Scrutiny on Latvia's Golden Visa

The Financial Intelligence Unit has identified over 20 companies registered in Latvia that appear to be involved in fraudulent 'investment' schemes aimed at obtaining residence permits.

Latvian Television's investigative program De Facto reported on Sunday that approximately 200 foreigners have invested more than 10 million euros in the share capital of these companies.

The 'golden visa' initiatives were designed to stimulate investment and attract affluent companies and individuals to Latvia, thereby enhancing the state's tax revenue. However, these programs have faced substantial criticism and allegations of abuse from the beginning, resulting in several regulatory changes over the years.

In the cases reviewed by De Facto, the funds are frequently not utilized for legitimate economic activities but are instead redirected to scheme organizers or circulated among related parties, providing no real benefit to the country while granting potential residence rights to the perpetrators.

Foreigners can apply for a temporary residence permit in Latvia by investing 50,000 or 100,000 euros in a company's share capital. This program attracted nearly six million euros last year. In total, 341 individuals—including investors and their family members—have received residence permits in Latvia through this process. However, the state does not systematically assess the actual contributions of these companies, such as turnover, employee numbers, or genuine economic activity.

Data from the Citizenship and Migration Affairs Office (PMLP), following a request from De Facto, indicates a growing interest in this program.

Last year, 109 applications were submitted—a more than fivefold increase compared to 2021, when 20 applications were received. However, a positive decision was made in only about a third of cases (Applicants are not guaranteed a visa and are subject to security and background checks).

Possessing a Latvian residence permit is valuable not only on its own but also because it facilitates movement within the European Union and Schengen Zone for third-country nationals.

De Facto investigated several companies that have attracted foreign investors to obtain residence permits.

One such company is "L Hotels," founded a year and a half ago, with nine investors applying for residence permits last year. The company's shareholder list includes 30 individuals from India, Afghanistan, Pakistan, Turkey, Chile, Malawi, Syria, the Republic of Vanuatu, and other countries. Most have invested 100,000 euros each, yet these investors have been granted "B" category shares, which, according to the statutes, do not confer voting rights.

A representative of "L Hotels" discussed projects in Portugal, where the company's headquarters are located. When asked why there was no information about operations in Latvia, he replied that the company has been operating in Portugal for nine years and has a portfolio worth 200 million euros.

The company did not respond to written questions later. PMLP data shows that "L Hotels" is among the companies whose investors were most often rejected under the visa program.

According to De Facto, one way to exploit the rules is for a single owner to control several companies, each attracting the maximum number of investors allowed for residence permits. One such example is the "Latvindia" group, owned by Roberts Stafeckis.

Two of its companies had zero turnover and losses in 2024. Stafeckis explained in writing that one is new, while for the other, revenue was booked later.

He also notes that a planned ten million euro student hotel project has not been implemented, as investors withdrew, and the possibility of developing a smaller residential building in Riga is currently being evaluated.

He also points out the difficulties foreigners face in opening bank accounts in Latvia and the lengthy registration process at embassies.

Stafeckis defends the current visa incentive, stating that "against this generally unattractive [investment] background, the possibility of obtaining a [residence permit] in exchange for an investment of at least 50,000 euros is a small ray of light that makes Latvia more attractive compared to neighboring countries."

Lursoft data shows that of the 78 companies that have attracted foreign investors in the past five years, seven have suspended economic activities, while nearly twenty have tax debts. About half of the companies that submitted annual reports for 2024 employed fewer than five employees. Approximately half met the legal requirement to pay at least 40,000 euros in taxes per year.

Latvia Coastlie

Origins of the 'golden visa' program

The "golden visa" program began in 2010. The amendments aimed to grant residence permits to foreigners who purchased expensive real estate, deposited a certain amount in a bank, or invested in a company's share capital.

The idea was conceived by the then-deputy mayor of Riga from Ainārs Šlesers (now leader of the Latvia First party in Saeima), but the proposal was forwarded to the Saeima by the National Economy Committee, then led by People's Party politician Vents Armands Krauklis. Krauklis argued in the Saeima that "every such deal ultimately also generates tax revenue" and "new jobs."

In contrast, then-Civil Union MP Kārlis Šadurskis warned that there would be no benefit from such "heating up the economy."

In the first four years, money flowed into the program rapidly, exceeding a billion euros—mostly from Russia. But as stricter restrictions were introduced—first when Latvia came under international pressure to clean up its non-resident banking sector and then even more following Russia's invasion of Ukraine—the flow of money dried up.

