WORLD TRADE  
ORGANIZATION  G/SCM/N/95/LVA 
28 January 2005 
 (05-0347) 
Committee on Subsidies 
and Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
New and Full Notification Pursuant to Article XVI:1  
of the GATT 1994 and Article 25 of the Agreement  
on Subsidies and Countervailing Measures  
 
LATVIA 
 
 The following communication, dated 20 January 2005,  is being circulated at the request of the 
Delegation of the European Communities on behalf of Latvia.  
_______________ 
 G/SCM/N/95/LVA 
Page 2  
 
 Notification of Subsidies in Latvia:  Year 2001 
 
Introduction 
 
Due to financial constraints and liberal appro ach to economic policies (the policy of minimum 
intervention in business activities), the Republic of La tvia provides very limited financial support to 
its business sector even for internationally accepte d goals of regional deve lopment, environmental 
protection, research and development.  Therefore the possibility of distortion of competition as a 
result of state aids, (Subsidies) is minimum.    
This survey covers all the assistance to the industr y.  Public expenditures, credit programmes or tax 
measures are included in this survey without preju dging whether the subsidy measure is specific or 
whether it can be qualified as a general policy measure.  This survey includes financial measures provided at  the national and local level. In cases where aid 
amounts are very small to have an impact on inte rnational trade of goods and services or where the 
nature of aid allows presume that respective meas ure can’t have distorted consequences in terms of 
international competition, only ge neral information is provided. 
 
STATE AID TO MANUFACTURING/SERVICES 
 
I. TAX - RELATED FORMS OF THE AID 
1. Tax debt capitalization 
Level of government:   Central  
Policy objective:   Debt capitalization is realized as a one-off measure
 to assist eligible enterprises to 
overcome consequences of the former economic system. 
Form of the subsidy:  tax debt capitalization 
Legal basis:  Tax debt capitalization is governed by the Law on Taxes and Duties, Cabinet of 
Ministers Regulations no.200 of 3 June 1997. To whom the subsidy is provided: tax debt capitalization is applicable to the enterprises under 
privatization and privatized enterprises (thereafter - eligible enterprises).  Mechanism:  For eligible enterprises tax debts (the princi pal debt and the sum of the increase of the 
principle debt
1), accrued till the moment of privatizati on or till the moment of submission of 
capitalization application (depending on the status of eligible enterprise) are being capitalized. For 
private enterprises, where state share previously exceeded 50 per cent, only debts, accrued when state 
had a control over enterprise, are capitalized.  
Actually, in 2001 a considerable number of cases the possibility to capitalize tax debts was provided 
for in the relevant company’s privatization regulati ons. This clearly influenced  the price for which the 
enterprise was sold.   The following tax debts can be capitalized:  VAT, Co rporate income tax, excise tax debts as well as 
social tax debts if accrued till year 1996. 
 
The property and personal income tax debts, which accrued till the moment of privatization and were 
not paid for objective and from the enterprise independent reasons, can be capitalized only for 
privatized enterprises. 
                                                     
 
1 The sum of delayed taxes and other payments, including punitive fines, (principle debt) is increased 
in concert with the refinancing rate specified by  the Bank of Latvia for the period of delay.  G/SCM/N/95/LVA 
 Page 3 
 
 
 Capitalization can not be done repeatedly. No capitali zation of debts can take place if the decision on 
liquidation of the enterprise is taken.  As a result of capitalization, the equity capital of th e respective enterprise is increased by the sum of 
the capitalized taxes, and the institution, which c onducts the capitalization, becomes the owner of the 
respective capital shares. This gives the state a real istic opportunity to recoup its investment by selling 
the capital shares on the open market.    The debts are capitalized if the value of assets of enterprise exceeds value of liabilities (except for 
capitalized tax debts) and company’s liquidity coeffici ent is not less than 1.0, and own funds coverage 
is not less than 0.1. 
 Only audited financial statements are used  for the purposes of tax capitalization. 
 In case of privatized enterprises the capitalization of  debts is refused if during the period between 
privatization and submission of capitalization app lication (this period should not exceed six months) 
tax debts increased by more than 10 per cent. 
 
The total amount of the subsidy:  In calculating the volume of aid awarded through tax debt 
capitalization, the revenues obtained in 2001 becau se of previously concluded agreements on tax 
capitalization were taken into account (EUR 2.5 mil lion). This means that the notification includes 
only the "net costs" of this programme. In 2001 the programme of tax debt capitalization amounted to 
EUR 1.65 million.  
2. Writing-off of previously calculated late fi nes and punitive fines for eligible enterprises 
Level of government: Central. 
Legal basis:  Law On Taxes and Duties, Cabinet of Mini sters regulations no.200 of 3 June 1997.  
Policy objective:  fine write-offs are applied as a one-off measure to assist eligible enterprises to 
overcome consequences of the former economic system. Form of the subsidy:  writing-off of previously calculated late fines and punitive fines, which are 
related to basic capitalized tax debts. To whom the subsidy is provided: The writing-off of fines is app licable to the enterprises under 
privatisation and privatized enterprises, whose tax de bts are capitalized. With reference to privatized 
enterprises, this condition refers to these enterp rises, whose capitalized tax debt accrued till the 
moment of privatization and has not been paid  for objective and from the enterprise independent 
reasons. Mechanism:  Capitalized tax-related fines are bei ng written off for the eligible enterprises 
simultaneously with capitalization of tax debt. 
The total amount of the subsidy:  In 2001 the total amount of written-off previously calculated late 
fines and punitive fines for eligible  enterprises was EUR 2.09 million. 
 
3. Tax extensions for the period up to three ye ars for enterprises under privatization and 
privatized enterprises 
Level of government:  Central. 
Legal basis : The scheme under which deadlines of tax debts payments were extended for up to three 
years was ended in 1 January 2000. For a reason of  transparency, however, this report reflects only 
the effect of extensions that ha d been approved in earlier years. 
Form of the subsidy:  tax debt payments extension. 
Mechanism : The extension of tax debt payments was u sed when capitalization of tax debts was not 
possible.  G/SCM/N/95/LVA 
Page 4  
 
 The total amount of the subsidy:  In 2001 the effect of extensions that had been approved in earlier 
years amounted to EUR 0.35 million. 
 
4. Enterprise income tax relieves 
Level of government:  Central. 
Legal basis : Law on taxes and fees, Section 18.1. 
Policy objective:  to promote the producing of high tec hnology products and software products in 
Latvia. Form of the subsidy: enterprise income tax relief. 
To whom the subsidy is provided/Mechanism:  Tax relief for the enterprises, which produce high-
technology products and software pr oducts, is 30 per cent from calculated enterprise income tax, if the 
enterprises comply with the following criteria:  
• "supported" products, the list of which is determined  by the Cabinet of Ministers, constitute at 
least 75 per cent of the net turnover of the enterprises in the respective taxation period; 
• The enterprises have received an ISO 9 0000, ISO 90001 or ISO 90002 certificate. 
 
