Doing Business 2020 Latvia Economy Profile Latvia Page 1 Doing Business 2020 Latvia Economy Profile of Latvia Doing Business 2020 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as postfiling processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Employing workers Flexibility in employment regulation and redundancy cost Page 2 Doing Business 2020 Latvia About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of employing workers. Although Doing Business does not present rankings of economies on the employing workers indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational studies, which exhaustively cover business regulation and reform in different cities and regions within a nation. These studies provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business study, published in 2003, covered 5 indicator sets and 133 economies. This year’s study covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. To learn more about Doing Business please visit doingbusiness.org Page 3 Doing Business 2020 Latvia Ease of Doing Business in DB RANK DB SCORE Region OECD high income Latvia Income Category High income 19 Population 1,926,542 80.3 City Covered Riga Rankings on Doing Business topics - Latvia 15 16 15 26 25 28 45 56 55 61 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Topic Scores 94.1 73.5 82.3 82.3 85.0 68.0 89.0 95.3 73.5 59.8 Starting a Business (rank) 26 Getting Credit (rank) 15 Trading across Borders (rank) 28 Score of starting a business (0-100) 94.1 Score of getting credit (0-100) 85.0 Score of trading across borders (0-100) 95.3 Procedures (number) 4 Strength of legal rights index (0-12) 9 Time to export Time (days) 5.5 Depth of credit information index (0-8) 8 Documentary compliance (hours) 2 Cost (number) 1.5 Credit registry coverage (% of adults) 96.9 Border compliance (hours) 24 Paid-in min. capital (% of income per capita) 0.0 Credit bureau coverage (% of adults) 48.1 Cost to export Documentary compliance (USD) 35 Dealing with Construction Permits (rank) 56 Protecting Minority Investors (rank) 45 Border compliance (USD) 150 Score of dealing with construction permits (0-100) 73.5 Score of protecting minority investors (0-100) 68.0 Time to export Procedures (number) 14 Extent of disclosure index (0-10) 5.0 Documentary compliance (hours) 1 Time (days) 192 Extent of director liability index (0-10) 4.0 Border compliance (hours) 0 Cost (% of warehouse value) 0.4 Ease of shareholder suits index (0-10) 9.0 Cost to export Building quality control index (0-15) 12.0 Extent of shareholder rights index (0-6) 5.0 Documentary compliance (USD) 0 Extent of ownership and control index (0-7) 5.0 Border compliance (USD) 0 Getting Electricity (rank) 61 Extent of corporate transparency index (0-7) 6.0 Score of getting electricity (0-100) 82.3 Enforcing Contracts (rank) 15 Procedures (number) 4 Paying Taxes (rank) 16 Score of enforcing contracts (0-100) 73.5 Time (days) 107 Score of paying taxes (0-100) 89.0 Time (days) 469 Cost (% of income per capita) 233.4 Payments (number per year) 7 Cost (% of claim value) 23.1 Reliability of supply and transparency of tariff index (0-8) 7 Time (hours per year) 169 Quality of judicial processes index (0-18) 13.5 Total tax and contribution rate (% of profit) 38.1 Registering Property (rank) 25 Postfiling index (0-100) 98.1 Resolving Insolvency (rank) 55 Score of registering property (0-100) 82.3 Score of resolving insolvency (0-100) 59.8 Procedures (number) 4 Recovery rate (cents on the dollar) 41.4 Time (days) 16.5 Time (years) 1.5 Cost (% of property value) 2.0 Cost (% of estate) 10.0 Quality of the land administration index (0-30) 22.5 Outcome (0 as piecemeal sale and 1 as going 0 concern) Strength of insolvency framework index (0-16) 12.0 Page 4 Doing Business 2020 Latvia Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate a company To make the data comparable across economies, several assumptions about the business and the (number) procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business city -Is a limited liability company (or its legal equivalent). If there is more than one type of limited • Postregistration (for example, social security registration, liability company in the economy, the limited liability form most common among domestic firms is company seal) chosen. Information on the most common form is obtained from incorporation lawyers or the statistical office. • Obtaining approval from spouse to start a business or to leave -Operates in the economy’s largest business city. For 11 economies the data are also collected for the home to register the company the second largest business city. • Obtaining any gender specific document for company -Performs general industrial or commercial activities such as the production or sale to the public of registration and operation or national identification card goods or services. The business does not perform foreign trade activities and does not handle products subject to a special tax regime, for example, liquor or tobacco. It is not using heavily Time required to complete each procedure (calendar days) polluting production processes. • Does not include time spent gathering information -Does not qualify for investment incentives or any special benefits. -Is 100% domestically owned. • Each procedure starts on a separate day (2 procedures cannot -Has five business owners, none of whom is a legal entity. One business owner holds 30% of the start on the same day) company shares, two owners have 20% of shares each, and two owners have 15% of shares • Procedures fully completed online are recorded as ½ day each. -Is managed by one local director. • Procedure is considered completed once final document is received -Has between 10 and 50 employees one month after the commencement of operations, all of them domestic nationals. • No prior contact with officials -Has start-up capital of 10 times income per capita. -Has an estimated turnover of at least 100 times income per capita. Cost required to complete each procedure (% of income per -Leases the commercial plant or offices and is not a proprietor of real estate. capita) -Has an annual lease for the office space equivalent to one income per capita. • Official costs only, no bribes -Is in an office space of approximately 929 square meters (10,000 square feet). -Has a company deed that is 10 pages long. • No professional fees unless services required by law or commonly used in practice The owners: Paid-in minimum capital (% of income per capita) -Have reached the legal age of majority and are capable of making decisions as an adult. If there • Funds deposited in a bank or with third party before registration is no legal age of majority, they are assumed to be 30 years old. or up to 3 months after incorporation -Are in good health and have no criminal record. -Are married, the marriage is monogamous and registered with the authorities. -Where the answer differs according to the legal system applicable to the woman or man in question (as may be the case in economies where there is legal plurality), the answer used will be the one that applies to the majority of the population. Page 5 Doing Business 2020 Latvia Starting a Business - Latvia Standardized Company Legal form Sabiedriba ar ierobezotu atbildibu (SIA) Paid-in minimum capital requirement EUR 1 City Covered Riga Indicator Latvia OECD high income Best Regulatory Performance Procedure – Men (number) 4 4.9 1 (2 Economies) Time – Men (days) 5.5 9.2 0.5 (New Zealand) Cost – Men (% of income per capita) 1.5 3.0 0.0 (2 Economies) Procedure – Women (number) 4 4.9 1 (2 Economies) Time – Women (days) 5.5 9.2 0.5 (New Zealand) Cost – Women (% of income per capita) 1.5 3.0 0.0 (2 Economies) Paid-in min. capital (% of income per capita) 0.0 7.6 0.0 (120 Economies) Figure – Starting a Business in Latvia – Score 82.4 95.0 99.2 100.0 Procedures Time Cost Paid-in min. capital Figure – Starting a Business in Latvia and comparator economies – Ranking and Score DB 2020 Starting a Business Score 0 100 95.4: Estonia (Rank: 14) 94.1: Latvia (Rank: 26) 93.3: Lithuania (Rank: 34) 92.7: Denmark (Rank: 45) 91.3: Regional Average (OECD high income) 82.9: Poland (Rank: 128) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2020 Latvia Figure – Starting a Business in Latvia – Procedure, Time and Cost Time (days) Cost (% of income per capita) 1.4 5 1.2 Cost (% of income per capita) 4 1 Time (days) 0.8 3 0.6 2 0.4 1 0.2 0 0 1 2 3 4 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2020 Latvia Details – Starting a Business in Latvia – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Complete signatories’ cards and companies deeds, certify cards by an official 1 day EUR 45 (EUR 9 per Agency : Register of Enterprises or Public Notary signature for 5 founders) The application to the Register of Enterprises, the consents for appointment to the Management Board and the register of the shareholders must be notarized by either a notary public, by an official at the Register of Enterprises or signed by secure electronic signature. The fee for the verification of signatures by the official at the Register of Enterprises is EUR 9.00 per signature. The verification of signatures by the notary public is EUR 18.78 for the first two signatures and EUR 4.70 for each additional signature. Additionally, entrepreneurs have an option to use e-signature. Obtaining an electronic e-signature (such as eParaksts eID, eParakstsLV, eParaksts card) can take up to 10 days. Costs for using a secure electronic signature depends on the service provider: 1) For using eParakstsLV- free of charge 2) For using eID card - free of charge; However, the issue of eID card will cost the following: EUR 14,23 - the card will be issued within 10 business days; EUR 28,46 - the card will be issued within 2 business days. 3) For using eParaksts card - monthly subscriber fee depending on number of cards held by the legal entity. The fee for making the card is EUR 52,01; about 0.40 EUR per one signature, 4.13 EUR for 20 signatures, or 9.95 EUR for a subscription for one year with unlimited signatures. 2 Open a bank account and get a receipt of reference from the bank 1 day EUR 10 Agency : Bank According to the Sec. 146 of the Commercial Law, at least 50% of the equity capital shall be signed fully and paid-up at least by the submission of the application for registration. If a company has start-up capital below 2,800 EUR, it is not mandated to show proof of depositing capital, and founders can instead certify the payment of share capital. Most banks do not levy a fee for opening a bank account, but a fee needs to be paid to obtain a bank statement on the payment of the share capital. Generally it is about EUR 10, depending on the bank. Most banks increase the fee for issuance of the statement within one business day. Page 8 Doing Business 2020 Latvia 3 Register at the Register of Enterprises and with the State Revenue Service (tax authority) 3 days EUR 150 (state fee) + for VAT EUR 27.03 (publication Agency : Register of Enterprises and State Revenue Service fee)+4.00 (in-person The following company incorporation documents must be submitted to the Register of Enterprises: registration fee) • Registration application, on a special form provided by the Registry (includes information on Board members and company share capital) signed in front of a notary public • Company charter • Foundation agreement (Resolution on foundation in case of one founder) • Proof of investment • Consent to the election to the Management Board • Notice of the Management Board on legal address of the Company • Power of Attorney in case any of the founders is signing the Registration application via authorized person • Information on beneficial owners The entrepreneurs have to pay the state fee (EUR 150 for companies with capital equal to or exceeding EUR 2,800; EUR 20 for companies with capital below 2,800) and the publication fee (EUR 27.03 for companies with capital equal to or exceeding EUR 