Free Zone Status is a Crucial Advantage for the Future Development of the Freeport of Riga

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One of the crucial features of the investment climate at the Freeport of Riga is an opportunity for merchants to operate under the Free Economic Zone Regime. The new Freeport of Riga Development Programme 2019-2028 provides for active promotion of the advantages ensured by the free economic zone in order to use the port territory more effectively and attract new development projects to vacant port territories.

There is an opinion that a free economic zone is an invention of the 20th century. However, in the case of ports, the introduction of special tax arrangements as an approach to facilitating trade has existed for many centuries. The concept of the freeport itself has long implied special conditions which mostly apply to the customs clearance of goods. The significance of the freeport regime in facilitating trade is suggested by the fact that during the times of the first Free State of Latvia, the law on the Freeport of Riga was adopted before the development of the Constitution was finished.

Today, the Free Zone involves many different activities — from significant tax discounts to facilitated customs and goods flow procedures. The total direct tax discounts for a merchant may reach up to 55% of the investment amount made in the port territory. The activity of entrepreneurs operating in the Port of Riga, using advantages offered by the Free Zone, suggests that the Free Zone Regime facilitates the attraction of investment and cargo turnover. The number of merchants which signed operation agreements under a special regime at the Port of Riga has significantly increased over the last decade. In 2009, licensed business activities were carried out by 16 companies, while in 2018 permits for licensed business activities have already been received by 23 companies.

“More than half of the total investment made by port companies in port infrastructure over the last decade has been made precisely by merchants that operate under a special regime and can use tax discounts. All of them are new, large companies which have constructed the infrastructure for terminals over the last decade: SIA “Riga Fertilizer Terminal”, SIA “Riga Bulk Terminal”, SIA “TFS Trans” and others”, said Edgars Sūna, Deputy CEO of the Freeport of Riga for Port Development Matters.

In turn, Atis Šulte, Business Development Director of SIA “Rīgas Universālais termināls” (RUT), explained: “Operation under the Free Zone Regime provides both direct advantages to our company and favourable conditions which we can offer our clients. Tax breaks eventually mean more funds for the company, which remain at our disposal and which we can further invest in the development of the terminal and improvement of competitiveness”.

The free economic zone plays a role in attracting new clients and cargo to the Port of Riga. Šulte continued: “For our clients, the status of a free economic zone primarily means advantages in the fulfilment of customs formalities when exporting or storing cargo in our terminal. This, in turn, enables us to be a step ahead in terms of market competition. Benefits provided by Free Zone status definitely played a role in the decision of our strategic partner, the company Portekfrom Singapore, to invest in the company five years ago”.