The total amount of the subsidy:  In 2001 the total amount of enterprise income tax relieves applicable 
to the eligible enterprises was EUR 0.12 million.  
II. GOVERNMENT - ISSUED LOANS  
Level of government:  Central.  
Legal basis:  Planned amount of state credits as well as beneficiary projects are included in the annual 
Law on State Budget (normally these are projects incl uded in the Public investment programme).   
Policy objective:  to alleviate access to financing to enterprises. 
Form of subsidy:  soft loans. 
 Mechanism:  The agreements with foreign entities referri ng to the government – issued loans (which 
the government, in turn, borrowed from foreign c ountries) were mostly signed between 1993 and 
1998. Since that time no new agreements on government – issued loans have been signed. All of these 
government – issued loans are long-term loans with  an interest rate of 5-9 per cent per year 
The total amount of the subsidy:   At the end of 2001, the outstanding sum of government – issued 
loans in the manufacturing sector amounted to EUR 20.3million. The state aid element in 2001 amounted to EUR 1.01 million in 2001. It must be re membered, of course, that  this is the maximum 
theoretical aid, because when the net aid equivalent  was calculated, it was not possible to determine 
the interest rates that were set for final beneficiarie s.  That is because the credits were distributed via 
several different channels.  For this reason in sever al cases interest rates that were paid by the initial 
recipient of the credit (usually th e bank that is servicing the credit). 
 
III. WRITING-OFF OF GOVERNMENT LOANS ISSUED IN PREVIOUS YEARS 
Level of government:  Central.  
Policy objective:  to fulfil the obligations under the auspi ces of previously signed loan agreements 
between the government and foreign entities. Legal basis/Form of the subsidy:  In relation to a few insolvent en terprises some government - issued 
loans were written-off (government had to make paym ents in place of these in solvent enterprises) in 
2001 under the auspices of the loan agreements, wh ich government has signed with foreign entities in 
previous years.   
Statistical: In 2001 government-issued loans were written off for some insolven t enterprises of the 
manufacturing sector for the total amount of EUR 5. 37 million. Some of losses that were incurred in 
2001 will be recouped in future years because of lawsuits that have been started. 
  G/SCM/N/95/LVA 
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 IV. REGIONAL AIDS 
1. Regions which receive special support  
Level of government: Central. 
Policy objective:  to promote development of less – favoured regions. 
Legal basis : Law "On specially assisted regions". 
Form of the subsidy /mechanism:  Status of a region requiring special  support is granted to regions on 
the basis of specific criteria (economic and social de velopment, infrastructure indicators, etc.), as well 
as on the basis of development plans which are prepar ed by the regions and which are evaluated by an 
inter-ministerial commission.  A ccording to the law, the maximum number of population, which is 
taken into account when the status of specially assist ed region is applied to the populated territories, 
can mot be higher than 15 per cent of the total population of the country.  
In order to provide real financial support to the re gions that receive special support, a Regional Fund 
was set up in March 1998. To whom the subsidy is provided: The enterprises, what got the assist ance within this programme, are 
qualified as small and medium sized enterprises. Majo r part of state aid from the Regional Fund went 
in order to cover part of credit interest rates. A nother part went toward financing of infrastructure 
development. The total amount of the subsidy:  In total EUR 0.72 million from the Regional Fund’s money was 
spent in 2001 in order to assist regional developm ent. Taking into account that these resources were 
used for more than 190 projects, the conclusion could be made that in fact the actually received aid is 
considered as de minimis .  
 
2. Special Economic Zones and Free Ports 
Level of government: Central.  
Policy objective:  to facilitate revitalization of special ec onomic zones (SEZ) and free ports in Latvia. 
Legal basis : Law "On Application of Taxes in Free Ports and Special Economic Zones" 
Form of the subsidy : tax relief. 
Mechanism : Companies in special economic zones (Liep āja and Rēzekne) and Riga free port enjoy 
favourable tax treatment – a discount of 80 per cent from the enterprise income tax and the 
immovable property tax.   To whom the subsidy is provided : According to the national legislation only the enterprises, what have 
been signed the agreement with The Board of special economic zones and Riga free port about the 
realization of business activities and investments in the territory of both special economic zones and 
Riga free port, may apply the tax relieves. The mech anism for the application of tax relieves for the 
enterprises located in Ventspils free port is the same. The total amount of the subsidy:  In 2001 14 enterprises received an 80 per cent discount on the 
immovable property tax, worth in total EUR 0.30 million and 6 enterprises received discount on the 
enterprise income tax, worth of EUR 0.42  million under this programme.  
 
V. AIDS FOR SMALL AND MEDIUM-SIZED ENTERPRISES 
1. Tax relieves 
Level of government: Central.  
Policy objective:  alleviation of tax burden for SMEs. 
Legal basis
: Law on Enterprise Income Tax. 
Form of the subsidy : tax rebate. 
To whom the subsidy is provided /Mechanism : The tax relief is in the form of a 20 per cent discount on 
the calculated tax as set out in the law "On the enterpri se income tax". It is important to note here that 
according to that law, only microenterprises – tho se in which the average number of employees does G/SCM/N/95/LVA 
Page 6  
 
 not exceed 25 people, with a balance value of not  more than EUR 0.125 million and net turnover does 
not exceed EUR 0.356 million– can receive the discount.   The total amount of the subsidy:  In 2001 such aid was granted to 8,0 thousand enterprises worth of 
EUR 3.1 million. 
 
2. Guarantees 
Level of government: Central. 
Legal basis : The state-owned J.S.C. "Latvian Guar antee Agency" (LGA) was set up in 1998 
according to the National programme of SMEs’ de velopment framework with the aim of supporting 
investment projects of SMEs by reducing the risk, which is undertaken by ba nks and other financial 
institutions, which provide loans to SMEs. By Cabi net of Ministers Order no. 209 of 30 April 1997 
state financing worth in total of EUR 0.9 million was assigned from the resources of Fund of State property privatisation in order to set up LGA. The regulations of creation and basic points of activities 
of LGA were defined in Financing Ag reement signed in 3 August 1998 between 
European Commission, Ministry of Economy of the Republic of Latvia and LGA. 
Form of the subsidy : guarantee. 
To whom the subsidy is provided: the LGA provides the support to those SMEs, in which the average 
number of employees does not exceed 150 people, with a balance value of not more than EUR 0.356 million and net turnover does not exceed EU R 1.78 million. In addition, the operations of 
these SMEs should not been totally connected with the sectors of agriculture and trade. 
Mechanism:  If banks or other financial institutions refu se to provide loans to SMEs aimed to the 
realization of initial investment projects because of  too high risk involved then the LGA would 
provide the possibility for SMEs to sign guarantee agreements.  
The total amount of the subsidy:  Unfortunately the agency’s operations did not develop in the 
intended way. By the end of 2001 the LGA had concluded only 7 guarantee agreements. Of these, 
only 2 involved manufacturing enterprises, and the aid equivalent amounted to EUR 18.7 thousand. 
 
