SEZ companies offer significantly higher-than-average salaries. For example, one high value-added company operating in the Latgale SEZ pays its employees an average monthly salary of EUR 3,800, demonstrating the region’s potential to attract and retain highly skilled professionals.
Currently, the largest investor in the Latgale SEZ is the local company SIA Light Guide Optics International, one of the world’s leading manufacturers of silicon dioxide optical fibers and fiber optic products. Located in Līvāni, the company reached a turnover of EUR 57.02 million in 2024 and employed 264 people.
Significant investments are also being made by SIA Pulsar Optics, a Lithuanian-owned company producing thermal imaging devices and digital night and day optics for the hunting, maritime, and security sectors. In 2024, the company achieved a turnover of EUR 82.0 million and employed 335 people.
How would you assess the availability of labor in the region?
The availability of labor in Latgale is generally sufficient; however, ensuring competitive salaries remains a key challenge. Companies offering wages above the regional average typically face no difficulties in attracting new employees.
Recent trends indicate an overall improvement in labor availability. It has become easier to attract specialists, partly due to successful remigration processes in the region. Under investment agreements concluded within the Latgale SEZ, more than 500 jobs have been planned, although the actual number of employees in companies often exceeds the figures initially stated in investment applications.
What are the future prospects for the Latgale SEZ?
The Latgale SEZ will continue to focus on attracting new investors and creating a favorable environment for business development in both the manufacturing and service sectors. Investments in business expansion and job creation will further contribute to the sustainable development of the entire region, which remains our primary objective.
Source: Dienas Bizness
