Ins and Outs of the Latvian RP
Why do the RP holders have to renew their registration every year? Maira Roze, Deputy Head of the Office of the Citizenship and Migration Affairs told the magazine m2 and portal varianti.lv about that and much more.
– The first five-year period of validity of the amendments to the Immigration Law allowing the foreigners to obtain RPs in Latvia in exchange for their investments has ended. Could you please tell about the results?
– Within the period of exactly five years, i.e., from the 1st of July 2010 till the 30th of June 2015, funds in the amount of EUR 1.312 billion have been brought to Latvia within the framework of these amendments. Out of them EUR 1.093 billion have been spent by foreigners applying for RPs on the basis of purchasing immovable property in Latvia. Additional EUR 148 million fall under the Section "investments into subordinated capital of the Latvian banks", almost EUR 71 million are investments in the equity capital of Latvian companies. And, at present, EUR 750.000 account for the results of the work initiated from 2015. That is our new investment product on issuing RPs in exchange for purchasing the Latvian Treasury bonds. I believe the overall picture looks quite good. However, due to a range of various reasons over the last six months, the statistic are less impressive than in previous years.
If we are focusing directly on the investors, after making the purchase of immovable property complying with the requirements of the Immigration Law, 13,674 persons have applied for RPs in Latvia (a RP for five years is issued to the investor, his/her legal spouse and minor children). – m2). 1,456 persons have applied for RPs on the basis of investing in the equity capital of the Latvian companies, 1,158 – on the basis of investing into subordinated bank capital, and 10 – on the basis of purchasing the Treasury bonds. In total, 16,295 applications for RPs have been made over the five years within the framework of this programme. Out of them 11,194 – from the citizens of Russia, 1,315 – China, 1,248 – Ukraine, 671 – Uzbekistan, 596 – Kazakhstan, 328 – Belarus, 225 – Azerbaijan, 73 – Israel, 52 – USA, and the 48 representatives of Georgia end the first top ten. In total, citizens of 53 countries have applied for the RPs as investors.
Over the five years of validity of the amendments to the Immigration Law, the investors applying for the RPs in Latvia have purchased 5,719 immovable property units. The OCMA statistical analysis shows that in 2010 (the programme was launched on 1 July) the RPs in Latvia on a MONTHLY basis requested by foreign buyers of 13 immovable property units ON THE AVERAGE, in 2011 – 56, 2012 – 84, 2013 –130, 2014 – 187, during the first six months of 2015 – 12.
I would like to draw a special attention to the following: the actual number of the RP holders according to the data as of the 30th of June 2015 turned out to be lower than the number of the applicants. For instance, on the basis of Section "immovable property purchase" actually 12,025 persons have been issued the RPs, compared to 13,674 applicants; on the basis of investments in subordinated capital – 874 instead of 1,158, and on the basis of investments in the equity capital of Latvian companies – only 884 instead of 1,456. In the first two cases there are several reasons for the difference between the number of the applied and valid RPs – somewhere the RP issuing process still has not been completed, some have been denied, and in some cases they have been annulled. The Office of the Citizenship and Migration Affairs initiates the RP annulment process in case if the basis for issuing it has been lost or if the RP holders have not arrived for the registration renewal within three months from the moment of expiry of the registration renewal period. In the past, the OCMA process of annulment was rather slow, but now it does it quite fast.
As regards the huge difference between the RP applicants on the basis of Section "investment in the equity capital of Latvian companies" and the actual holders, the explanation is simple: many investors have not complied with the requirement on the amount of mandatory tax payments payable to the Treasury. Often the companies whose shareholders they as if have been turned out to be shell companies not carrying out any actual operation and not giving any income to the state budget. We could not proceed with such persons: their RPs were annulled.
I can tell that there are foreigners who are expressing their dissatisfaction with the season when they have to renew their registration. They would like it to be some other time. I am sorry, but in that case you should start the RP application procedure all over again and reapply your documents when it is convenient for you and when you like it. We believe that we are ensuring comfortable RP registration renewal conditions: the documents may be applied 90 days prior to the period expiry date.