3. Soft loans 
Level of government: Central.  
Title of the subsidy programme: Crediting of SME’s development.  
Legal basis : According to the Concept of project on "Cre diting of SME’s development", accepted by 
the Cabinet of Ministers, 15 November 1999. 
Purpose of the subsidy:  Because the successful operations of  SMEs ensure social stability and 
promote long-term economic growth , an important condition for SME development is the availability 
of loans. However, commercial banks and other fina ncial institutions are often uninterested in issuing 
loans to SMEs. The main purpose of this programme  is to improve the ability of SMEs to receive 
loans so as to promote the modernisation and divers ification of the Latvian economy and to ensure the 
development and improveme nt of SMEs operations. 
To whom the subsidy is provided:  Under this support programme the aid is given to SMEs, which do 
not have sufficient collateral or an adequate cred it history to receive loans, which are owned by 
women or located in less developed regions of th e country. These SMEs have a good chance for rapid 
development as the result of business ideas, contac ts, knowledge, etc., but with respect to which 
commercial banks or other financial institutions  are not interested in providing financing. 
Form of the subsidy:  soft loan. 
Mechanism:  In 2001 the government in collaboration w ith the Latvian Mortgage and Land bank 
initiated to establish the support programme "Cre diting of SME’s development". Aid under the 
auspices of this programme will be granted mainly for initial investments: credit sum for a single 
enterprise will vary from 150 000 to 300 000 EURO and the beneficiary’s contribution to its financing 
is at least 25 per cent.  G/SCM/N/95/LVA 
 Page 7 
 
 
 The annual amount of the subsidy :  Till the end of 2001 the Latvian Mortgage and Land bank issued 
soft loans to 167 SMEs with a total amount of EUR 7.4 million, and this represents the aid equivalent 
of EUR 19 thousand.  
VI. TRADE FINANCING AND GUARANTEEING 
1. The operations of the state-owned share company "Latvijas eksportkred īts" (LEK), 
which is to be liquidated 
Level of government: Central.  
Legal basis : Cabinet of Ministers Regulations no.354 of 17 September 1996 - Regulations on state aid 
to guaranteeing and financing export and import operations. 
Form of the subsidy : loan guarantees, credits. 
Policy objective: to alleviate access to financing to companies. 
Mechanism: State aid to export is channelled through th e state stock company LEK.  That institution 
offers guarantees and credits, which can be classified as part of the state’s export aid programme.  It should be added that the services, which LEK provides,  satisfy the criteria, which are set out by the 
OECD. 
 In 2001 the aid awarded by LEK was related to ag reements that had been completed in previous 
years. LEK has taken no new obligations since 2000, because the government no longer provides 
budget resources for this purpose.   
 
The total amount of the subsidy: In fact, the operations of LEK in 2001 were aimed at monitoring and 
supervising existing projects - at the end of 200 1, the outstanding loans from LEK amounted to 
EUR 35 thousand and the guarantees, which LEK ha d issued, amounted to EUR 0.114 million. This 
does not involve state aid, because th e interest rates that apply to loans that had been issued in 
previous years and on loans, which had been guara nteed in previous years, were higher that the 
reference rate.  
 In concert with guarantee agreements, a compen sation sum amounting to EUR 0.415 million was paid 
out in 2001 by LEK. Thanks to lawsuits that have  been started, the government recovered payments 
that had been made on behalf of loan recipients , with a total amount of EUR 42 thousand in 2001. 
This means that aid involving LEK in  2001 amounted to EUR 0.374 million.  
 
2. Aid for participation in international exhibitions and fairs 
Level of government: Central.  
Legal basis:  Planned amount of grants are included in the annual Law on State Budget. 
Form of the subsidy: grants. 
Policy objective: to provide a support of Latvian enterprises for the participation in international 
exhibitions and fairs and taki ng part in trade missions.  
Mechanism: The financing was awarded from the nationa l budget. This aid was managed by the 
Economics Ministry and business support organisations (mostly the non-profit State J.S.C. "Latvian 
Development Agency"). The money was used by en terprises to lease exhibition space for their stands, 
to cover the cost of building the stands, to publis h product catalogues in foreign languages, to pay for 
the placement of information in exhibition catalogues. 
The annual amount budgeted for the subsidy:  In 2001 the programme of support amounted to 
EUR 0.45 million. The grants under the programme qualified as de minimis aid.  
 G/SCM/N/95/LVA 
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 3. Aid for marketing of Latvian exports 
Level of government: Central.  
Legal basis:  Planned amount of grants are included in the annual Law on State Budget. 
Form of the subsidy: grants. 
The purpose of the subsidy: to reduce the marketing costs, which Latvian enterprises face when they 
enter new markets.  
Mechanism:  Here, too, the responsible institutions are the Ministry of Economics and the Latvian 
Development Agency. The government provides financi ng that covers up to 30 per cent of marketing 
costs, and a single company can receive up to EUR 18 thousand.  The total amount of the subsidy:  In 2001 the total amount of financing under the auspices if the 
programme was EUR 39,0 thousand. 
 
VII. AIDS TO COMPANIES WITH FOREIGN CAPITAL PARTICIPATION 
Level of government: Central. 
Legal basis:  Companies with foreign investment can receive tax relief on the enterprise income tax of 
between 50 per cent and 100 per cent, in concert with  the procedure that was once set out in the law 
"On foreign investments in the Republic of Latvia " (since 1 April 1995, no new enterprise income tax 
relief has been awarded to companies with foreign investment).  
Form of the subsidy: tax relief. 
To whom the subsidy is provided/Mechanism:  The enterprise income tax relief was intended to cover 
a period of four to eight years, starting with the first year that a company earned a profit.  The tax 
relief conditions are differentiated on the basis of  whether the company was registered before 
12 March 1993 or between 12 March 1993, and 1 April 1995, as well as on the basis of the share of foreign capital in the equity capital of the company.   The annual amount of the subsidy: In 2001 enterprises with participation of foreign capital received 
tax relieves worth of EUR 7.6 million. Actually, in 2001 overall aid declined in comparison to 
previous years awarded under auspices of this programme, mostly because some enterprises with 
participation of foreign capital that had enjoyed enterprise income tax relief saw the period of tax 
relief expire.  
VIII.  AIDS FOR RESEARCH AND DEVELOPMENT (R&D) 
Level of government:  Central.  
Legal basis:  Planned amount of grants for R&D as we ll as beneficiary projects are included in the 
annual Law on State Budget (normally these are pr ojects included in the Public investment 
programme).   Form of the subsidy:  grant. 
Mechanism:  R&D projects were administered by the La tvian Council of Science and carried out by 
public owned universities and institutes. All these projects fall under the cat egory of fundamental 
research, and thus having no influence on competiti on. In addition, there is also in operation a 
programme which focuses on market oriented research and which is administered by the Ministry of Education and Science. Although the results of such  research are "closer" to the market, it is difficult 
to classify any of these projects as pre-compe titive development activity, which means that the 
projects mostly fit into category of industrial research.  
The annual amount budgeted for the subsidy:  In 2001 the total amount of grants awarded to the 
enterprises and aimed to R&D activities amounted to EUR 1.86  million. All these projects were 
mostly de minimis  aid projects (the average financing per project was less than EUR 17.8 thousand). 
  G/SCM/N/95/LVA 
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 IX. AIDS FOR ENVIRONMENTAL PROTECTION 
Level of government:  Central.  
Legal basis:  Law on Natural Resources Tax Section 3.3;  Cabinet of Ministers Order no.64 of 
12 February 1997 – On Non-profit Organization St ate Ltd. "The Environmental Investment Fund". 
Form of the subsidy:  soft loan. 
To whom the subsidy is provided/Mechanism: The financing was provided to the financing of the 
projects, which complied with the priorities set by Ministry of Environmental Protection and Regional 
Development of the Republic of Latvia. The total amount of the subsidy : In 2001 the total amount of aid was equal to the sum of 
EUR 0.11 million.   X. AIDS AT THE LOCAL MUNICIPALITIES LEVEL 
1. Local municipalities – issued loans 
Level of government:  Local.  
Policy objective:  to alleviate access to financing to enterprises. 
Form of subsidy:  soft loan. 
Mechanism:  Some enterprises of the manufacturing/servi ces sectors used the possibility to receive 
soft loans from the local governments. In 2001 this possibility was not used very often.  
The total amount of the subsidy:  State aid in the form of soft  loans in 2001 amounted to 
EUR 0.14 million (calculated as the difference betwee n the profit rate of five-year Government bonds 
plus 2 per cent and the interest rate that is bei ng paid, multiplied by the sum of the remaining loan 
amount in the specific quarter).  
 
