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Ireland

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Irish government actively promotes FDI, a strategy that has fueled economic growth since the mid-1990s.  The principal goal of Ireland’s investment promotion has been employment creation, especially in technology-intensive and high-skill industries.  More recently, the government has focused on Ireland’s international competitiveness by encouraging foreign-owned companies to enhance research and development (R&D) activities and to deliver higher-value goods and services.

The Irish government’s actions have achieved considerable success in attracting U.S. investment in particular.  The stock of American FDI in Ireland stood at USD 446 billion in 2017, more than the U.S. total for China, India, Russia, Brazil, and South Africa (the so-called BRICS countries) combined.  There are approximately 700 U.S. subsidiaries currently in Ireland employing roughly 155,000 people and supporting work for another 100,000. This figure represents a significant proportion of the 2.28 million people employed in Ireland.  U.S. firms operate primarily in the following sectors: chemicals, bio-pharmaceuticals and medical devices, computer hardware and software, electronics, and financial services.

U.S. investment has been particularly important to the growth and modernization of Irish industry over the past 25 years, providing new technology, export capabilities, management and manufacturing best practices, and employment opportunities.  The activities of U.S. firms in Ireland span from the manufacturing of high-tech electronics, computer products, medical devices, and pharmaceuticals to retailing, banking, finance, and other services. More recently, Ireland has also become an important R&D center for U.S. firms in Europe, and a magnet for U.S. internet/digital media investment.  Industry leaders like Google, Amazon, eBay, PayPal, Facebook, Twitter, LinkedIn, and Electronic Arts use Ireland as the hub or important part of their respective European, and sometimes Middle Eastern, African, and/or Indian operations.

U.S. companies are attracted to Ireland as an exporting sales and support platform to the EU market of 500 million consumers and other global markets, mainly the Middle East and Africa.  Ireland is a successful FDI destination for many reasons, including a corporate tax rate of 12.5 percent for all domestic and foreign firms; a well-educated, English-speaking workforce; the availability of a multilingual labor force; cooperative labor relations; political stability; and pro-business government policies and regulators.  Ireland also benefits from a transparent judicial system; good transportation links; proximity to the United States and Europe, and the drawing power of existing companies operating successfully in Ireland (a so-called “clustering” effect).

Conversely, factors that negatively affect Ireland’s ability to attract investment include high labor and operating costs (such as for energy) costs; sporadic skilled-labor shortages; residual fallout from Ireland’s economic and financial restructuring; and sometimes-deficient infrastructure (such as in transportation, energy and broadband quality).  Ireland also suffers from housing and high-quality office space shortages; uncertainty in EU policies on some regulatory matters; and absolute price levels that are among the highest in Europe. Some Irish government agencies have in the past expressed concern that energy costs and the reliability of energy supply also could undermine Ireland’s attractiveness as a FDI destination.  The American Chamber of Commerce in Ireland has noted the need for greater attention to a “skills gap” in the supply of Irish graduates to the high technology sector. It also has asserted that high personal income tax rates can make attracting talent from abroad difficult.

In 2013, Ireland became the first country in the Eurozone to exit the EU, European Central Bank, and International Monetary Fund (EU/ECB/IMF, or so-called Troika) bailout program.  Compliance with the terms of the Troika program came at a substantial economic cost with gross domestic product (GDP) stagnation, austerity measures, and high unemployment (15 percent).  The economy has since recovered and has been the fastest growing Eurozone economy for the past five years, with a growth rate of 6 percent in 2018. Meanwhile, government initiatives to attract investment have continued to stimulate job creation and employment.  As a result, unemployment levels have fallen dramatically and the Central Bank of Ireland forecasts that Ireland’s unemployment rate will fall to 4.9 percent in 2019. Against this good economic background, there is a resurgent interest in Ireland as an investment destination.  Since exiting the bailout program, the Irish government has successfully returned to international sovereign debt markets, and successful bonds sales exemplify renewed international confidence in Ireland’s recovery.

Brexit and its Implications for Ireland

The UK’s exit from the EU will leave Ireland as the only remaining English-speaking country in the bloc.  Ireland is the only EU country to share a land border with the UK. It is still unclear what the full economic consequences of Brexit will be for Ireland as it loses a close EU ally on policy matters.  Econometric models from the Irish Department of Finance and from the Central Bank of Ireland suggest Brexit will cut economic growth modestly in the near term. Ireland is heavily dependent on the UK as an export market, especially for food products, and sectors such as food and agri-business may be hardest hit.  Ireland also sources many imports from the UK, which could raise costs if supply chains are disrupted. A number of UK-based firms (including US firms) have moved headquarters or opened subsidiary offices in Ireland to facilitate ease of business with other EU countries.

Industrial Promotion

Six government departments and organizations have responsibility to promote investment into Ireland by foreign companies:

  • The Industrial Development Authority of Ireland (IDA Ireland) has overall responsibility for promoting and facilitating FDI in all areas of the country, except in the Shannon Free Zone (see below).  IDA Ireland is also responsible for attracting foreign financial and insurance firms to Dublin’s International Financial Services Center (IFSC). IDA Ireland maintains seven U.S. offices (in New York, NY; Boston, MA; Chicago, IL; Mountain View, CA; Irvine, CA; Atlanta, GA; and Austin, TX), as well as offices throughout Europe and Asia.
  • Enterprise Ireland (EI) promotes joint ventures and strategic alliances between indigenous and foreign companies.  The agency also assists foreign firms that wish to establish food and drink manufacturing operations in Ireland. EI has five offices in the United States (New York, NY; Austin, TX; Boston, MA; Chicago, IL; and Mountain View, CA), as well as offices in Europe, South America, the Middle East, and Asia.
  • Shannon Group (formerly the Shannon Free Airport Development Company) promotes FDI in the Shannon Free Zone (see description below) and owns properties in the Shannon region as potential green-field investment sites.  Since 2006 and the Industrial Development Amendments Act, EI assumed responsibility for investment by Irish firms in the Shannon region. IDA Ireland remains responsible for FDI in the Shannon region outside the Shannon Free Zone.
  • Udaras na Gaeltachta (Udaras) has responsibility for economic development in those areas of Ireland where the predominant language is Irish, and works with IDA Ireland to promote overseas investment in these regions.
  • