Investment Conditions in the Baltic States

The Baltic States, comprising Estonia, Latvia, and Lithuania, are often perceived as a unified economic space, due to the size of their national markets. However, they maintain three distinct legal systems with unique characteristics. Presently, these states exhibit diverse tax and economic incentive systems, coupled with distinct economic orientations.

All three Baltic States are members of the EU, Eurozone, NATO, OECD, and WTO.

The Baltic States entered in general 2023 under a moderate recession, with high inflation and rising interest rates, putting pressure on economic growth. However, the economic slowdown has been relatively mild in comparison with the great economic recession in 2008. The slower pace of economic development may create both challenges and opportunities for Baltic real estate.

Lithuania:

Lithuania is strategically situated at the crossroads of Europe and Eurasia. It offers investors a diversified economy, EU rules and norms, a well-educated multilingual workforce, advanced IT infrastructure, and a stable democratic government. The Lithuanian economy has been growing steadily since the 2009 economic crisis and only contracted slightly in 2020 due to economic fallout from the COVID-19 pandemic. It recovered rapidly in 2021, reaching 5.1 percent GDP growth thanks to budget surpluses and accumulated financial reserves prior to the crisis, as well as a well-diversified economy. Despite the impacts of Russia’s war with Ukraine, GDP growth continued in 2022 (2.2%) though growth slow in 2023. Disruptions caused by the war in Ukraine drove one of the highest inflation rates in the Eurozone, 21.7% in December 2022, primarily because of dramatically rising energy and electricity prices. Economists expect GDP growth to be close to zero in 2023, though also expect inflation to slow to single digits in 2023. The country joined the Eurozone in January 2015 and completed the accession process for the Organization for Economic Cooperation and Development (OECD) in May 2018. In terms of average net monthly wages, Lithuania ranks 15th of 27 EU member states. According to Bank of Lithuania statistics, in 2022 the United States was Lithuania’s 16th largest investor, with cumulative investments totaling $390 million (1.2 percent of total FDI).

The current government elected at the end of 2020 has continued prior governments’ efforts to improve the business climate and lower barriers to investment. In 2013, the government passed legislation which streamlined land-use planning, saving investors both time and money. In July 2017, the government introduced the new Labor Code which is believed to better balance the interests of both employees and employers, and in 2020 it introduced a law on the exemption of profit tax for a period of up to 20 years for large and significant investments to the country.

The government provides equal treatment to foreign and domestic investors and sets few limitations on their activities. Foreign investors have the right to repatriate or reinvest profits without restriction and can pursue investor-State dispute settlement under relevant treaty provisions. Lithuania offers special incentives, such as tax concessions, to both small companies and strategic investors. Incentives are also available in seven Special Economic Zones located throughout the country. Lithuania is a partner of the regional Three Seas Initiative.

Lithuania offers many investment opportunities in most of its economic sectors. The sectors which to date have attracted most investment include Information and Communication Technology, Biotech, Metal Processing, Machinery and Electrical Equipment, Plastics, Furniture, Wood Processing and Paper Industry, Textiles and Clothing. Lithuania also offers opportunities for investment in the growing sectors of Real Estate and Construction, Global Business Services, Financial Technologies, Biotech and Lasers.

Latvia:

Located between Lithuania and Estonia, Latvia is a member of the EU, Eurozone, NATO, OECD, and the World Trade Organization (WTO). The Latvian government recognizes that, as a small country, it must attract foreign investment to foster economic growth, and thus has pursued liberal economic policies and developed infrastructure to position itself as a transportation and logistics hub. As a member of the European Union, Latvia applies EU laws and regulations, and, according to current legislation, foreign investors possess the same rights and obligations as local investors (with certain exceptions). Any foreign investor is entitled to establish and own a company in Latvia and apply for a temporary residence permit.

Latvia is a transportation and logistics hub between West and East, providing strategic access to both the EU market and to Central Asia. Latvia’s three ice-free ports are connected to the country’s rail and road networks and to the largest international airport in the Baltic region (Riga International Airport). Latvia’s road network is connected to both European and Central Asian road networks; in the case of the latter, via the Russian Federation. Railroads connect Latvia with the other Baltic states, Russia, and Belarus, with further connections extending into Central Asia and China. Latvia’s workforce is highly educated and multilingual, and its culture promotes hard work and dependability. Labor costs in Latvia are the fourth-lowest in the EU. Latvia ranked second in the OECD’s 2022 International Tax Competitiveness Index Rankings. To further boost its competitiveness, the Latvian government has abolished taxes on reinvested profits and has established special incentives for foreign and domestic investment. There are five special economic zones (SEZs) in Latvia: Riga Free Port, Ventspils Free Port, Liepaja Special Economic Zone, Rezekne Special Economic Zone, and Latgale Special Economic Zone, which provide various tax benefits for investors. The Latgale Special Economic Zone covers a large part of Latgale, which is the most economically challenged region in Latvia, bordering Russia and Belarus.