– I have heard from the agents that your Office has denied issuing RPs to some buyers of the Latvian immovable property from Russia who have been engaged in special services of our Eastern neighbour. Could it be strictly stated that the former employees of the Russian special services or former high-rank state agents should not consider applying for the Latvian RP?
– I would not say so. Yet the past of the RP applicants is being checked. Therefore the application form they are filing in contains three annexes, including the one regarding the former military of state service. And our competent Latvian bodies are thoroughly verifying that information. And they pass their verdict: whether the RP may or may not be issued.
– Do I get you right, that from the view point of officials the least complicated and conditionally guaranteed way for getting a RP in Latvia is the purchase of Treasury bonds? To which clients the attitude is more loyal?
– It is not about the loyalty. Often the foreigners who are examining Latvia as an investment prospect are expressing their concerns: we will invest the money and will not get the RP. In the case of Treasury bonds, the specialists are checking the applicant and all the documents provided by him/her, on the first place. And only when the decision on issuing a RP has been made, the investor transfers the required statutory amount to the Treasury – for the Treasury bond buyers the amount is EUR 250,000 (the amount is returned after five years – ) and the state duty accounts for EUR 25,000. Under the rest Sections of the Immigration Law the procedure is different. For instance, a foreigner has bought immovable property, then he/she applies the documents, and only then we start his/her verification. And it is possible that the OCMA might have no issues, yet the competent bodies would not let him/her enter. Then the investor will be denied in issuing the RP.
– Over the past five years, the purchase of immovable property has been the most popular way for acquiring the Latvian RP. Yet, these conditions have become stricter since the 1st of September 2014: that must be a single linked property at the price of at least EUR 250,000. This condition applies throughout the territory of Latvia. How many properties have been purchased by the investors under the new provisions?
– First, let me clarify that the provisions have changed also regarding other Sections of the Immigration Law. The necessity of paying the state duty arose. In the case of investment into subordinated bank capital the state duty accounts for EUR 25,000, for buying immovable property – 5% of the value thereof. As regards the immovable property, over the period from the 1st of September 2014 till the 30th of June 2015, the foreigners who had applied for the RPs in Latvia had bought 138 units of property. At the same time, 44 foreigners selected the investment (EUR 280,000 – m2 in the subordinated bank capital. Thanks to the new state duty, the Treasury has received almost EUR 2.2 M from these two Sections. A part of the funds is directed to the implementation of the state aid programme on purchasing dwelling for families with children.
Two Types of PRPs
– The five-year period of validity of the Latvian RPs in exchange for investments has expired for the first holders. What to do next?
– As I said before, the persons who are holding a RP and who have retained its basis thanks to which they had received it may apply for the RP for the next five-year period or apply for a permanent residence permit (PRP). The state duty in the amount of 5% of the value applicable to the immovable property buyers or the payment of EUR 25,000 when investing into subordinated capital do not apply to them. And already in summer we received the first applications for issuing the PRPs for investors.
– What are the key requirements for issuing the PRP?
– Only the person whose RP five-year period has expired can be issued the PRP. Let's make it clear that there are two statuses of the permanent residence permit in place. The first one is awarded under the Latvian Immigration Law, so called 'national RP', and the second is a long-term resident of the European Union.
According to the Immigration Law of Latvia, the following criteria apply to the Latvian PRP applicants: they must have at least A2 level of the official language command, and the total period of residence in Latvia over the last five years must be at least four years, provided that the period of residence outside the country has not exceeded six months. And, of course, the applicant should have monthly income: if he/she is applying for the PRP it should correspond at least to the minimum wages in Latvia. Besides, if a RP holder wants to extend his/her RP for 5 more years he/she must have at least a triple amount of the minimum wages, i.e., EUR 1,800 per month or the corresponding amount on his/her account. Those are the basic requirements. Among additional requirements: the applicant must have a place of residence.