Currently, investments under the "golden visa" program account for just 0.3% of total non-resident investments in the Latvian economy.

"What was here is more of an immigration or fiscal instrument, one might say. Is our goal to issue a residence permit? Is our goal to create an investment? And that investment is not just buying some government securities or even buying an apartment. It is a presence. It is a contribution to the economy, it is jobs," commented Māris Vainovskis, Deputy Chairman of the Board of the influential Foreign Investors Council in Latvia (FICIL).

Ten years ago, the investor program was revised, allowing those who purchased interest-free government securities worth 250,000 euros to obtain a residence permit in Latvia.

This opportunity was taken advantage of by 88 investors and 132 of their family members. The last two bonds were purchased last year.

Russians rebranded as Israelis

The Treasury has concluded that the visa program is ineffective and has been calling for at least five years to also assess the risks associated with money laundering. The state could waive the granting of residence permits in exchange for the purchase of real estate. A political agreement on this was reached already in 2022.

However, the Ministry of Economics is now pushing proposals to preserve this option. Edgars Šadris, Deputy State Secretary at the Ministry of Economics, emphasizes that this way investments enter the economy and funds are paid into the state budget.

The Ministry of Economics also points out that investors from third countries are carefully screened by the responsible authorities and security risks are screened out. In addition, such residence permits have not been granted to citizens of aggressor countries Russia and Belarus since 2022.

However, the State Security Service warns that even a check does not guarantee that the investor will not pose a threat to Latvia's security. Since 2012, more than 30 people who held Latvian residence permits have been included in the entry "black list" on the recommendation of the service.

Deputy Head of the State Security Service, Ēriks Cinkus, stated at the parliamentary inquiry commission for the evaluation of immigration regulations that obtaining information about potential recipients of temporary residence permits from China, Central Asia, or Africa is very difficult. He also said that the service is seeing a trend: individuals who initially received a residence permit as Russian citizens are now, in some cases, seeking to extend it by presenting Israeli citizenship instead. It is difficult to determine dual citizenship for Russian citizens who hide it.

While the state is now refusing to issue temporary residence permits for investments in government bonds and subordinated liabilities of credit institutions, there is no firm commitment regarding investments in companies. The Office of Citizenship and Migration Affairs admits that even if a company does not actually do anything but formally pays the required taxes, it is difficult to revoke a residence permit.

"We also have legal proceedings on these issues. But, yes, in our opinion, this revocation criterion is currently not sufficient," Ilze Briede, Head of the Migration Department of the PMLP, emphasized at the Saeima commission meeting.

Passport

Interest in residence, not business

Both the Enterprise Register and the Financial Intelligence Unit (FID) have expressed suspicions to the parliamentary investigative committee that the sole purpose of certain companies may not be economic activity, but rather obtaining temporary residence permits.

The FID has identified cases where foreigners have made seemingly fictitious investments, but the money has not remained in the real business - it has been diverted to the organizers of the scheme, for example, in the form of loans, rewards, or fictitious transactions, used to purchase property or vehicles, or transferred to other persons without a real economic basis. In some cases, investors are warned in advance that dividends will not be paid and the investment will not be repaid.

FID chief Toms Platacis told De Facto that in some cases, the legally required amount of 50,000 euros was essentially just the same money being used multiple times: "ten thousand, paid five times in a circle."

The FID also highlighted the scale of this scheme. It has identified more than 20 legal entities registered in Latvia that were used to make seemingly fictitious investments. Approximately 200 foreigners have invested more than 10 million euros in their share capital—on paper, at least.

More than 50 of them have already received temporary residence permits, and they have also been granted to more than 25 family members, but the total number of family members who have already received permits or have applied for them exceeds 100.

Several members of the Saeima are ready to urge the abandonment of this investor incentive as well, but it is unclear whether it will have political support. The head of the parliamentary investigation commission, Jānis Dombrava (National Alliance), hopes that the commission will reach a conclusion about the complete closure of the program. "What is observed there is not some positive investment in our economy, but in fact a crude way of circumventing the system," Dombrava said.

In turn, the chairman of the Saeima National Security Committee, Ainars Latkovskis (New Unity), pointed out that the positions of the Ministry of Economics and the Ministry of the Interior are conflicting: "There must be one common denominator." When asked whether this Saeima will still manage to address this issue before the elections due in October, Latkovskis suggested it was unlikely: "Looking at how other issues are being addressed currently, it is difficult."