2,800; EUR 14.23 for companies with capital below 2,800). Since June 2017, an additional EUR 4.00 fee applies to customers who submit an application for registration and accompanying documents to the Company's customer service room on-site.These fees can be paid either in advance (in that case, proof of payment must be submitted) or at the moment of submitting the documents for registration. Company can apply for registration as VAT payer at the same time as applying for incorporation. Alternatively, registration procedure can be done online via https://www.latvija.lv/Epakalpojumi/EP119/Apraksts. The documents submitted in the e-service can be signed with an e-signature issued in the Republic of Latvia - smart card e-signature (e- signature, eID) or virtual e-signature (eParakstsLV). Consent to election to the position of the Management Board member needs to be signed by secure electronic signature or the signature needs to be approved by the notary public or the official of the Register of Enterprises. Alternatively the consent can be inserted in the registration application, however the signature of the Management Board member needs to be approved as described above. Consent of the owner of the real estate regarding registering the registered address of the company to be established also needs to be submitted to the Register of Enterprises. Notarized Section of Shareholders Register must also be submitted. According to amendments of the Annual Reports Law, the annual report of the company should be reviewed by the sworn auditor and the appointment of auditor is needed only if two of the following three criteria are exceeded: 1) the sum of the balance sheet amounts to EUR 400 000 - 800 000; 2) the net turnover amounts to EUR 800 000 - 1 600 000; 3) average number of the employees during the financial year amounts to 25-50. Starting December 1, 2017 any new registered company has to include information on beneficiaries in accordance with Law on the Prevention of Money Laundering and Terrorism Financing (AML law). This information has to be submitted in the application of establishment when a company is being registered and it is impossible to register a company without submitting the information. 4 Register employees for mandatory state social insurance contribution with the State Less than one day no charge Revenue Service (online procedure) Agency : State Revenue Service Regulation No 827 On Registration of Persons Performing Mandatory State Social Insurance Contributions and Personal Income Tax of the Cabinet of Ministers of Republic of Latvia (dated 7 September 2010) has been adopted and states that the following persons must register with the territorial agency of the State Revenue Service: employers, self-employed person, domestic employees working for foreign employers, and foreign employees working for foreign employers. There have been amendments made to the Regulation No 827 dated 09.10.2012 and 19.02.2013 providing that the employer registers the employee with the State Revenue Service no later than one day before the person starts the work if the application has been filed in paper format or not later than one hour before the person starts work if the application has been filed via electronic declaring system. Furthermore, the person can be registered at any customer service center of the State Revenue Service instead of the respective territorial department of the State Revenue Service. Also, as of 01.07.2013 the employee's profession (position in the company, specialty) in accordance with the Profession classification needs to be notified to the State Revenue Service at the registration process. Employees registration is done using the Electronic Declaration System (https://eds.vid.gov.lv) of the State Revenue Service. Takes place simultaneously with previous procedure. Page 9 Doing Business 2020 Latvia Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2019. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining all necessary clearances, licenses, permits and certificates The construction company (BuildCo): • Submitting all required notifications and receiving all necessary - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest inspections business city. For 11 economies the data are also collected for the second largest business city. • Obtaining utility connections for water and sewerage - Is 100% domestically and privately owned; has five owners, none of whom is a legal entity. Has a licensed architect and a licensed engineer, both registered with the local association of architects • Registering and selling the warehouse after its completion or engineers. BuildCo is not assumed to have any other employees who are technical or licensed Time required to complete each procedure (calendar days) experts, such as geological or topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse upon its • Does not include time spent gathering information completion. • Each procedure starts on a separate day—though procedures that can be fully completed online are an exception to this rule The warehouse: • Procedure is considered completed once final document is - Will be used for general storage activities, such as storage of books or stationery. received - Will have two stories, both above ground, with a total constructed area of approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 meters (9 feet, 10 inches) high and will be • No prior contact with officials located on a land plot of approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of income per - Will have complete architectural and technical plans prepared by a licensed architect. If capita) preparation of the plans requires such steps as obtaining further documentation or getting prior • Official costs only, no bribes approvals from external agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory Building quality control index (0-15) requirements). • Quality of building regulations (0-2) The water and sewerage connections: • Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there is no water • Quality control during construction (0-3) delivery infrastructure in the economy, a borehole will be dug. If there is no sewerage • Quality control after construction (0-3) infrastructure, a septic tank in the smallest size available will be installed or built. - Will have an average water use of 662 liters (175 gallons) a day and an average wastewater flow • Liability and insurance regimes (0-2) of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and • Professional certifications (0-4) a peak wastewater flow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 10 Doing Business 2020 Latvia Dealing with Construction Permits - Latvia Standardized Warehouse Estimated value of warehouse EUR 762,153.60 City Covered Riga Indicator Latvia OECD high income Best Regulatory Performance Procedures (number) 14 12.7 None in 2018/19 Time (days) 192 152.3 None in 2018/19 Cost (% of warehouse value) 0.4 1.5 None in 2018/19 Building quality control index (0-15) 12.0 11.6 15.0 (6 Economies) Figure – Dealing with Construction Permits in Latvia – Score 64.0 52.2 97.9 80.0 Procedures Time Cost Building quality control index Figure – Dealing with Construction Permits in Latvia and comparator economies – Ranking and Score DB 2020 Dealing with Construction Permits Score 0 100 87.9: Denmark (Rank: 4) 84.9: Lithuania (Rank: 10) 82.6: Estonia (Rank: 19) 76.4: Poland (Rank: 39) 75.6: Regional Average (OECD high income) 73.5: Latvia (Rank: 56) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Page 11 Doing Business 2020 Latvia Figure – Dealing with Construction Permits in Latvia – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 0.2 Cost (% of warehouse value) 150 0.15 Time (days) 100 0.1 50 0.05 0 0 1 2 3 4 *5 6 7 8 9 * 10 11 * 12 13 14 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 12 Doing Business 2020 Latvia Figure – Dealing with Construction Permits in Latvia and comparator economies – Measure of Quality 14 13.0 12.0 11.6 12 11.0 11.0 10.0 Index score 10 8 6 4 2 0 Latvia Denmark Estonia Lithuania Poland OECD high income Details – Dealing with Construction Permits in Latvia – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain topographic survey of the land plot 24 days EUR 475 Agency : Private licensed company The on-site work will usually be done within 1-2 days. The preliminary information will be made available within two weeks, based on which the architect can begin to develop the project. The rest of the time is allocated to allow all the involved institutions to provide their input (depending on which communications might be present at a particular site). Next, the Geodesic Division of the Riga Construction Board approves the topographic survey. 2 Obtain geo-technical study of the land 21 days EUR 1,000 Agency : Private licensed company For the warehouse, as described in the case study, the minimum requirement would be approximately 6 points of testing the soil and at least 1 drill of at least 5 meters deep. In addition the company charges for interpreting the results. The geo-technical survey is carried out using the information presented in the topographic survey. 3 Request and obtain a building permit 30 days EUR 1,409 Agency : Municipal Building Board From October 1st, 2014 a new Construction Law was enforced. According to the new Law, BuildCo applies for a construction permit by submitting only the Outline of the building that shows the exact location of the building, the architecture of facades , building construction volume and the intended usage of the building. After that the Building Board reviews the outline and if it is in accordance with the local planning and zoning rules, issues the Building permit with architectural planning conditions. According to Construction law, Section 12 , the Building permit should be either issued or declined within 30 days. After obtaining the building permit with architectural conditions specified, BuildCo has to start developing the Technical Project which will require obtaining the mandatory technical conditions from the relevant agencies (environment protection agency, water and sewage company). 4 Obtain technical requirements from the State Environmental Service of the Republic of 28 days no charge Latvia Agency : State Environmental Service of the Republic of Latvia Technical requirements from the State Environmental Service are issued free of charge. After obtaining the building permit, BuildCo can begin obtaining all the technical conditions. 5 Obtain technical requirements from water and sewage company 21 days no charge Agency : Riga Water Company (Rīgas Ūdens) According to the Regulation No 500 of the Cabinet of Ministers the General Construction Regulations from August 19, 2014 (Paragraph 17) the technical requirements should be issued within 20 days. It takes on average 3 weeks in practice. 6 Obtain design clearance from water and sewage company 7 days no charge Agency : Riga Water Company (Rīgas Ūdens) The applicant must obtain approval of the project design from the water and sewage company after having first obtained the technical requirements. 7 Obtain a note in the construction permit regarding execution of the design conditions 21 days no charge Agency : Municipal Building Board According to the Construction law Section 12, the building authority shall make a note in the construction permit regarding execution of the design conditions included therein within 15 working days from the day when documents certifying execution of all the relevant conditions were submitted to the building authority. This is done after having obtained all the technical requirements and getting the design clearance. Page 13 Doing Business 2020 Latvia 8 Obtain a note in the construction permit regarding execution of the conditions for 7 days no charge commencing construction work Agency : Municipal Building Board According to the Construction law Section 12, the Building Authority shall make a note in the explanatory memorandum, certification card or construction permit regarding execution of the conditions for commencing construction work within five working days from the day when documents certifying execution of all the relevant conditions were submitted to the building authority.This can be done after having obtained a note in the construction permit regarding execution of the design conditions. 