Almost the same criteria apply for acquiring the status of a resident of the European Union, except for the absence from the country over the past five years – not exceeding ten months. He/she should also have regular income in Latvia complying with our legislation. In this case the funds available on the bank account are not taken into consideration. Obviously, the monthly income must be completely taxable: we will check the wage over the last 12 months.
– What is the main difference between the status of the holder of the Latvian PRP and a permanent resident of the European Union?
– A permanent resident of the European Union is the status complying with the European Directive which is the same and understood in all EU countries. If a person who has obtained such status moves, e.g., to Denmark, Germany or France in the future, their immigration specialists understand immediately what requirements the referred person has met in order to receive his/her status. For them it is clear that he/she has integrated to a certain degree in the EU country, has been residing there for many years, has had official income and that he/she has entered the European spirit, so to say. The holder of the EU permanent resident status, upon the availability of appropriate employment vacancies, can get a job in another EU country and apply for a residence permit for the purpose of performing the job. And after a year he/she can also change the employer there without the need for any vacancies, yet he/she should notify the public bodies on that.
Investors Want to Know
– The next element of our conversation, with your permission, I would like to define as questions of practical nature received from the holders of the Latvian RPs and the ones considering applying for them. Our editorial office keeps receiving them constantly. First: a foreign investor has a valid RP on the basis of purchasing immovable property. With time the person has understood that the immovable property is not interesting for him/her any more, and sells it. He/she immediately invests in purchasing either a new estate or Treasury bonds, or subordinated bank capital. Will the previous RP five-year period still be valid?
– No, it will be annulled and a new RP will be issued. The foreigner will receive it already under the new provisions. I.e., he/she will have to undergo the entire procedure again and pay the state duty collectable from the 1st of September 2014. A tip to those who are considering changing the immovable property unit or the Immigration Law Section on which basis he/she has been issued the RP: plan everything in such a way so that the decision on annulling the old RP and issuing the new one would be taken simultaneously. This way the legal residence status of the person will not be discontinued. According to the law, the foreigner should notify us on the loss of the basis thanks to which he was holding the RP, within three days, for instance, after the sale of the immovable property.
– Does the requirement on taking the Latvian language exam for those applying for the PRP in Latvia includes any easements for people in retirement age?
– There are no privileges or easements. Only if a recreation therapist says that the person should be completely or partially excused from taking the Latvian language exam due to illness. But no one will accept a medical certificate for granted: we will ask the State Health Inspectorate if the excuse is justified. The patient's history will be checked, and this often leads to revoking the recreation therapist's conclusions.
– Did the RP holders have to reregister their RPs every year during the first five years? What practice will be applied on those who have applied for the second term?
– For now it remains the same – the RPs will be renewed annually.
– But several other European countries do not request arriving so often from their RP holders.
– The same opportunity is in Latvia, too. The foreigners can buy the Latvian Treasury bonds for EUR 250,000. Then, after being issued a RP on this basis, they are allowed not to enter our country until the expiry of the five-year period. In this case the registration does not have to be renewed. As regards the rest holders of the RPs, there was a proposal made in the Saeima (the Latvian Parliament – ) commissions to make the registration renewal period longer than one year. Nevertheless, the deputies did not support the proposal, as the programme supporters said that its main task had been to promote foreigners to arrive to Latvia and spend money there. If they do not have to renew the registration many of them will not even come to our country after being issued the RP. The logics – to issue RPs, and the foreigners will spend their money in other EU countries – does not make any sense for us. The registration renewal guarantees that the people will appear in Latvia at least once a year. Nevertheless, we are developing the electronic customer servicing option in the future, and this means that for some part of investors the registration renewal procedure might be facilitated in perspective.
– Do the investors who have been issued the Latvian RP on the basis of amendments to the Immigration Law have the opportunity of becoming Latvian citizens in the future?
– Of course. For this one has to reside with the RP for five years, then five years with the PRP, and afterwards the person may take the naturalisation exam. I will describe it in a simpler way: during the exam he/she demonstrates his/her language command (what should not cause any significant problems to the PRP holders, as they have already undergone the procedure earlier. – m2), the history and hymn of Latvia. After the OCMA acknowledges that the person complies with all requirements, the Cabinet of Ministers takes the decision on awarding him/her the Latvian citizenship. And the foreigner renounces his/her former citizenship and acquires the Latvian citizenship.