2. Grants awarded by local-municipalities 
Level of government:  Local.  
Policy objective:  to promote the development of enterprises in particular municipalities. 
Form of subsidy:  grant. 
Mechanism:  Some enterprises of the manufacturing/services sectors were awarded grants by the local 
governments. This aid was mainly aimed to  giving operating aid to the enterprises.  
The total amount of the subsidy: In 2001 all the grants awarded by the municipalities to the enterprises 
qualified as de minimis  aid.  The total amount of grants in 2001 was only EUR 0.09 million. 
 3. The immovable property tax relieves 
Level of government: Central/ local government.  
Legal basis/mechanism: According to the Law On immovable property tax, local governments can 
provide tax relief of 25 per cent, 50 per cent, 70 per cent and even 90 per cent of the immovable 
property tax sum to specific categories of taxpayers.    
The total amount of the subsidy:  The local governments did not use very much the previously 
mentioned opportunity in 2001, and the total amount  of tax relief provided under this provision in 
2001 amounted only to EUR 0.04  million. 
 G/SCM/N/95/LVA 
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 Table 1 
State aid to the manufacturing sector – 1999, 2000, 2001 Breakdown of aid according to sector and function 
 
Horizontal objectives Particular 
sectors 
(Synthetic 
fibres) Regional objective 
SME Environment R&D Tr ade Other (mainly, 
rescue and 
restructuring)   
Million EUR 
1999 1.6 0.46 2.51 0.68 6.76* 
(8.96)** 6.09 0.78 
2000 1.66 0.003 2.32 0.77 16.53* 
(19.18)** - 0.97 
2001 3.14 0.11 1.86 0.86 18.46*
(20.96)** - 1.43*** 
As a % of total aid of manufacturing 
1999 8.5 2.5 13.3 3.6 35.8 32.2 4.1 
2000 7.48 0.01 10.42 3.48 74.27 - 4.34 
2001 12.13 0.42 7.18 3.32 71.40 - 5.55 
 
* the sum of state aid (int.al., sum of capitalized tax debts) less the revenues in the respective year from 
the previously concluded tax capitalization agreements. 
** the sum of state aid (int.al., the sum of capitalized tax debts). 
*** the figure includes EUR 0.16 million support (in form of tax relieves) for the steel company. 
 
 Table 2 State aid to the manufacturing sector – 1999, 2000, 2001 Breakdown according to the type of aid  
Group A Group B Group C  Group D  
Grants Tax 
exemptions Equity 
participation Soft loans Tax 
deferrals Guarantees  
 
TOTAL 
1999 3.96 5.78 0.22 0.37 2.28 6.26 18.87 
2000 3.24 8.93 8.68 0.37 0.61 0.42 22.25 In million EUR 2001 3.15 13.67 1.65 6.65 0.35 0.39 25.86 
1999 21.0% 30.6% 1.2% 1.9% 12.1% 33.2% 100% 
2000 14.57% 40.13% 39.02% 1.68% 2.73% 1.87% 100% As a % 
of the total aid 
to 
manuf-acturing 2001 12.18% 52.86% 6.38% 25.71% 1.35% 1.52% 100% 
  G/SCM/N/95/LVA 
 Page 11 
 
 
 Notification of Subsidies in Latvia:  Year 2002 
 
Introduction 
 
Due to financial constraints and liberal appro ach to economic policies (the policy of minimum 
intervention in business activities), the Republic of La tvia provides very limited financial support to 
its business sector even for internationally accepte d goals of regional deve lopment, environmental 
protection, research and development. Therefore the possibility of distortion of competition as a result 
of State aids (Subsidies) is minimum.    
This survey covers all the assistance to  the manufacturing and services sectors.  
 The figures on aid granted are classified according to the objectives of aid and forms of aid. 
Breakdown of aid in line with sectors to which it is directed is in the second place.   
In the 2002 survey, unlike previous reports, only data of State aid granted to the enterprises operating 
in the sectors indicated in sections C, D and E of cl assifications NACE are included in figures of State 
aid granted to the manufacturing sector. Till now analysing State aid granted to the manufacturing sector in previous reports, there were also included figures of State aid granted to the enterprises operating in different sectors of services (for example, all kinds of wholesale and retail trade; construction; repair of motor vehicles, motorcyc les and personal and household goods; real estate, 
renting and other business activities) in the total amount of State aid granted to the manufacturing 
sector.   Public expenditures, credit programmes or tax measures are included in this survey without 
prejudging whether the subsidy measure is specific or whether it can be qualified as a general policy 
measure. 
 This survey includes financial measures provided at  the national and local level. In cases where aid 
amounts are very small to have an impact on inte rnational trade of goods and services or where the 
nature of aid allows presume that respective meas ure can't have distorted consequences in terms of 
international competition, only ge neral information is provided. 
 
STATE AID TO MANUFACTURING/ SERVICES 
 I. TAX - RELATED FORMS OF THE AID 
1. Tax debt capitalization  
Level of government:  Central.  
Policy objective:  Debt capitalization is realized as a one-off measure
 to assist eligible enterprises to 
overcome consequences of the former economic system. Legal basis:  Tax debt capitalization is governed by the Law on Taxes and Duties; Cabinet of 
Ministers Regulations no.200 of 3 June 1997. Form of the subsidy:  tax debt capitalization. 
To whom the subsidy is provided: tax debt capitalization is applicable to the enterprises under 
privatization and privatized enterprises (t hereafter – the eligible enterprises).  
Mechanism:  For the eligible enterprises tax debts (the pr incipal debt and the sum of the increase of the 
principle debt
1), accrued till the moment of privatizati on or till the moment of submission of 
capitalization application (depending on the status of  the eligible enterprise) are being capitalized. For 
                                                      
1 The sum of delayed taxes and other payments, including punitive fines, (principle debt) is increased 
in concert with the refinancing rate specified by  the Bank of Latvia for the period of delay. G/SCM/N/95/LVA 
Page 12  
 
 the private enterprises, where state share previous ly exceeded 50 per cent, only debts, accrued when 
state had a control over th e enterprise, are capitalized. 
 Actually, in 2002 a considerable number of cases the possibility to capitalize tax debts was provided 
for in the relevant company’s privatization regulati ons. This clearly influenced  the price for which the 
enterprise was sold.  
 The following tax debts can be capitalized: VAT, Cor porate income tax, excise tax debts as well as 
social tax debts if accrued till year 1996.  
The property and personal income tax debts, which accrued till the moment of privatization and were 
not paid because of objective and from the enterpri se independent reasons, can  be capitalized only for 
privatized enterprises.  No capitalization of debts can take place if the d ecision on liquidation of the enterprise is taken. 
 
As a result of capitalization, the equity capital of th e respective enterprise is increased by the sum of 
the capitalized taxes, and the institution, which c onducts the capitalization, becomes the owner of the 
respective capital shares. This gives the state a real istic opportunity to recoup its investment by selling 
the capital shares on the open market.    
The debts are capitalized if the value of assets of enterprise exceeds value of liabilities (except for 
capitalized tax debts) and enterprise’s liquidity co efficient is not less than 1.0, and own funds 
coverage is not less than 0.1 or long-term liquida tion coverage indicator exceeds 0 after the moment 
of capitalization.  
Only audited financial statements are used  for the purposes of tax capitalization. 
 In case of privatized enterprises the capitalization of  debts is refused if during the period between 
privatization and submission of capitalization app lication (this period should not exceed six months) 
tax debts increased by more than 10 per cent. 
 
The total amount of the subsidy:  In calculating the volume of aid awarded through tax debt 
capitalization, the revenues obtained in 2002 becau se of previously concluded agreements on tax 
capitalization were taken into account (EUR 0.828 m illion). This means that the notification includes 
only the "net costs" of this programme. In 2002 th e programme of tax debt capitalization in "net 
costs" amounted to EUR 0.264 million. All amount of the aid was granted to the enterprises operating 
in the manufacturing sector. 
 
2. Writing-off of previously calculated late fi nes and punitive fines for eligible enterprises 
Level of government: Central.  
Policy objective:  fine write-offs are applied as a one-off measure to assist eligible enterprises to 
overcome consequences of the former economic system. 
Legal basis:  Law On Taxes and Duties, Cabinet of Mini sters regulations no.200 of 3 June 1997.  
Form of the subsidy:  writing-off of previously calculated late fines and punitive fines, which are 
related to basic capitalized tax debts.  To whom the subsidy is provided: The writing-off of fines is app licable to the enterprises under 
privatisation and privatized enterprises, whose ta x debts are capitalized. With reference to the 
privatized enterprises, this condition refers to these  enterprises, whose capitalized tax debt accrued till 
the moment of privatization and has not been pa id for objective and from the enterprise independent 
reasons.  G/SCM/N/95/LVA 
 Page 13 
 
 
 Mechanism:  Capitalized tax-related fines are bei ng written off for the eligible enterprises 
simultaneously with capitalization of tax debt. The total amount of the subsidy:  In 2002 the total amount of written-off previously calculated late 
fines and punitive fines for eligible enterprises was EUR 1.103 million.  All amount of the aid was 
granted to one enterprise operating in the manufacturing sector.  3. Tax extensions for the period up to three ye ars for enterprises under privatization and 
privatized enterprises 
Level of government:  Central. 
Legal basis : The scheme under which deadlines of tax debts payments were extended for up to three 
years was ended in 1 January 2000. For a reason of  transparency, however, this notification reflects 
only the effect of extensions that had been approved in earlier years. 
Form of the subsidy:  tax debt payments extension. 
Mechanism : The extension of tax debt payments was u sed when capitalization of tax debts was not 
possible.  
The total amount of the subsidy:  In 2002 the effect of extensions that had been approved in earlier 
years amounted to EUR 0.007 million, of which EUR 0.005 million was awarded to the enterprises of manufacturing sector. 
 
4. Enterprise income tax relieves 
Level of government:  Central. 
Legal basis : Law On Enterprise Income Tax, Section 18.1. 
Policy objective:  to promote the producing of high tec hnology products and software products in 
Latvia. Form of the subsidy: enterprise income tax rebate. 
To whom the subsidy is provided/Mechanism:  Tax rebate for the enterprises, which produce high-
technology products and software pr oducts, is 30 per cent from calculated enterprise income tax, if the 
enterprises comply with the following criteria:  
• "supported" products, the list of which is determined  by the Cabinet of Ministers, constitute at 
least 75 per cent of the net turnover of the enterprises in the respective taxation period; 
• The enterprises have received an ISO 9 0000, ISO 90001 or ISO 90002 certificate. 
 
The total amount of the subsidy:  In 2002 the total amount of enterprise income tax rebate applicable to 
12 eligible enterprises was EUR 0.319 million, of which 5 enterprises operating in the manufacturing 
sector received tax rebate worth of EUR 0.149 million.  
II. GOVERNMENT - ISSUED LOANS  
Level of government:  Central.  
Policy objective:  to alleviate access to financing to enterprises. 
Legal basis: Planned amount of state loans as well as beneficiary projects are included in the annual 
Law on State Budget (normally these are projects incl uded in the Public investment programme).  
Form of subsidy: soft loans. 
Mechanism:  The agreements with foreign entities referri ng to the government – issued loans (which 
the government, in turn, borrowed from foreign c ountries) were mostly signed between 1993 and 
2002. All of these government – issued loans are long-te rm loans with an interest rate of 3-15 per cent 
per year. The total amount of the subsidy:  At the end of 2002, the outstanding sum of government – issued 
loans in the manufacturing/ services sectors amounted to EUR 13.783 million (EUR 11.388 million of that - in the manufacturing services). The state aid element in 2002 amounted to EUR 0.494 million in G/SCM/N/95/LVA 
Page 14  
 
 the manufacturing/ services sectors. EUR 0.341 million of this aid was granted to the manufacturing 
sector. It must be remembered, of course, that this  is the maximum theoretical aid, because when the 
net aid equivalent was calculated, it was not possible to determine the interest rates that were set for 
final beneficiaries. That is because the loans were di stributed via several different channels.  For this 
reason in several cases interest rate s that were paid by the initial recipient of the credit (usually the 
bank that is servicing the loan) were used calculating the grant equivalent. 
 
III. WRITING-OFF OF GOVERNMENT LOANS ISSUED IN PREVIOUS YEARS 
Level of government:  Central.  
Policy objective:  to fulfil the obligations under the auspi ces of previously signed loan agreements 
between the government and foreign entities. 
Legal basis/Form of the subsidy:  In relation to a few insolvent en terprises some government - issued 
loans were written-off (government had to make paym ents in place of these in solvent enterprises) in 
2002 under the auspices of the loan agreements, wh ich government has signed with foreign entities in 
previous years.   
Statistical:  In 2002 government-issued loans were written - off for some insolvent enterprises of the 
manufacturing sector for the total amount of EUR 0.075 million. Some of losses that were incurred in 2002 will be recouped in future years because of lawsuits that have been started. 
 
IV. REGIONAL AIDS 
1. Assisted regions 
Level of government: Central. 
Policy objective:  to promote development of less – favoured regions. 
Legal basis : Law "On regional development". 
Form of the subsidy /mechanism:  Status of a region requiring special  support is granted to regions on 
the basis of specific criteria (economic and social de velopment, infrastructure indicators, etc.), as well 
as on the basis of development plans which are prepar ed by the regions and which are evaluated by an 
inter-ministerial commission.  A ccording to the law, the maximum number of population, which is 
taken into account when the status of specially assist ed region is applied to the populated territories, 
cannot be higher than 15 per cent of the total population of the country.  In order to provide real financial support to the re gions that receive special support, a Regional Fund 
was set up in March 1998. 
To whom the subsidy is provided: The enterprises, what got the assist ance within this programme, are 
qualified as small and medium sized enterprises, mostly of them are situated in rural areas. Major part 
of state aid from the Regional Fund went in order to cover part of credit interest rates. Another part 
went toward financing of municipal infrastructure development. The total amount of the subsidy:  In total EUR 0.962 million from the Regional Fund’s money was 
spent in 2002 in order to assist regional developm ent. The amount of EUR 0.461 million of this aid 
was granted to the manufacturing sector. This programme offers de minimis  support.  
 
2. Special Economic Zones and Free Ports 
Level of government: Central.  
Policy objective:  to develop regional infrastructure, create new working places and improve 
economical situation of the respectiv e regions and Latvia in a whole. 
Legal basis : Law "On Application of Taxes in Free Ports and Special Economic Zones". 
Form of the subsidy : tax rebate. 
Mechanism
: Enterprises in special economic zones (Liep āja and Rēzekne) and Riga and Ventspils free 
ports enjoy favourable tax treatment – a discount of 80 per cent from the enterprise income tax and 
the immovable property tax.    G/SCM/N/95/LVA 
 Page 15 
 
 
 To whom the subsidy is provided : According to the national legislation only the enterprises, what have 
been signed the agreement with The Board of special economic zones a nd free ports about the 
realization of business activities and initial investment s in the territory of both special economic zones 
and free ports, may apply the tax rebates.  
The total amount of the subsidy:  In 2002 32 enterprises received an 80 per cent discount on the 
immovable property tax, worth in total EUR 0. 617 million and 22 enterprises received discount on the 
enterprise income tax, worth of EUR 3.607  million under this programme. Aid worth of 
EUR 0.295 million as immovable tax rebate and EUR 1.197 million as enterprise income tax rebate of 
the total aid amount was granted to the enterpri ses operating in the manufacturing sector under this 
programme. 
 
V. AIDS FOR SMALL AND MEDIUM-SIZED ENTERPRISES 
1. Tax rebate 
Level of government: Central.  
Policy objective:  alleviation of tax burden for SMEs. 
Legal basis : Law on Enterprise Income Tax Section 17. 
Form of the subsidy : tax rebate. 
To whom the subsidy is provided /Mechanism : The tax rebate is in the form of a 20 per cent discount 
on the calculated tax as set out in the law "On the ente rprise income tax". It is important to note here 
that according to that law, only microenterprises – those in which the average number of employees 
does not exceed 25 people, with a balance value of  not more than EUR 0.12 million and net turnover 
does not exceed EUR 0.34 million– can receive the rebate.   
The total amount of the subsidy:  In 2002 such aid was granted to 9.9 thousand enterprises worth of 
EUR 6.223 million. EUR 0.818 million of this aid was granted to SMEs operating in the 
manufacturing sector. 
 
2. Guarantees 
Level of government: Central. 
Legal basis : Limited liability company "Latvian Guarantee Agency" (LGA) was set up in 1998 
according to the National programme of SMEs’ de velopment framework with the aim of supporting 
investment projects of SMEs by reducing the risk, which is undertaken by ba nks and other financial 
institutions, which provide loans to SMEs. By Cabi net of Ministers Order no. 209 of 30 April 1997 
state financing worth in total of EUR 0.9 million was assigned from the resources of Fund of State 
property privatisation in order to set up LGA. The regulations of creation and basic points of activities 
of LGA were defined in Financing Ag reement signed in 3 August 1998 between 
European Commission, Ministry of Economy of the Republic of Latvia and LGA. LGA is working in 
accordance with the Rules for Issui ng Guarantees for Loans, that have been drawn up on the basis of 
the Financing Agreement. 
Form of the subsidy : guarantee. 
Mechanism:  If banks or other financial institutions refu se to provide loans to SMEs aimed to the 
realization of initial investment projects because of  too high risk involved then the LGA would 
provide the possibility for SMEs to sign guarant ee agreements. During 2002 the LGA in cooperation 
with the Ministry of Economy and Latvian co mmercial banks worked out new loan guaranteeing 
conditions, restructured it’s administration structur e and searched for possibilities to attract additional 
financial resources in order to increase equity capital of the LGA. To whom the subsidy is provided: the 
LGA provides the support to t hose SMEs, the operations of 
which should not been totally connected w ith the sectors of agriculture and trade. 
The total amount of the subsidy:  Unfortunately the agency’s operations did not develop in the 
intended way. By the end of 2002 the LGA had concluded only 7 guarantee agreements. Of these, 
only 2 involved manufacturing enterprises. This does not  involve state aid, because the interest rates G/SCM/N/95/LVA 
Page 16  
 
 that apply to loans that had been issued in previous years and on loans, which had been guaranteed in 
previous years, were higher that the reference ra te.  In 2002 the LGA paid out one compensation for 
the amount of EUR 0.108 million to the manufacturing enterprise, this sum respectively composed aid 
equivalent of State aid granted by the LGA.  3. Soft loans 
Level of government: Central.  
Title of the subsidy programme: Crediting of SME’s development.  
Legal basis : According to the Concept of project on "Cre diting of SME’s development", accepted by 
the Cabinet of Ministers, 15 November 1999. 
Purpose of the subsidy:  Because the successful operations of  SMEs ensure social stability and 
promote long-term economic growth , an important condition for SME development is the availability 
of loans. However, commercial banks and other fina ncial institutions are often uninterested in issuing 
loans to SMEs because many SMEs do  not have sufficient collateral or  an adequate credit history to 
receive loans as well as the cost of servicing SME lo ans is also comparatively high. The main purpose 
of this programme is to improve the ability of  SMEs to receive loans so as to promote the 
modernisation and diversification of the Latv ian economy and to ensure the development and 
improvement of SMEs operations. Form of the subsidy:  soft loan. 
Mechanism:  In 2001 the government in collaboration w ith the Latvian Mortgage and Land bank 
initiated to establish the support programme "Cre diting of SME’s development". Aid under the 
auspices of this programme will be granted main ly for initial investments and the beneficiary’s 
contribution to its financin g is at least 25 per cent.   
To whom the subsidy is provided:  Under this support programme the aid is given to SMEs, which do 
not have sufficient collateral or an adequate cred it history to receive loans, which are owned by 
women or located in less developed regions of th e country. These SMEs have a good chance for rapid 
development as the result of business ideas, contac ts, knowledge, etc., but with respect to which 
commercial banks or other financial institutions  are not interested in providing financing. 
The annual amount of the subsidy :  In 2002 the Latvian Mortgage and Land bank serviced 503 loans 
issued to SMEs (total credit balance amounted to  EUR 5.68 million in the start of 2002) and the aid 
equivalent was EUR 0.021 million, EUR 0.005 milli on of which went to the manufacturing sector. 
 VI. TRADE FINANCING AND GUARANTEEING 
1. The operations of the state-owned share company "Latvijas eksportkred īts" (LEK), 
which is to be liquidated 
Level of government: Central.  
Policy objective: to alleviate access to financing to enterprises. 
Legal basis : Cabinet of Ministers Regulations no.354 of 17 September 1996 - Regulations on state aid 
to guaranteeing and financing export and import operations. 
Form of the subsidy : loan guarantees, loans. 
Mechanism: State aid to export was channelled through the state stock company LEK.  That 
institution offered guarantees and credits, which could be classified as part of the state’s export aid programme.  It should be added that the services, wh ich LEK provided, satisfy the criteria, which are 
set out by the OECD. 
 In 2002 the aid awarded by LEK was related to ag reements that had been completed in previous 
years. LEK has taken no new obligations since 2000, because the government no longer provides 
budget resources for this purpose.   
  G/SCM/N/95/LVA 
 Page 17 
 