9 Receive inspection by the State Environmental Service of the Republic of Latvia 1 day no charge Agency : Latvian Environment Agency A representative from the State Environmental Service conducts an on-site inspection. Receive inspection by Fire Safety and Rescue Department 1 day no charge 10 Agency : Fire Safety and Rescue Department A representative from the Fire Safety and Rescue department conducts an on-site inspection. 11 Obtain measurements from State Land Service 27 days EUR 263 Agency : State Land Service Before placing the newly built or renovated building into operation, the State Land Service takes the measurements of the building and draws the plans of each floor. This is done within 27 days; however, in cases with very complicated buildings, this could take longer. The costs are calculated according to the technical parameters of the building. Obtain water and sewerage connection 20 days EUR 37 12 Agency : Riga Water Company (Rīgas Ūdens) According to the Construction Regulations, a written application should be submitted to the relevant water and sewerage company (in Riga, the company is Riga Water Ltd.). 13 Receive on-site inspection and obtain the final handover certificate 5 days no charge Agency : Municipal Building Board Use of the building may begin only after the final handover. Municipal Building Board inspects the completed project and issues the final handover certificate. 14 Register the building in the land book 20 days EUR 23 Agency : Land Registry After receiving of the handover certificate, the building can be registered in the land book. If the owner of the building is the same as the owner of the land, the building is registered in the same file as the land and is deemed an undivided property. If the owners are different for the building, a separate and independent file is opened and the building is considered a separate object of ownership only while the lease is in force. After that, the building is either removed or becomes the property of the land owner. The cost to complete the procedure is EUR 14.23 for adding the building into the folio + EUR 8.58 for notarized request to register the building. Takes place simultaneously with previous procedure. Page 14 Doing Business 2020 Latvia Details – Dealing with Construction Permits in Latvia – Measure of Quality Answer Score Building quality control index (0-15) 12.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; Free 1.0 of charge. Which requirements for obtaining a building permit are clearly specified in the building regulations or on any List of required 1.0 accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in compliance with existing Licensed architect; 1.0 building regulations? (0-1) Licensed engineer. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? (0-2) Inspections by in- 1.0 house engineer. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance with the approved Yes, final inspection 2.0 plans and regulations? (0-2) is done by government agency; Yes, in-house engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 0.0 Which parties (if any) are held liable by law for structural flaws or problems in the building once it is in use No party is held liable 0.0 (Latent Defect Liability or Decennial Liability)? (0-1) under the law. Which parties (if any) are required by law to obtain an insurance policy to cover possible structural flaws or No party is required 0.0 problems in the building once it is in use (Latent Defect Liability Insurance or Decennial Insurance)? (0-1) by law to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the architectural plans Minimum number of 2.0 or drawings are in compliance with existing building regulations? (0-2) years of experience; University degree in architecture or engineering; Passing a certification exam. What are the qualification requirements for the professional who supervises the construction on the ground? (0- Minimum number of 2.0 2) years of experience; University degree in engineering, construction or construction management; Passing a certification exam. Page 15 Doing Business 2020 Latvia Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection (number) To make the data comparable across economies, several assumptions about the warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining all necessary clearances and permits The warehouse: • Completing all required notifications and receiving all necessary - Is owned by a local entrepreneur and is used for storage of goods. inspections - Is located in the economy’s largest business city. For 11 economies the data are also collected for • Obtaining external installation works and possibly purchasing the second largest business city. material for these works - Is located in an area where similar warehouses are typically located and is in an area with no physical constraints. For example, the property is not near a railway. • Concluding any necessary supply contract and obtaining final - Is a new construction and is being connected to electricity for the first time. supply - Has two stories with a total surface area of approximately 1,300.6 square meters (14,000 square Time required to complete each procedure (calendar days) feet). The plot of land on which it is built is 929 square meters (10,000 square feet). • Is at least 1 calendar day The electricity connection: • Each procedure starts on a separate day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140- • Does not include time spent gathering information kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 kilowatt (kW). - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution • Reflects the time spent in practice, with little follow-up and no network and is either overhead or underground, whichever is more common in the area where the prior contact with officials warehouse is located and requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other Cost required to complete each procedure (% of income per owners’ private property because the warehouse has access to a road. capita) - Does not require work to install the internal wiring of the warehouse. This has already been • Official costs only, no bribes completed up to and including the customer’s service panel or switchboard and the meter base. • Value added tax excluded The monthly consumption: The reliability of supply and transparency of tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 p.m. (8 hours • Duration and frequency of power outages (0–3) a day), with equipment utilized at 80% of capacity on average and that there are no electricity cuts • Tools to monitor power outages (0–1) (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest supplier. • Regulatory monitoring of utilities’ performance (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation purposes only 30 days are used. • Financial deterrents limiting outages (0–1) • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor in the ranking on the ease of getting electricity. Page 16 Doing Business 2020 Latvia Getting Electricity - Latvia Standardized Connection Name of utility Sadales Tikls Price of electricity (US cents per kWh) 11.4 City Covered Riga Indicator Latvia OECD high income Best Regulatory Performance Procedures (number) 4 4.4 3 (28 Economies) Time (days) 107 74.8 18 (3 Economies) Cost (% of income per capita) 233.4 61.0 0.0 (3 Economies) Reliability of supply and transparency of tariff index (0-8) 7 7.4 8 (26 Economies) Figure – Getting Electricity in Latvia – Score 83.3 61.3 97.1 87.5 Reliability of supply and transparency of Procedures Time Cost tariff index Figure – Getting Electricity in Latvia and comparator economies – Ranking and Score DB 2020 Getting Electricity Score 0 100 92.9: Lithuania (Rank: 15) 90.2: Denmark (Rank: 21) 85.9: Regional Average (OECD high income) 83.3: Estonia (Rank: 53) 82.3: Latvia (Rank: 61) 82.3: Poland (Rank: 60) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Figure – Getting Electricity in Latvia – Procedure, Time and Cost Time (days) Cost (% of income per capita) 250 100 Cost (% of income per capita) 200 80 Time (days) 150 60 100 40 20 50 0 0 1 2 3 *4 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures Page 17 Doing Business 2020 Latvia reflected here, see the summary below. Figure – Getting Electricity in Latvia and comparator economies – Measure of Quality 8.2 8 8 8 7.8 Index score 7.6 7.4 7.4 7.2 7 7 7 7 6.8 6.6 6.4 Latvia Denmark Estonia Lithuania Poland OECD high income Page 18 Doing Business 2020 Latvia Details – Getting Electricity in Latvia – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application to Sadales Tikls and await estimate and technical conditions 14 calendar days EUR 0 Agency : Sadales tikls AS A filled in form of “Application for Connection to Electricity Network” has to be submitted at any Sadales tīkls AS Customer Service Centre. Any Customer Service Centre provides detailed information on the procedure of the document submission and getting a new connection. In order to speed up the connection procedure the application may be sent by e-mail or post. The application form and the attached Agreement on the Procedure of Establishing Connection with Electric Facilities and Construction Design are also available electronically on Sadales tīkls AS homepage at www.sadalestikls.lv and can be filled in and if necessary printed out. The application form contains information on the additional documents to be submitted together with the form. A document confirming the right of the person to sign the application; a copy of the Registration Certificate; a copy of the Tax payer Certificate; a copy of location map (land boundary map or location layout); a copy of the document confirming the title to real property or the rights to use the respective property; a copy of construction plan approved by Construction Board; and other documents if needed may be attached to the application. If site inspection by DSO is necessary to prepare an evaluation of connection there usually is no need for the participation of customer. After the application has been registered according to the "Regulations On System Connection for Electricity System Participants", Sadales tīkls AS estimates the potential costs of establishing the connection and informs the customer. Sadales tīkls AS drafts the technical regulations for the connection. There is no additional inspection required, however the customer submits a certificate on the internal wiring to DSO before the final connection of his equipment 2 Hire certified electrical designer to obtain design of the external electricity network and its 60 calendar days EUR 1,422.9 approval Agency : Electrical design firm Customer hires a certified electrical designer or electrical design firm to obtain the approved design of the external electricity network based on utility' s issued technical conditions. Certified electrical designer or electrical design firm prepares design and coordinates approval process with the utility and other stakeholders in order to get the design approved. 