Despite Russia’s war of aggression against Ukraine, and the continued COVID-19 pandemic, Latvia’s GDP increased by 2 percent in 2022. According to the government, growth in manufacturing and services sectors were the main contributors to growth. The most competitive sectors in Latvia remain woodworking, metalworking, transportation, IT, green tech, healthcare, life science, food processing, and finance. Recent reports suggest that some of the most significant challenges investors encounter in Latvia are a shortage of available workforce, demography, quality of education, and a significant shadow economy. Latvia’s year-on-year inflation was 20.1 percent in February 2023, double the EU average (9.9 percent) and slightly higher than inflation in the other Baltic states (Estonia 17.8 percent; Lithuania 17.2 percent).

Latvia has made significant progress combating money laundering since its non-resident banking sector first came under increased regulatory scrutiny in 2018 over poor compliance with international AML standards. In late 2019 and early 2020, MONEYVAL and the Financial Action Task Force (FATF) concluded that Latvia had developed and implemented strong enough reforms for combating financial crimes to avoid inclusion on FATF’s so-called “grey list.” The Government of Latvia continues work to restore confidence in its financial institutions and has passed several pieces of additional reform legislation. Latvia was the first state under MONEYVAL review to successfully implement all 40 FATF recommendations.

Estonia:

Estonia is a safe and dynamic country for investment. As a member of the EU, the Government of Estonia maintains liberal policies to attract investments and export-oriented companies. Creating favorable conditions for foreign direct investment (FDI) and openness to foreign trade has been the foundation of Estonia’s economic strategy. The overall freedom to conduct business in Estonia is well protected under a transparent regulatory environment.

Estonia has been hit hard by Europe’s energy crisis. A sharp increase in electricity prices drove annual inflation to 19.4 percent in 2022, and inflation is forecast at 9.3 percent in 2023. Rapidly increasing costs have increased pressure on Estonian industrial competitiveness. Preliminary data indicates Estonia’s GDP decreased by 1.3 percent in 2022, and GDP is expected to grow 0.4 percent in 2023.

In the area of climate and environmental policies, Estonia is working to decarbonize its economy by reducing its dependency on oil shale in electricity generation, increasing the energy efficiency of buildings, and introducing carbon free transport.

Estonia adopted an investment screening mechanism in January 2023. Estonia will review direct and indirect investments by non-EU investors in strategically important and sensitive sectors.
With a flat tax of 20 percent, the Estonian tax system is considered one of the simplest regimes globally. Undistributed profits are not subject to taxation. This may change for companies with an annual turnover of more than 750 million euros as the EU implements the OECD’s global minimum tax agreement.
Estonia offers opportunities for businesses in a number of economic sectors including information and communication technology (ICT), green energy, smart cities, and defense technologies.
Estonia has strong trade ties with Finland, Sweden, and Germany.
Estonia suffers from a shortage of labor, both skilled and unskilled.

Independent developer and broker company.

Jesper Kjær ApS is an independent developer and broker company offering renewable energy projects, investment projects, real estate trade, intermediation, and consulting services in Poland, Lithuania, Latvia, and Estonia since 2001, with a particular focus on agriculture and forest since 2003. Over the years, we have developed an extensive and efficient network, enabling us to collaborate closely and offer our investors the best possible opportunities.

Our position is based on a deep understanding of local opportunities - and the ability to be at the forefront of tomorrow. We take pride in being a committed partner and we have made it our brand to make the impossible possible.

Development and mediation of investment projects is a difficult and complex process, but we never lose sight of what creates value for our customers.

We offer our knowledge, experience, and network to investors.

Agricultural and Forestry Real Estate as an Investment

Agricultural Real Estate is a unique and valuable asset class that has become increasingly attractive to investors in recent years. It is a tangible asset that is essential for food production.

Forestry is another attractive investment opportunity. Forests provide a number of valuable resources, including timber, paper, and biomass. They also play an important role in protecting the environment.

Both agricultural and forestry real estate offers a number of potential benefits.

Agriculture for sale

Here you will find a selection of agricultural farms and investment objects for sale.

Forest for sale

Here you will find a selection of forest for sale.

If you don't find exactly what you're looking for, please feel free to contact us. We have properties that have yet to be posted online.

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