 
 The total amount of the subsidy: In fact, the operations of LEK in 2002 were aimed at monitoring and 
supervising existing projects - at the end of 200 2, the outstanding loans from LEK amounted to 
EUR 8.69 thousand. This does not involve state aid, b ecause the interest rates that apply to loans that 
had been issued in previous years and on loans, which had been guar anteed in previous years, were 
higher that the reference rate. In 2002 the governme nt recovered payments that had been made in 
previous years on behalf of loan recipients, with  a total amount of EUR 0.279 million. This means 
that aid regarding LEK credit liabilities results as minus EUR 0.279 million.   In concert with guarantee agreements, a compen sation sum amounting to EUR 1.03 million was paid 
out in 2002 by LEK. Thanks to lawsuits that have  been started, the government recovered payments 
that had been made on behalf of loan recipien ts in previous years, with a total amount of 
EUR 0.011 million and in 2002. This means that ai d involving LEK guarantee liabilities amounted to 
EUR 1.019 million in 2002.   
2. Aid for participation in international ex hibitions and fairs – increasing of the 
competitiveness of Latvian SMEs in 2002 
Level of government: Central.  
Policy objective: to provide a support of Latvian enterprises for the participation in international 
exhibitions and fairs and taki ng part in trade missions.  
Legal basis:  Planned amount of grants are included in the annual Law on State Budget. 
Form of the subsidy: grants. 
Mechanism: The financing was awarded from the nationa l budget. This aid was managed by the 
Economics Ministry and business support organisations (mostly the non-profit State J.S.C. "Latvian 
Development Agency"). The money was spent for ensuring participation of Latvian SMEs in 
international exhibitions and fair s, and marketing activities of the enterprises in relation with these 
affairs under this programme. 
The annual amount budgeted for the subsidy:  In 2002 the programme of support amounted to 
EUR 0.183 million. The grants under the programme qualified as de minimis  aid.  
 
3. Aid for marketing of Latvian exports 
Level of government: Central.  
The purpose of the subsidy: to provide assistance for costs, whic h Latvian enterprises face when they 
enter new markets.  
Legal basis:  Planned amount of grants are included in the annual Law on State Budget. 
Form of the subsidy: grants. 
Mechanism:  Here, too, the responsible institutions are the Ministry of Economics and the Latvian 
Development Agency. The government provides financi ng that covers up to 30 per cent of marketing 
costs, and a single company can receive up to EUR 17.15 thousand.  
The total amount of the subsidy:  In 2002 the total amount of financing under the auspices if the 
programme was EUR 0.011 million.  
VII. AIDS TO COMPANIES WITH FOREIGN CAPITAL PARTICIPATION 
Level of government: Central. 
Legal basis:  Companies with foreign investment can rece ive tax rebate on the enterprise income tax 
of between 50 per cent and 100 per cent, in accordance with the procedure that was once set out in the 
law "On foreign investments in the Republic of Latv ia" (since 1 April 1995, no  new enterprise income 
tax relief has been awarded to companies with foreign investment).  
Form of the subsidy: tax rebate. 
To whom the subsidy is provided/Mechanism:  The enterprise income tax rebate was intended to cover 
a period of four to eight years, starting with the first year that a company earned a profit.  The tax G/SCM/N/95/LVA 
Page 18  
 
 rebate conditions are differentiated on the basis of whether the company was registered before 
12 March 1993 or between 12 March 1993, and 1 April 1995, as well as on the basis of the share of foreign capital in the equity capital of the company.   The annual amount of the subsidy: In 2002 enterprises with participation of foreign capital received 
tax rebate worth of EUR 2.926 m illion, of which the enterprises of the manufacturing sector received 
tax rebate worth of EUR 0.346 million. Actually, in  2002 overall aid sharply declined in comparison 
to previous years awarded under auspices of this programme, mostly because some enterprises with 
participation of foreign capital that had enjoyed enterprise income tax rebate saw the period of tax 
relief expire.  VIII.  AIDS FOR RESEARCH AND DEVELOPMENT (R&D) 
Level of government:  Central.  
Legal basis:  Planned amount of grants for R&D as we ll as beneficiary projects are included in the 
annual Law on State Budget (normally these are pr ojects included in the Public investment 
programme).   
Form of the subsidy:  grant. 
Mechanism:  R&D projects were administered by the La tvian Council of Science and carried out by 
public owned universities and institutes. All these projects fall under the cat egory of fundamental 
research, and thus having no influence on competiti on. In addition, there is also in operation a 
programme which focuses on market oriented research and which is administered by the Ministry of Education and Science. Although the results of such  research are "closer" to the market, it is difficult 
to classify any of these projects as pre-compe titive development activity, which means that the 
projects mostly fit into category of industrial research.  The annual amount budgeted for the subsidy:  In 2002 the total amount of grants awarded to the 
enterprises of manufacturing sector and aimed to R&D activities amounted to EUR 1.937  million. All 
these projects were mostly de minimis  aid projects (the average financing per project was less than 
EUR 17.15 thousand). 
 
IX. AIDS FOR ENVIRONMENTAL PROTECTION 
Level of government:  Central.  
Legal basis:  Law on Natural Resources Tax Section 3.3;  Cabinet of Ministers Order no.64 of 
12 February 1997 – On Non-profit Organization Stat e Ltd. "The Environmental Investment Fund".  
Form of the subsidy:  soft loan. 
To whom the subsidy is provided/Mechanism: The financing was provided to the financing of the 
projects, which complied with the priorities set by Ministry of Environmental Protection of the Republic of Latvia. The total amount of the subsidy : In 2002 the total amount of aid was equal to the sum of 
EUR 0.033 million. All the amount of aid was granted to the manufacturing sector.  
 