3 Await completion of external works by utility's subcontractor 33 calendar days EUR 34,149.6 Agency : Sadales tikls AS After the connection agreement has been concluded and the connection payment made, Sadales tīkls AS organizes the connection construction works up to the borders of the belonging of the customer's electrical installation. The utility hires an electrical contractor. In order to do so, the utility is organizing a public tender to award the external connection works to a private firm. The utility usually has all material on stock and gives the material to the firm that does the connection works. The utility can have material for a better price, as they buy the material in large quantities and keep stock for about a year. The customer is paying the cost for the works and the material directly to the utility. Once the connection works are finished, the electrical contractor makes some tests of the connection and sends the results to the utility for approval. After completing external connection works, Sadales tīkls AS signs an agreement on the use of the distribution network with the customer. The customer confirms that the internal wiring of the warehouse conforms with existing technical standards and, if he agrees with the terms of the contract, signs and sends both documents to the Sadales tīkls AS. After a few days, the controlling engineer/electrician from Sadales tīkls AS inspects the constructed electrical network connection, installs the meter and seals the meter chains and connects the customer’s electrical installation to the electrical network. 4 Sign electricity supply contract with electricity retailer, await and receive final electricity 3 calendar days EUR 0 flow Agency : Electricity Retailer Electricity supply contact can be concluded with any supplier of electricity operating in Latvia's competitive market. Within 3 days after signing the contract the customer receives electricity flow. Takes place simultaneously with previous procedure. Page 19 Doing Business 2020 Latvia Details – Getting Electricity in Latvia – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 7 Total duration and frequency of outages per customer a year (0-3) 3 System average interruption duration index (SAIDI) 1.0 System average interruption frequency index (SAIFI) 0.4 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of supply? Yes Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages exceed a certain cap? No Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online DSO's web page: http:// https://www.sadalestikls.lv /uploads/2018/01/ST_tarifi _ENG.pdf The Official publisher of the Republic of Latvia “Latvijas Vestnesis” https://www.vestnesis.lv/o p/2016/88.19 Public utilities commission web page: https://www.sprk.gov.lv/up loads/doc/LemumsN073D 05052016.pdf Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 20 Doing Business 2020 Latvia Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable property To make the data comparable across economies, several assumptions about the parties to the (number) transaction, the property and the procedures are used. • Preregistration procedures (for example, checking for liens, The parties (buyer and seller): notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). • Registration procedures in the economy's largest business city. - Are located in the periurban (that is, on the outskirts of the city but still within its official limits) • Postregistration procedures (for example, filling title with area of the economy’s largest business city. For 11 economies the data are also collected for the municipality) second largest business city. - Are 100% domestically and privately owned. Time required to complete each procedure (calendar days) - Perform general commercial activities. • Does not include time spent gathering information The property (fully owned by the seller): • Each procedure starts on a separate day - though procedures - Has a value of 50 times income per capita, which equals the sale price. that can be fully completed online are an exception to this rule - Is fully owned by the seller. • Procedure is considered completed once final document is - Has no mortgages attached and has been under the same ownership for the past 10 years. received - Is registered in the land registry or cadastre, or both, and is free of title disputes. • No prior contact with officials - Is located in a periurban commercial zone (that is, on the outskirts of the city but still within its official limits), and no rezoning is required. Cost required to complete each procedure (% of property - Consists of land and a building. The land area is 557.4 square meters (6,000 square feet). A two- value) story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in good condition, has no heating system and complies with all safety standards, • Official costs only (such as administrative fees, duties and building codes and legal requirements. The property, consisting of land and building, will be taxes). transferred in its entirety. • Value Added Tax, Capital Gains Tax and illicit payments are - Will not be subject to renovations or additional construction following the purchase. excluded - Has no trees, natural water sources, natural reserves or historical monuments of any kind. - Will not be used for special purposes, and no special permits, such as for residential use, Quality of land administration index (0-30) industrial plants, waste storage or certain types of agricultural activities, are required. • Reliability of infrastructure index (0-8) - Has no occupants, and no other party holds a legal interest in it. • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 21 Doing Business 2020 Latvia Registering Property - Latvia Indicator Latvia OECD high income Best Regulatory Performance Procedures (number) 4 4.7 1 (5 Economies) Time (days) 16.5 23.6 1 (2 Economies) Cost (% of property value) 2.0 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 22.5 23.2 None in 2018/19 Figure – Registering Property in Latvia – Score 75.0 92.6 86.6 75.0 Procedures Time Cost Quality of the land administration index Figure – Registering Property in Latvia and comparator economies – Ranking and Score DB 2020 Registering Property Score 0 100 93.0: Lithuania (Rank: 4) 91.0: Estonia (Rank: 6) 89.9: Denmark (Rank: 11) 82.3: Latvia (Rank: 25) 77.0: Regional Average (OECD high income) 63.9: Poland (Rank: 92) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Page 22 Doing Business 2020 Latvia Figure – Registering Property in Latvia – Procedure, Time and Cost Time (days) Cost (% of property value) 2.5 16 14 Cost (% of property value) 2 12 Time (days) 10 1.5 8 1 6 4 0.5 2 0 0 1 2 3 4 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology). For details on the procedures reflected here, see the summary below. Page 23 Doing Business 2020 Latvia Figure – Registering Property in Latvia and comparator economies – Measure of Quality 35 30 27.5 28.5 24.5 23.2 Index score 25 22.5 20 19.0 15 10 5 0 Latvia Denmark Estonia Lithuania Poland OECD high income Details – Registering Property in Latvia – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Verification of title Less than one day, EUR 5; (EUR 2.52 for non- Agency : Land Registry online attested paper copy The buyer should request from the Land Register website an updated extract from the relevant EUR 6.20 for attested folio of the Land Registry, which allows the buyer to verify the title of the real estate and the legal paper copy rights attached to it. Any credit or debit card holder can obtain information on any real estate EUR 5.00 for a electronic registered in the Land Register. (PDF) version EUR 7.11 for paper copy) 2 Municipality’s first refusal rights 5 days No charge Agency : Municipality The parties submit the signed real estate sales agreement to the municipality for a decision on its first refusal rights. If the municipality does not need the property for municipal functions set by law, the municipality must issue a statement waiving the right of first refusal within 5 business days from receiving the purchase agreement or a copy. When it is necessary for the municipality to perform its self-government functions on the real estate, it must prepare a statement waiving the right of first refusal within 20 days from receiving the purchase agreement or a copy. The buyer cannot register title to the real estate with the Land Registry without waiting for expiry of the entire term as set out above. If the municipality does not take a decision within these 20 business days, the title can be transferred to the buyer after passing of 27 days from the day the municipality was asked to exercise its rights of first refusal. 3 Notarial certification of signatures of both parties on the application 1 day EUR 80.41; (1) Agency : Notary Office Certification of the The parties sign and a notary attests the application for the registration of the buyer’s title with the signature of both parties land registry or Land Book. The registration application should contain the authorization to the (two persons), EUR 18.78 person that is entitled to perform the registration Procedures. If the authorization is not each; incorporated in the registration application, the parties can: 1) issue a notarized power of attorney 2) Information about both to this effect, or 2) incorporate the authorization in the sales agreement, in which case the sales companies - EUR 7,12 agreement must be attested by a notary, or 3) authorize a notary to process the registration of title. each; 3) Information from the Citizen's register - EUR 5,41 for each person (2 required) 4) Information from the Invalid documents' register - EUR 1,42 for each person (2 required); 5) Information from the Land Book register for both companies - EUR 7,12 for each company. Additionally the state fee - EUR 0,71 is being added. The total sum is being taxed with the VAT of 21% (not included in estimates).) Page 24 Doing Business 2020 Latvia 4 Registration of the buyer’s title 10 days EUR 15,264.41; (EUR Agency : Land Registry (Land Book) 14,23 (processing fee for The parties submit the documents obtained in the previous Procedures to the Land Registry Unit the registration of title), of the Land Book. After reviewing all submitted documents a Land Book judge adopts a decision EUR 7,11 (processing fee on registration of change of ownership rights. A true copy of a decision shall be issued, which a for the receipt of the judge and a secretary of a Land Register office shall certify with their signatures. Entry shall be registration certificate), made in a Land Register not later than the next working day after a decision has been taken, and 2% of the highest of either they shall be signed by a judge and a secretary of a Land Register office on the same day. the purchase price of the The following documents must be provided together with registration application: real estate valu) • Real estate sales agreement signed by parties • Statement of the payment of real estate tax (Obtained in Procedure 1) • Municipality’s approval of the transfer (Obtained in Procedure 2) • Notarized application for the registration (obtained in Procedure 4) • Statement on the shareholders of the buyer (obtained in Procedure 3) • Receipt of payment of stamp duty and registration fee. (The payment for registration and the stamp duty can be paid at POS stations in the Land Registry. Receipt of payment should be submitted before the registration of the title) Takes place simultaneously with previous procedure. Page 25 Doing Business 2020 Latvia Details – Registering Property in Latvia – Measure of Quality Answer Score Quality of the land administration index (0-30) 22.5 Reliability of infrastructure index (0-8) 8.0 Type of land registration system in the economy: Title Registration System What is the institution in charge of immovable property registration? Land Registry office of Riga city Vidzeme district court In what format are past and newly issued land records kept at the immovable property registry of the largest Computer/Fully digital 2.0 business city of the economy —in a paper format or in a computerized format (scanned or fully digital)? Is there a comprehensive and functional electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: State Land Service Riga Regional Division In what format are past and newly issued cadastral plans kept at the mapping agency of the largest business Computer/Fully digital 2.0 city of the economy—in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information