Innovations are Yet to Come
– I am well aware that you are trying not to comment on any political aspects. Yet I would like to find out your opinion. In 2014, the Section of the Immigration Law allowing issuing RPs in Latvia for the immovable property buyers was attacked by several political forces. Proposals were also made on introducing a moratorium for issuing the RPs to the Russian immovable property buyers. I have a question: has this topic subsided now or is it still being discussed behind closed doors?
– Let me put it this way: the Immigration Law is still open, but for its second reading the Parliament has been presented with a huge amount of proposals on both facilitating and tightening the RP issuing provisions for Latvian investors. The decision on the second reading has been postponed till September. Besides, information regarding its opinion on issuing RPs in exchange for purchasing immovable property and investing in the equity capital of companies has been requested from the government. Several new proposals have been made but at the moment I may not disclose them. In September, the Parliament will start discussing on further steps.
– That means that the information war will start again in relation to the Immigration Law, which, as experienced over the last year and a half, has a negative effect on the flow of the potential investors.
– An analysis will be carried out, and any decisions will be made only afterwards. Having the numbers on hands, the government will be able to make a reasoned justification of all pros and cons, taking into consideration the situation that arose with the flow of investors after the 1st of September 2014 when the entry threshold was set higher for the immovable property buyers.
– You mentioned the phrase “on both facilitating and tightening the RP issuing provisions”. Does this mean that theoretically the value of the Latvian immovable property ensuring the issuance of RPs for foreigners might become even more expensive?
– Let me put it this way: different changes may be introduced, yet it is unlikely that anyone would raise the bar of the immovable property value, in particular. Taking into consideration that the amount of deals with foreigners has already decreased such proposals are not of current concern any more. Yet, it is unlikely that the threshold of EUR 250,000 for immovable property would lower. Maybe purchasing two units for the total amount will be allowed, maybe in regions. But at the present stage all that is crystal-ball gazing.
– Do you study the programmes offered by other countries, such as Greece, Spain, Hungary, Cyprus, Malta, etc., to the foreign investors?
– We have reviewed them. But you should understand that each country has its goals and nuances, why the programme for attracting investors has been designed in one way or the other. And it is not always right or reasonable to compare the Latvian conditions for issuing RPs with the ones offered by other countries. Besides, it is pointless to copy identically what others are doing. For instance, recently there was a corruption scandal developing regarding the ‘gold visa’ in Portugal. It is better to look at us. Our aim is to have a real benefit for Latvia from the action of the Immigration Law.
The purchasing of immovable property by foreigners has its supporters and detractors. The former ones state that it benefits the country; the latter ones believe that the prices increase due to that, thus making the immovable property unavailable for the local buyers. As a result, the locals have to rent the property from the foreigners and pay them rent.
– In the classical theories, construction is a positive factor reflecting the economic development level of the country. Currently, due to the decreased volumes of purchasing immovable property in the centre of Jurmala and Riga, the construction companies in Latvia, as well as in the related areas, are closing up their businesses. The old projects are being completed, yet the constructors undertake new projects in exceptional cases.
– This question should be addressed to the politicians or the Ministry of Economics, not me. This topic does not fall under the competence of the immigration policy. The OCMA operates according to the principle: the economy says "we need", the politicians, after assessing the economic and national interests, make the respective amendments in the laws, and we implement them. If they say that everything is good in the economy of Latvia, then no one changes anything. You should not think that only the Ministry of Internal Affairs or the OCMA are responsible for the immigration policy, we are acting strictly within the framework set for us. If the country needs students, it needs them; if it needs the labour force – that is what we are getting down to.
– So, let's summarise our conversation. We are looking forward to the analysis of the five-year performance of the programme for attracting investors to Latvia. Maybe some changes can be expected. But, as regards the immovable property, one should not expect any tightening requirements.
– Exactly, I suppose.
- Thank you for the conversation!