X. AIDS AT THE LOCAL MUNICIPALITIES LEVEL 
1. Local municipalities – issued loans 
Level of government:  Local.  
Policy objective:  to alleviate access to financing to enterprises. 
Form of subsidy:  soft loan. 
Mechanism:  Some enterprises of the manufacturing/servi ces sectors used the possibility to receive 
soft loans from the local governments. In 2002 this possibility was not used very often and all aids 
qualified as de minimis  aid.  
The total amount of the subsidy:  State aid in the form of soft  loans in 2002 amounted to 
EUR 0.105 million (calculated as the difference between  the averaged weighted profit rate of   G/SCM/N/95/LVA 
 Page 19 
 
 
 five-year Government bonds plus 2 per cent and the in terest rate that is being paid, multiplied by the 
sum of the remaining loan amount in the specific quarter), EUR 0.012 million of which was granted to 
the manufacturing sector.  
2. Grants awarded by local-municipalities 
Level of government:  Local.  
Policy objective:  to promote the development of enterprises in particular municipalities. 
Form of subsidy:  grant. 
Mechanism:  Some enterprises of the manufacturing/services sectors were awarded grants by the local 
governments. This aid was mainly aimed to  giving operating aid to the enterprises.  
The total amount of the subsidy: In 2002 all the grants awarded by the municipalities to the enterprises 
qualified as de minimis  aid.  The total amount of grants  in 2002 was only EUR 0.055 million, 
EUR 0.034 million of which went to the manufacturing sector.  
3. The immovable property tax rebate 
Level of government: Central/ local government. 
Policy objective:  to promote the development of enterprises in particular municipalities.  
Legal basis/mechanism: According to the Law On immovable property tax, local governments can 
provide tax rebate of 25 per cent, 50 per cent, 70 per cent and even 90 per cent of the immovable 
property tax sum to specific categories of taxpayers.  Form of subsidy:  tax rebate. 
The total amount of the subsidy:  The local governments did not use very much the previously 
mentioned opportunity in 2002, and the total amount  of tax rebate provided under this provision 
amounted only to EUR 0.146 million, of which tax rebates worth of EUR 0.019 million were granted 
to the manufacturing sector.  G/SCM/N/95/LVA 
Page 20  
 
 Table 1 
State aid to the manufacturing/services – 2000, 2001, 2002 Breakdown of aid according to objective and sector  
 
Horizontal objectives 
 Year 
SME Environ 
ment R&D Rescue & 
restructuring* Commerce Employ- 
ment aid Training 
aid Other 
objectives Regional 
aid TOTAL 
in 
MLVL 
Million LVL 
2000 0.936 0.0016 1.303 - 0.435 - - 9.29** 
(10.780)*** 0.543 12.509 
2001 1.763 0.061 1.044 - 0.483 - - 10,375** 
(11,78)*** 0.807 14.533 
2002 3.703 0.019 1.129 0.801 0. 818 - - 2.128 3.024 11.622 
As a % of total aid to manufacturing/services 
2000 7.48 
 0.01 10.42 - 3.48 - - 74.27 4.34 100 
2001 12.13 
 0.42 7.18 - 3.32 - - 71.40 5.55 100 
2002 31.86 
 0.16 9.72 6.89 7.04 - - 18.31 26.02 100 
Approximate value of non- de minimis  aid in the respective category of  State aids 
2000 - -  
- - 0.232 - - 9.2** 
(10.7)*** 0.174 9.606 
2001 - - - 
 - 0.210 - - 9.97** 
(11.374)*** 0.332 10.512 
2002 0.063 - - 
 0.797 0.686 - - 0.617 0.884 3.047 
As a % of total non- de minimis  aid to the manufacturing/ services 
2000 -  - - 2.41   95.79 
 1.8 100 
2001 - - - - 2.00 
   94.84 3,16 100 
2002 2.07 
 - - 26.16 22.51 - - 20.25 29.01 100 
 
* figures on State aid granted under this Section have been included in Subsection 2.1. "Other objectives" 
of Section 2. "Manufacturing/ Se rvices" in previous reports. 
** the sum of state aid (int .al., sum of capitalized tax debts) less the revenues in the respective year from 
the previously concluded tax capitalization agreements. 
*** the sum of state aid (int.al., the sum of capitalized tax debts). 
 
  G/SCM/N/95/LVA 
 Page 21 
 
 
 Table 2 
State aid to the manufacturing sector – 2000, 2001, 2002  Breakdown of aid according to objective and sector  
Horizontal objectives 
 Year 
SME Environ- 
ment R&D Rescue 
& 
restructu
-ring* Commerce **** Employ- 
ment aid Training 
aid Other 
objectives Regional 
aid TOTAL   
in 
MLVL 
Million LVL 
2000 0.936 0.0016 1.303 - 0.435 - - 9.29** 
(10.780)*** 0.543 12.509 
2001 1,763 0,061 1,044 - 0.483 - - 10,375** 
(11,78)*** 0.807 14.533 
2002 0,543 0,019 1,129 0,8 - - - 0,57 1,139 4.20 
As a % of total aid to manufacturing 
2000 7.48 
 0.01 0.42 - 3.48 - - 74.27 4.34 100 
2001 12.13 
 10.42 7.18 - 3.32 - - 71.40 5.55 100 
2002 12.93 
 0.45 26.88 19.05 - - - 13.57 27.12 100 
Approximate value of non- de minimis  aid in the respective category of  State aids 
2000 - - - - 0.232 - - 9.2** 
(10.7)*** 0.174 9.606 
2001 - - - 
 - 0.210 - - 9.97** 
(11.374)*** 0.332 10.512 
2002 0,063 - - 
 0.797 - - - 0.516 0.771 2.147 
As a % of total non- de minimis  aid to the manufacturing 
2000 -  - - 2.41   95.79 
 1.8 100 
2001 - - - - 2.00 
   94.84 3,16 100 
2002 2.93 
  - 37.12 - - - 24.03 35.92 100 
 
* figures on State aid granted under this Section have been included in Subsection 2.1. "Other objectives" 
of Section 2. "Manufacturing/ Se rvices" in previous reports. 
** the sum of state aid (int .al., sum of capitalized tax debts) less the revenues in the respective year from 
the previously concluded tax capitalization agreements. 
*** the sum of state aid (int.al., the sum of capitalized tax debts). 
**** figures on State aid granted under this Section ha ve been included in the total amount of aid for the 
manufacturing sector in previous reports. 
 
 
 
    
 
    G/SCM/N/95/LVA 
Page 22  
 
 Table 3 
State aid to the manufacturing sector – 2000, 2001, 2002 Breakdown according to the type of aid  
Group A Group B Group C  Group D  
Grants Tax 
exemptions Equity 
participation Soft loans Tax deferrals Guarantees TOTAL 
2000 1.823 5.02 4.88 0.21 0.341 0.234 12.508 
2001 1.77 7.683 0.928 3.736 0.196 0.2205 14.533 In MLVL 
2002 1.418 2.29 0.154 0.272 0.003 0.063 4.20 
2000 - 4.078 4.88 0.131 0.322 0.232 9.643 
2001 - 5.928 0.928 3.514 0.175 0.210 10.755 In MLVL 
(non – de 
minimis  
aids) 2002 - 1.687 0.154 0.243 - 0.063 2.147 
2000 14.57% 40.13% 39.02% 1.68% 2.73% 1.87% 100% 
2001 12.18% 52.86% 6.38% 25.71% 1.35% 1.52% 100% As a % of 
the total aid 
to 
manufacturi
ng 2002 33.76% 54.52% 3.67% 6.48% 0.07% 1.50% 100% 
2000 - 42.29% 50.61% 1.36% 3.34% 2.4% 100% 
2001 - 55.12% 8.63% 32.67% 1.63% 1.95% 100% As a % of 
the total aid to 
manufacturi
ng (non – 
de minimis  
aids)  2002 - 78.58% 7.17% 11.32% - 2.93% 100% 
 
__________