Yes 1.0 (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral or mapping agency Different databases 1.0 kept in a single database, in different but linked databases or in separate databases? but linked Do the immovable property registration agency and cadastral or mapping agency use the same identification Yes 1.0 number for properties? Transparency of information index (0–6) 4.5 Who is able to obtain information on land ownership at the agency in charge of immovable property registration Anyone who pays the 1.0 in the largest business city? official fee Is the list of documents that are required to complete any type of property transaction made publicly available– Yes, online 0.5 and if so, how? Link for online access: https://www.zemesgr amata.lv/saturs/lv/12- 6-6 Is the applicable fee schedule for any type of property transaction at the agency in charge of immovable property Yes, online 0.5 registration in the largest business city made publicly available–and if so, how? Link for online access: http://likumi.lv/ta/id/27 8870-valsts-zemes- dienesta-maksas- pakalpojumu- cenradis-un- samaksas-kartiba Does the agency in charge of immovable property registration agency formally commit to deliver a legally Yes, online 0.5 binding document that proves property ownership within a specific timeframe –and if so, how does it communicate the service standard? Link for online access: https://likumi.lv/ta/en/ en/id/200087- regulation-regarding- state-fee-for- registering- ownership-rights-and- pledge-rights-in-the- land-register https://www.zemesgr amata.lv/saturs/lv/9- 1-1 https://www.zemesgr amata.lv/saturs/lv/38- 12-6 Page 26 Doing Business 2020 Latvia Is there a specific and independent mechanism for filing complaints about a problem that occurred at the agency No 0.0 in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the immovable property Yes 0.5 registration agency? Number of property transfers in the largest business city in 2018: 14,275 In Riga for 2018 Who is able to consult maps of land plots in the largest business city? Anyone who pays the 0.5 official fee Is the applicable fee schedule for accessing maps of land plots made publicly available—and if so, how? Yes, online 0.5 Link for online access: http://likumi.lv/ta/id/27 8870-valsts-zemes- dienesta-maksas- pakalpojumu- cenradis-un- samaksas-kartiba Does the cadastral/mapping agency formally specifies the timeframe to deliver an updated cadastral plan—and Yes, online 0.5 if so, how does it communicate the service standard? Link for online access: http://www.vzd.gov.lv/ lv/pakalpojumi/zemes - ipasniekiem/registraci ja/zemes-ipasuma- registracija/ Is there a specific and independent mechanism for filing complaints about a problem that occurred at the No 0.0 cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 4.0 Are all privately held land plots in the largest business city formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the economy formally registered at the immovable property registry? No 0.0 Are all privately held land plots in the largest business city mapped? Yes 2.0 Are all privately held land plots in the economy mapped? Yes 2.0 Land dispute resolution index (0–8) 6.0 Does the law require that all property sale transactions be registered at the immovable property registry to make Yes 1.5 them opposable to third parties? Legal basis: Article 1477 of the Civil Law of the Republic of Latvia provides that corroboration is required if rights to an immovable property are acquired with the transfer of the property. Rights that exist on the basis of the law are valid also without corroboration. Article 994 of the Civil law states that only such persons who are registered as owners in the Land Registry are regarded as owners of an immovable property. The same principle is envisaged in Article 1 of the Land registry law. Page 27 Doing Business 2020 Latvia Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Type of guarantee: State guarantee Legal basis: Land Register Law, Art. 1., Law on Judicial Power. Land Register is part of the judicial system. Is there a is a specific, out-of-court compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Legal basis: Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., Yes 0.5 checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Notary; Interested parties; Does the legal system require verification of the identity of the parties to a property transaction? Yes 0.5 If yes, who is responsible for verifying the identity of the parties? Notary; Is there a national database to verify the accuracy of government issued identity documents? Yes 1.0 What is the Court of first instance in charge of a case involving a standard land dispute between two local Riga Regional Court businesses over tenure rights for a property worth 50 times gross national income (GNI) per capita and located in the largest business city? How long does it take on average to obtain a decision from the first-instance court for such a case (without Between 1 and 2 2.0 appeal)? years Are there publicly available statistics on the number of land disputes at the economy level in the first instance No 0.0 court? Number of land disputes in the economy in 2018: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 28 Doing Business 2020 Latvia Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of indicators. The depth of credit • Rights of borrowers and lenders through collateral laws (0-10) information index measures rules and practices affecting the coverage, scope and accessibility of • Protection of secured creditors’ rights through bankruptcy laws credit information available through a credit registry or a credit bureau. The strength of legal rights (0-2) index measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined whether a unitary Depth of credit information index (0–8) secured transactions system exists. Then two case scenarios, case A and case B, are used to • Scope and accessibility of credit information distributed by determine how a nonpossessory security interest is created, publicized and enforced according to credit bureaus and credit registries (0-8) the law. Special emphasis is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest credit bureau In some economies the legal framework for secured transactions will allow only case A or case B as a percentage of adult population (not both) to apply. Both cases examine the same set of legal provisions relating to the use of Credit registry coverage (% of adults) movable collateral. • Number of individuals and firms listed in credit registry as a Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: percentage of adult population - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 29 Doing Business 2020 Latvia Getting Credit - Latvia Indicator Latvia OECD high income Best Regulatory Performance Strength of legal rights index (0-12) 9 6.1 12 (5 Economies) Depth of credit information index (0-8) 8 6.8 8 (53 Economies) Credit registry coverage (% of adults) 96.9 24.4 100.0 (2 Economies) Credit bureau coverage (% of adults) 48.1 66.7 100.0 (14 Economies) Figure – Getting Credit in Latvia – Score 85.0 Score - Getting Credit Figure – Getting Credit in Latvia and comparator economies – Ranking and Score DB 2020 Getting Credit Score 0 100 85.0: Latvia (Rank: 15) 75.0: Poland (Rank: 37) 70.0: Denmark (Rank: 48) 70.0: Estonia (Rank: 48) 70.0: Lithuania (Rank: 48) 64.3: Regional Average (OECD high income) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Page 30 Doing Business 2020 Latvia Figure – Legal Rights in Latvia and comparator economies 10 9 9 8 8 7 7 Index Score 7 6 6.1 6 5 4 3 2 1 0 Latvia Denmark Estonia Lithuania Poland OECD high income Page 31 Doing Business 2020 Latvia Details – Legal Rights in Latvia Strength of legal rights index (0-12) 9 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents No to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without requiring a specific description Yes of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a specific description of Yes collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and replacements of the Yes original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; Yes and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by asset type, with an Yes electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed online by any interested third No party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency procedure? Yes Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law Yes protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell Yes the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Latvia and comparator economies 9 8 8 8 8 7 6.8 7 6 Index Score 6 5 4 3 2 1 0 Latvia Denmark Estonia Lithuania Poland OECD high income Page 32 Doing Business 2020 Latvia Details – Credit Information in Latvia Depth of credit information index (0-8) Credit bureau Credit registry Score Are data on both firms and individuals distributed? Yes Yes 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and Yes No 1 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes Yes 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes Yes 1 By law, do borrowers have the right to access their data in the credit bureau or Yes Yes 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes Yes 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Total Score ("yes" to either public bureau or private registry) 8 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 575,200 1,121,007 Number of firms 22,200 82,095 Total 597,400 1,203,102 Percentage of adult population 48.1 96.9 Page 33 Doing Business 2020 Latvia Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Disclosure, review, and To make the data comparable across economies, a case study uses several assumptions about approval requirements for related-party transactions the business and the transaction. • Extent of director liability index (0–10): Ability of minority shareholders to sue and hold interested directors liable for The business (Buyer): prejudicial related-party transactions; Available legal - Is a publicly traded corporation listed on the economy’s most important stock exchange. remedies (damages, disgorgement of profits, disqualification - Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of from managerial position(s) for one year or more, rescission of Buyer where permitted, even if this is not specifically required by law. the transaction) - Has a supervisory board in economies with a two-tier board system on which Mr. James • Ease of shareholder suits index (0–10): Access to internal appointed 60% of the shareholder-elected members. corporate documents; Evidence obtainable during trial and - Has not adopted bylaws or articles of association that go beyond the minimum requirements. allocation of legal expenses Does not follow codes, principles, recommendations or guidelines that are not mandatory. - Is a manufacturing company with its own distribution network. • Extent of conflict of interest regulation index (0-30): Sum of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder suits indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two directors to • Extent of shareholder rights index (0-6): Shareholders’ rights Buyer’s five-member board. and role in major corporate decisions - Mr. James also owns 90% of Seller, a company that operates a chain of retail hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-7): Governance - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Buyer’s safeguards protecting shareholders from undue board control distribution of its food products, a proposal to which Buyer agrees. The price is equal to 10% of and entrenchment Buyer’s assets and is higher than the market value. • Extent of corporate transparency index (0-7): Corporate - The proposed transaction is part of the company’s principal activity and is not outside the transparency on ownership stakes, compensation, audits and authority