F OREIGN INVESTMENTS IN THE BALTIC STATES UIA 58th conference in Florence, Italy October 29 – November 2, 2014 Yvonne Goldammer bnt attorneys-at-law

Investment environment in the Baltics EU member states Estonia and Latvia in the Eurozone, Lithuania to join in 2015 Stable, functional rule-of-law legal systems Tax benefits offered for investors Cheap and well-educated labour Conveniently located with ready access to key European markets

I.Lithuania 1.Taxes Tax benefits for foreign investors Favorable tax environment for small businesses 5% (instead of 15%) of corporate income tax applicable to enterprises having less than 10 employees and with gross income below EUR 290k Possibility to establish micro companies with no statutory capital and to apply tax thresholds on payments to its founders 7 special economic zones with attached tax benefits No corporate income tax for 6 tax periods, reduction of corporate income tax by 50% for 10 years afterwards 0% corporate income tax on dividends 0% VAT on goods and services supplied in free economic zones

Tax incentives Investment incentive relief (reduction of taxable profit up to 50% due to investment incentive project) Research and development (R&D) incentive (taxable income reduced 3x by R&D costs) Relief for financing production of a film (reduction of taxable income up to 75%) Accumulated tax loss carry forward (up to 70% of the current year’s taxable profit)

2. Opportunities for Investment Key PPP sectors: Energy Efficiency, Transport, Public order and security On the table now: 3 hot investment opportunities (PPP) New Detention Facility in Vilnius (40M EUR) Cargo Port Development in Kaunas (11M EUR) Road Reconstruction Vilnius-Utena (70M EUR)

3.Employment and education Well educated: 2x EU average of young people studying Engineering, Manufacturing and Construction Loyal: Average employee turnover rate in international Shared Service Centers is 7-8% 69% of population aged would like to work for an international company Not expensive: Minimum monthly wage – EUR Average monthly wage in the national economy – EUR (second quarter of 2014) * Information based on statistics published in the official site of Invest Lithuania:

4. Lithuania’s program for EU regional funding 2014 – 2020 Detailed plan of investments for worth € 7.89 billion (€ 6.7 billion of EU investments and a national contribution of around €1 billion) for Lithuania to create employment and growth Covers several key EU investment funds, i.e. (ERDF), (CF), (ESF), (YEI) More than half of investments business support, research and innovation, information and telecommunication technologies and low carbon economy First calls for proposals planned for the end of 2014.

II. Latvia Tax benefits, such as tax rebate for large-scale investment projects Corporate income tax a flat rate of 15 % Personal income tax a flat rate of 23 % Highly beneficial destination for holding countries Four free ports and special economic zones with tax advantages

1.Public guarantees and loans for investments Export credit guarantee Other credit guarantees Mezannine loans Micro-loans (EUR ) to SME Risk capital investments from risk capital funds financed by the Latvian Guarantees Agency

2. Co-funding under EU Cohesian Policy EUR 4.51 billion in total allocated to Latvian private industries and public entities Samples of private industries related major investment priorities: Creation and the extension of advanced capacities for product and service development Energy efficiency and use of RES in the enterprises, production and distribution of energy from RES High growth enterprises and SME’s in manufacturing, as well in the priority industries covered by R&I Strategy Private business investment in R&I

III. Estonia Favorable tax environment; for example no corporate income tax; only distributed profits are taxed Personal income tax a flat rate of 21 % General ease of doing business Excellent IT infrastructure Four free trade zones

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