of the company. financial prospects - Buyer enters into the transaction. All required approvals are obtained, and all required disclosures • Extent of shareholder governance index (0–20): Sum of the made—that is, the transaction was not entered into fraudulently. extent of shareholders rights, extent of ownership and control - The transaction causes damages to Buyer. Shareholders sue Mr. James and the executives and and extent of corporate transparency indices directors that approved the transaction. • Strength of minority investor protection index (0–50): Sum of the extent of conflict of interest regulation and extent of shareholder governance indices Page 34 Doing Business 2020 Latvia Protecting Minority Investors - Latvia Stock exchange information Stock exchange Nasdaq Baltic Stock exchange URL http://www.nasdaqomxbaltic.com Listed firms with equity securities 61 City Covered Riga Indicator Latvia OECD high income Best Regulatory Performance Extent of disclosure index (0-10) 5.0 6.5 10 (13 Economies) Extent of director liability index (0-10) 4.0 5.3 10 (3 Economies) Ease of shareholder suits index (0-10) 9.0 7.3 10 (Djibouti) Extent of shareholder rights index (0-6) 5.0 4.7 6 (19 Economies) Extent of ownership and control index (0-7) 5.0 4.5 7 (9 Economies) Extent of corporate transparency index (0-7) 6.0 5.7 7 (13 Economies) Figure – Protecting Minority in Latvia – Score 68.0 Score - Protecting Minority Investors Figure – Protecting Minority Investors in Latvia and comparator economies – Ranking and Score DB 2020 Protecting Minority Investors Score 0 100 72.0: Denmark (Rank: 28) 70.0: Lithuania (Rank: 37) 68.2: Regional Average (OECD high income) 68.0: Latvia (Rank: 45) 66.0: Poland (Rank: 51) 58.0: Estonia (Rank: 79) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Page 35 Doing Business 2020 Latvia Figure – Protecting Minority Investors in Latvia and comparator economies – Measure of Quality Latvia 6 4 5 5 5 9 Denmark 6 5 7 5 5 8 Estonia 5 3 8 2 5 6 Lithuania 7 4 7 6 4 7 Poland 6 2 7 4 5 9 OECD high income 5.6 5.6 6.6 4.3 4.5 7.4 0 5 10 15 20 25 30 35 40 Sub-Indicator Score Extent of corporate transparency index (0-7) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-7) Extent of shareholder rights index (0-6) Ease of shareholder suits index (0-10) Page 36 Doing Business 2020 Latvia Details – Protecting Minority Investors in Latvia – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-30) Extent of disclosure index (0-10) 5.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of directors 2.0 excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Existence of a conflict 1.0 without any specifics Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 1.0 transaction only Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 1.0 transaction only Extent of director liability index (0-10) 4.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the transaction caused to Yes 1.0 Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Can shareholders hold the other directors liable for the damage the transaction caused to Buyer? (0-2) Liable if negligent 1.0 Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by shareholders? (0-1) Yes 1.0 Must Mr. James repay profits made from the transaction upon a successful claim by shareholders? (0-1) No 0.0 Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of fraud 0.0 or bad faith Ease of shareholder suits index (0-10) 9.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the transaction documents? Yes 1.0 (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying specific ones? (0-1) Yes 1.0 Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) Yes 1.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-20) Extent of shareholder rights index (0-6) 5.0 Does the sale of 51% of Buyer's assets require shareholder approval? No 0.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of shareholders? Yes 1.0 Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new shares? Yes 1.0 Do shareholders elect and dismiss the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the affected shares approve? Yes 1.0 Extent of ownership and control index (0-7) 5.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of directors? Yes 1.0 Must the board of directors include independent and nonexecutive board members? No 0.0 Page 37 Doing Business 2020 Latvia Can shareholders remove members of the board of directors without cause before the end of their term? No 0.0 Must the board of directors include a separate audit committee exclusively comprising board members? Yes 1.0 Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Buyer? Yes 1.0 Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? Yes 1.0 Extent of corporate transparency index (0-7) 6.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and directorships in other Yes 1.0 companies? Must Buyer disclose the compensation of individual managers? No 0.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting agenda? Yes 1.0 Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Page 38 Doing Business 2020 Latvia Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2019 covering for the Paying Taxes indicator calendar year 2018 (January 1, 2018 – December 31, 2018). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in 2018 (number Using a case scenario, Doing Business records taxes and mandatory contributions a medium size per year adjusted for electronic and joint filing and payment) company must pay in a year, and measures the administrative burden of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of • Total number of taxes and contributions paid or withheld, filing and payments, time taken to comply with tax laws, time taken to comply with the including consumption taxes (value added tax, sales tax or requirements of postfiling processes and time waiting. goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2017. It produces Time required to comply with 3 major taxes (hours per year) ceramic flowerpots and sells them at retail. All taxes and contributions recorded are paid in the • Collecting information, computing tax payable second year of operation (calendar year 2018). Taxes and mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if required • Completing tax return, filing with agencies The VAT refund process: - In June 2018, TaxpayerCo. makes a large capital purchase: the value of the machine is 65 times • Arranging payment or withholding income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income Total tax and contribution rate (% of commercial profits) per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred • Profit or corporate income tax in June will be fully recovered after four consecutive months if the VAT rate is the same for inputs, • Social contributions, labor taxes paid by employer sales and the machine and the tax reporting period is every month. Input VAT will exceed Output VAT in June 2018. • Property and property transfer taxes • Dividend, capital gains, financial transactions taxes The corporate income tax audit process: - An error in calculation of income tax liability (for example, use of incorrect tax depreciation rates, • Waste collection, vehicle, road and other taxes or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. discovered the error and voluntarily notified the Postfiling Index tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax • Time to comply with VAT refund (hours) liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. • Time to obtain VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 39 Doing Business 2020 Latvia Paying Taxes - Latvia Indicator Latvia OECD high income Best Regulatory Performance Payments (number per year) 7 10.3 3 (2 Economies) Time (hours per year) 169 158.8 49 (3 Economies) Total tax and contribution rate (% of profit) 38.1 39.9 26.1 (33 Economies) Postfiling index (0-100) 98.1 86.7 None in 2018/19 Figure – Paying Taxes in Latvia – Score 93.3 81.5 83.0 98.1 Payments Time Total tax and contribution rate Postfiling index Figure – Paying Taxes in Latvia and comparator economies – Ranking and Score DB 2020 Paying Taxes Score 0 100 91.1: Denmark (Rank: 8) 89.9: Estonia (Rank: 12) 89.0: Latvia (Rank: 16) 88.8: Lithuania (Rank: 18) 84.3: Regional Average (OECD high income) 76.4: Poland (Rank: 77) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Page 40 Doing Business 2020 Latvia Figure – Paying Taxes in Latvia and comparator economies – Measure of Quality 120 98.1 99.4 97.5 100 89.1 86.7 Index score 77.4 80 60 40 20 0 Latvia Denmark Estonia Lithuania Poland OECD high income Page 41 Doing Business 2020 Latvia Details – Paying Taxes in Latvia Tax or Payments Notes on Time (hours) Statutory tax Tax base Total tax and Notes on TTCR mandatory (number) Payments rate contribution contribution rate (% of profit) Social security 1.0 online 80.0 24.09% gross salaries 27.17 contributions Dividend tax 1.0 online 22.5 20/80 distributed profits 7.82 Real estate tax 1.0 online 1.5% cadastral value 2.15 Environmental 1.0 online various rates per kilo 0.90 tax Unemployment 0.0 jointly EUR 0.36 per number of 0.04 insurance employee employees contribution Vehicle tax 1.0 EUR 8.54-277.46 depends on 0.03 weight Value added tax 1.0 online 66.0 21% taxable value 0.00 not included (VAT) Fuel tax 1.0 various rates included in the 0.00 small amount price of fuel Employee paid - 0.0 jointly 11.0% gross salaries 0.00 withheld Social security contributions Totals 7 169 38.1 Page 42 Doing Business 2020 Latvia Details – Paying Taxes in Latvia – Tax by Type Taxes by type Answer Profit tax (% of profit) 7.8 Labor tax and contributions (% of profit) 27.2 Other taxes (% of profit) 3.1 Page 43 Doing Business 2020 Latvia Details – Paying Taxes in Latvia – Measure of Quality Answer Score Postfiling index (0-100) 98.1 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process none Percentage of cases exposed to a VAT audit (%) 25% - 49% Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) 0.0 100 Time to obtain VAT refund (weeks) 6.0 94.3 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 2.5 98.2 Time to complete a corporate income tax correction (weeks) No tax audit per case 100 study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 44 Doing Business 2020 Latvia Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port or border handling in Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are recorded as origin economy 22×24=528 hours). If customs clearance takes 7.5 hours, the data are recorded as is. Alternatively, • Obtaining, preparing and submitting documents required by suppose documents are submitted to a customs agency at 8:00a.m., are processed overnight and destination economy and any transit economies can be picked up at 8:00a.m. the next day. The time for customs clearance would be recorded as 24 hours because the actual procedure took 24 hours. • Covers all documents required by law and in practice, including electronic submissions of information Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the Border compliance costs recorded. Costs are reported in U.S. dollars. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. • Customs clearance and inspections Contributors are private sector experts in international trade logistics and are informed about • Inspections by other agencies (if applied to more than 20% of exchange rates. shipments) Assumptions of the case study: • Handling and inspections that take place at the economy’s port - For all 190 economies covered by Doing Business, it is assumed a shipment is in a warehouse in or border the largest business city of the exporting economy and travels to a warehouse in the largest business city of the importing economy. Domestic transport - It is assumed each economy imports 15 metric tons of containerized auto parts (HS 8708) from • Loading or unloading of the shipment at the warehouse or its natural import partner—the economy from which it imports the largest value (price times port/border quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (defined by the largest export value) to its natural export partner—the economy that is • Transport between warehouse and port/border the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while shipment is en - The mode of transport is the one most widely used for the chosen export or import product and route the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 45 Doing Business 2020 Latvia Trading across Borders - Latvia Indicator Latvia OECD high income Best Regulatory Performance Time to export: Border compliance (hours) 24 12.7 1 (19 Economies) Cost to export: Border compliance (USD) 150 136.8 0 (19 Economies) Time to export: Documentary compliance (hours) 2 2.3 1 (26 Economies) Cost to export: Documentary compliance (USD) 35 33.4 0 (20 Economies) Time to import: Border compliance (hours) 0 8.5 1 (25 Economies) Cost to import: Border compliance (USD) 0 98.1 0 (28 Economies) Time to import: Documentary compliance (hours) 1 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 0 23.5 0 (30 Economies) Figure – Trading across Borders in Latvia – Score 85.5 85.8 99.4 91.3 100.0 100.0 100.0 100.0 Time Cost Time Cost Time Cost Time Cost to to to to to to to to export: export: export: export: import: import: import: import: Border Border Documentary Documentary Border Border Documentary Documentary compliance compliance compliance compliance compliance compliance compliance compliance Figure – Trading across Borders in Latvia and comparator economies – Ranking and Score DB 2020 Trading Across Borders Score 0 100 99.9: Estonia (Rank: 17) 97.8: Lithuania (Rank: 19) 95.3: Latvia (Rank: 28) 94.3: Regional Average (OECD high income) 100: Denmark (Rank: 1) 100: Poland (Rank: 1) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Page 46 Doing Business 2020 Latvia Figure – Trading across Borders in Latvia – Time and Cost Time (hours) Cost (USD) 30 150 160 24 140 25 120 Time (hours) Cost (USD) 20 100 15 80 60 10 35 40 5 2 1 20 0 0 0 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 47 Doing Business 2020 Latvia Details – Trading across Borders in Latvia Characteristics Export Import Product HS 44 : Wood and articles of wood; wood charcoal HS 8708: Parts and accessories of motor vehicles Trade partner Sweden Germany Border Riga port Latvia- Lithuania border crossing Distance (km) 7 100 Domestic transport time (hours) 2 4 Domestic transport cost (USD) 150 115 Details – Trading across Borders in Latvia – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required by 3.0 0.0 customs authorities Export: Clearance and inspections required by 0.0 0.0 agencies other than customs Export: Port or border handling 24.0 150.0 Import: Clearance and inspections required by 0.0 0.0 customs authorities Import: Clearance and inspections required by 0.0 0.0 agencies other than customs Import: Port or border handling 0.0 0.0 Page 48 Doing Business 2020 Latvia Details – Trading across Borders in Latvia – Trade Documents Export Import Bill of lading CMR Waybill Commercial invoice Packing list Packing list Commercial invoice Intrastat Intrastat SOLAS certificate Page 49 Doing Business 2020 Latvia Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the courts The dispute in the case study involves the breach of a sales contract between two domestic (calendar days) businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. • Time to file and serve the case • Time for trial and to obtain the judgment To make the data on the time and comparable across economies, several assumptions about the case are used: • Time to enforce the judgment - The dispute concerns a lawful transaction between two businesses (Seller and Buyer), both Cost required to enforce a contract through the courts (% of located in the economy’s largest business city. For 11 economies the data are also collected for the claim value) second largest business city. - The Buyer orders custom-made furniture, then fails to pay alleging that the goods are not of • Average attorney fees adequate quality. • Court costs - The value of the dispute is 200% of the income per capita or the equivalent in local currency of USD 5,000, whichever is greater. • Enforcement costs - The Seller sues the Buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000 whichever is greater. Quality of judicial processes index (0-18) - The Seller requests the pretrial attachment of the defendant’s movable assets to secure the • Court structure and proceedings (-1-5) claim. - The claim is disputed on the merits because of Buyer’s allegation that the quality of the goods • Case management (0-6) was not adequate. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The Seller enforces the judgment through a public sale of the Buyer’s movable assets. Page 50 Doing Business 2020 Latvia Enforcing Contracts - Latvia Standardized Case Claim value EUR 27,479 Court name Vidzeme Suburb Court of Riga City Covered Riga Indicator Latvia OECD high income Best Regulatory Performance Time (days) 469 589.6 120 (Singapore) Cost (% of claim value) 23.1 21.5 0.1 (Bhutan) Quality of judicial processes index (0-18) 13.5 11.7 None in 2018/19 Figure – Enforcing Contracts in Latvia – Score 71.4 74.1 75.0 Time Cost Quality of judicial processes index Figure – Enforcing Contracts in Latvia and comparator economies – Ranking and Score DB 2020 Enforcing Contracts Score 0 100 78.8: Lithuania (Rank: 7) 76.1: Estonia (Rank: 8) 73.9: Denmark (Rank: 14) 73.5: Latvia (Rank: 15) 67.8: Regional Average (OECD high income) 64.4: Poland (Rank: 55) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Page 51 Doing Business 2020 Latvia Figure – Enforcing Contracts in Latvia – Time and Cost Time (days) Cost (% of claim value) 800 30 Cost (% of claim value) 685 700 23.6 23.3 23.1 25 589.6 21.5 600 19.4 Time (days) 485 17.3 469 20 500 455 400 370 15 300 10 200 5 100 0 0 Denmark Estonia Latvia Lithuania OECD Poland high income Page 52 Doing Business 2020 Latvia Figure – Enforcing Contracts in Latvia and comparator economies – Measure of Quality Latvia 3 5.5 2 3 Denmark 2.5 4.5 3.5 3.5 Estonia 2.5 3.5 4 3.5 Lithuania 3 4.5 4 3.5 Poland 3 1.5 1.5 5 OECD high income 2.5 3.2 2.4 3.6 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Latvia Indicator Time (days) 469 Filing and service 49 Trial and judgment 300 Enforcement of judgment 120 Cost (% of claim value) 23.1 Attorney fees 14.3 Court fees 6.4 Enforcement fees 2.4 Quality of judicial processes index (0-18) 13.5 Court structure and proceedings (-1-5) 3.0 Case management (0-6) 5.5 Court automation (0-4) 2.0 Alternative dispute resolution (0-3) 3.0 Page 53 Doing Business 2020 Latvia Details – Enforcing Contracts in Latvia – Measure of Quality Answer Score Quality of judicial processes index (0-18) 13.5 Court structure and proceedings (-1-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? No 0.0 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, but manual 0.5 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 5.5 1. Time standards 1.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.5 2.a. Does the law regulate the maximum number of adjournments that can be granted? No 2.b. Are adjournments limited to unforeseen and exceptional circumstances? Yes 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? Yes 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) Yes 1.0 clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the competent court? Yes 1.0 5. Are there any electronic case management tools in place within the competent court for use by judges? Yes 1.0 6. Are there any electronic case management tools in place within the competent court for use by lawyers? Yes 1.0 Court automation (0-4) 2.0 1. Can the initial complaint be filed electronically through a dedicated platform within the competent court? No 0.0 2. Is it possible to carry out service of process electronically for claims filed before the competent court? No 0.0 3. Can court fees be paid electronically within the competent court? Yes 1.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public Yes through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made Yes available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 3.0 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy— No that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes Page 54 Doing Business 2020 Latvia 2. Mediation/Conciliation 1.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or Yes section of the applicable code of civil procedure encompassing substantially all their aspects (for example, definition, aim and scope of application, desig 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or Yes conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 55 Doing Business 2020 Latvia Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s estate) - The value of the hotel is 100% of the income per capita or the equivalent in local currency of USD 200,000, whichever is greater. • Measured as percentage of estate value - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s real estate. • Court fees The hotel cannot pay back the loan, but makes enough money to operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to judicial • Lawyers’ fees liquidation and reorganization proceedings and the extent to which best insolvency practices have • Assessors’ and auctioneers’ fees been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 56 Doing Business 2020 Latvia Resolving Insolvency - Latvia Indicator Latvia OECD high income Best Regulatory Performance Recovery rate (cents on the dollar) 41.4 70.2 92.9 (Norway) Time (years) 1.5 1.7 0.4 (Ireland) Cost (% of estate) 10.0 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going concern) 0 .. .. Strength of insolvency framework index (0-16) 12.0 11.9 None in 2018/19 Figure – Resolving Insolvency in Latvia – Score 44.6 75.0 Recovery rate Strength of insolvency framework index Figure – Resolving Insolvency in Latvia and comparator economies – Ranking and Score DB 2020 Resolving Insolvency Score 0 100 85.1: Denmark (Rank: 6) 76.5: Poland (Rank: 25) 74.9: Regional Average (OECD high income) 60.1: Estonia (Rank: 54) 59.8: Latvia (Rank: 55) 46.7: Lithuania (Rank: 89) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Page 57 Doing Business 2020 Latvia Figure – Resolving Insolvency in Latvia – Time and Cost Time (years) Cost (% of estate) 3.5 15.0 15.0 16 3.0 3.0 3 14 Cost (% of estate) 12 Time (years) 2.5 10.0 2.3 9.0 9.3 10 2 1.7 1.5 8 1.5 1.0 6 1 4.0 4 0.5 2 0 0 Denmark Estonia Latvia Lithuania OECD Poland high income Page 58 Doing Business 2020 Latvia Figure – Resolving Insolvency in Latvia and comparator economies – Measure of Quality Latvia 5 2.5 2 2.5 Denmark 6 3 2 1 Estonia 5.5 2.5 3 2 Lithuania 4 2.5 1 0.5 Poland 6 3 2 3 OECD high income 5.3 2.8 2.1 1.9 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Latvia and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 100 88.5 90 80 70.2 70 60.9 60 50 41.4 40.3 40 36.1 30 20 10 0 Latvia Denmark Estonia Lithuania Poland OECD high income Page 59 Doing Business 2020 Latvia Details – Resolving Insolvency in Latvia Indicator Answer Score Proceeding liquidation (after an Mirage management is likely to file for reorganization (legal protection) in order to benefit from certain protections, attempt at such as stay of enforcement proceedings. However, BizBank is unlikely to approve the reorganization plan, because it reorganization) would not get paid for 2 years (given Mirage's current financial state). At that time, the proceedings would be converted into liquidation. Outcome piecemeal sale Reorganization of Mirage does not seem viable, therefore, most likely thw liquidation proceeding will commence. Mirage's assets will be sold piecemeal, but could be consolidated by the same buyer to continue operating the hotel. Although Latvian insolvency framework includes provisions on sale of business as a going concern, they are rarely applied in practice. Therefore, the most likely outcome is that the hotel's assets will be sold piecemeal at the end of the liquidation proceeding. Time (in years) 1.5 The process of reorganization converted into liquidation will take approximately 18 months. It will take 3-4 months for the debtor to file for reorganization and for the court to consider and reject the petition due to lack of support from creditors. After that, the debtor or its creditors will file for insolvency. The court will consider the case and issue a decision within 1-2 months. The insolvency proceedings will take around 10 months (includes submission of claims, creditors' meetings, etc). The sale of assets and other necessary formalities would take a few more months before BizBank receives its payment. Cost (% of estate) 10.0 The total cost of the proceedings will amount to approximately 10% of the value of the hotel. The main fees will be as follows: administrator costs - 7%, attorney fees - 1%, fees of accountants - 1%, and other fees, including court fees, auctioneer fees and publication costs - up to 1.5%. Recovery rate 41.4 (cents on the dollar) Page 60 Doing Business 2020 Latvia Details – Resolving Insolvency in Latvia – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 12.0 Commencement of proceedings index (0-3) 2.5 What procedures are available to a DEBTOR when commencing insolvency proceedings? (a) Debtor may file for 1.0 both liquidation and reorganization Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor 0.5 may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) (c) Both (a) and (b) 1.0 Debtor is generally unable to pay its debts as they mature (b) The value of debtor's liabilities exceeds the value options are available, of its assets but only one of them needs to be complied with Management of debtor's assets index (0-6) 5.0 Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the Yes 1.0 debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0 Does the insolvency framework allow avoidance of preferential transactions? No 0.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of Yes 1.0 insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (b) Yes over ordinary 1.0 unsecured creditors but not over secured creditors Reorganization proceedings index (0-3) 2.5 Which creditors vote on the proposed reorganization plan? (a) All creditors 0.5 Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as Yes 1.0 what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote Yes 1.0 separately and are creditors in the same class treated equally? Creditor participation index (0-4) 2.0 Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency Yes 1.0 representative? Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0 Does the insolvency framework provide that a creditor has the right to request information from the insolvency No 0.0 representative? Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting Yes 1.0 creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 61 Doing Business 2020 Latvia Employing Workers Doing Business presents detailed data for the employing workers indicators on the Doing Business website (http://www.doingbusiness.org). The study does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2019. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the worker and the (i) whether fixed-term contracts are prohibited for permanent business are used. tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the maximum probationary period; (iv) minimum The worker: wage;(v) ratio of minimum wage to the average value added per - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. worker. - Is a full-time employee. - Is not a member of the labor union, unless membership is mandatory. Working hours (i) maximum number of working days allowed per week; (ii) The business: premiums for work: at night, on a weekly rest day and overtime; - Is a limited liability company (or the equivalent in the economy). (iii) whether there are restrictions on work at night, work on a - Operates a supermarket or grocery store in the economy’s largest business city. For 11 weekly rest day and for overtime work; (iv) length of paid annual economies the data are also collected for the second largest business city. leave. - Has 60 employees. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the Redundancy rules food retail sector and they apply even to firms that are not party to them. (i) whether redundancy can be basis for terminating workers; (ii) - Abides by every law and regulation but does not grant workers more benefits than those whether employer needs to notify and/or get approval from third mandated by law, regulation or (if applicable) collective bargaining agreements. party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether the law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments, and (iii) penalties due when terminating a redundant worker. Data on the availability of unemployment protection for a worker with one year of employment is also collected. Page 62 Doing Business 2020 Latvia Employing Workers - Latvia Details – Employing Workers in Latvia Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) 60.0 Maximum length of fixed-term contracts, including renewals (months) 60.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 476.2 Ratio of minimum wage to value added per worker 0.2 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 5.5 Premium for night work (% of hourly pay) 50.0 Premium for work on weekly rest day (% of hourly pay) 0.0 Premium for overtime work (% of hourly pay) 100.0 Restrictions on night work? No Restrictions on weekly holiday? No Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 20.0 Paid annual leave for a worker with 5 years of tenure (working days) 20.0 Paid annual leave for a worker with 10 years of tenure (working days) 20.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 20.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? Yes Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 4.3 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 4.3 Severance pay for redundancy dismissal for a worker with 1 year of tenure (weeks of salary) 4.3 Severance pay for redundancy dismissal for a worker with 5 years of tenure (weeks of salary) 8.7 Page 63 Doing Business 2020 Latvia Severance pay for redundancy dismissal for a worker with 10 years of tenure (weeks of salary) 13.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure, in weeks of salary) 8.7 Unemployment protection after one year of employment? Yes Page 64 Doing Business 2020 Latvia Business Reforms in Latvia From May 2, 2018 to May 1, 2019, 115 economies implemented 294 business regulatory reforms across the 10 areas measured by Doing Business. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. =Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2020 Paying Taxes: Latvia made paying taxes costlier by increasing the effective corporate income tax burden. The new calculations replaced the corporate income tax paid on the taxable profits of companies with an income tax based on distributed profits. DB2019 Registering Property: Latvia made property transfer less transparent by not publishing statistical data on the number of land disputes for 2017. DB2018 Enforcing Contracts: Latvia made enforcing contracts easier by introducing an electronic case management system for the use of judges. Employing Workers: Latvia amended its legislation to extend the duration of the contribution period that is required before an employee can become eligible for unemployment protection. DB2017 Getting Credit: Latvia improved access to credit information by launching a private credit bureau. Paying Taxes: Latvia made paying taxes less complicated by improving its online systems for filing corporate income tax return and mandatory labor contributions. DB2016 Dealing with Construction Permits: Latvia made dealing with construction permits more time-consuming by increasing the time required to obtain a building permit— despite having streamlined the process by having the building permit issued together with the architectural planning conditions. Registering Property: Latvia made transferring property easier by introducing a new application form for transfers. Getting Credit: Latvia improved its credit information system through a new law governing the licensing and functioning of credit bureaus. Paying Taxes: Latvia made paying taxes more complicated for companies by eliminating the possibility of deducting bad debt provisions. On the other hand, Latvia reduced the rate for social security contributions paid by employers. Enforcing Contracts: Latvia made enforcing contracts easier by restructuring its courts and by introducing comprehensive specialized laws regulating domestic arbitration and voluntary mediation. Employing Workers: 1) Latvia increased the maximum duration of a single fixed-term contract from 36 months to 60. 2) Latvia increased its minimum wage DB2015 Starting a Business: Latvia made starting a business more difficult by increasing registration fees, bank fees and notary fees. Paying Taxes: Latvia made paying taxes easier for companies by simplifying the VAT return, enhancing the electronic system for filing corporate income tax returns and reducing employers’ social security contribution rate. DB2014 Starting a Business: Latvia made starting a business easier by making it possible to file the applications for company registration and value added tax registration simultaneously at the commercial registry. Dealing with Construction Permits: Latvia made dealing with construction permits easier by introducing new time limits for issuing a building permit and by eliminating the Public Health Agency’s role in approving building permits and conducting inspections. Getting Credit: Latvia improved its credit information system by adopting a new law regulating the public credit registry. Trading across Borders: Latvia made trading across borders easier by reducing the number of documents required for importing. DB2013 Employing Workers: Latvia eliminated notification requirements to third parties in cases of redundancy dismissal. Page 65 Doing Business 2020 Latvia DB2012 Starting a Business: Latvia made starting a business easier by reducing the minimum capital requirement and introducing a common application for value added tax and company registration. Getting Electricity: Latvia made getting electricity faster by introducing a simplified process for approval of external connection designs. Registering Property: Latvia made transferring property easier by allowing electronic access to municipal tax databases that show the tax status of property, eliminating the requirement to obtain this information in paper format. Resolving Insolvency: Latvia adopted a new insolvency law that streamlines and expedites the insolvency process and introduces a reorganization option for companies. DB2011 Trading across Borders: Latvia reduced the time to export and import by introducing electronic submission of customs declarations. Resolving Insolvency: Latvia introduced a mechanism for out-of-court settlement of insolvencies to alleviate pressure on courts and tightened some procedural deadlines. DB2010 Getting Credit: Latvia’s new public credit registry started sharing data on loans, improving access to credit information. DB2009 Registering Property: Latvia made registering property easier by introducing an online database allowing the land registry’s employees to verify the cadastral value of real estate. Resolving Insolvency: Latvia improved its insolvency system through a new insolvency law that for the first time allows financially distressed companies to continue operating by pursuing reorganization, and through stronger qualification standards for bankruptcy administrators. DB2008 Employing Workers: Latvia increased the maximum cumulative duration of fixed-term contracts and introduced a requirement for third-party notification for a single redundancy dismissal. Page 66 Doing Business 2020 Latvia Page 67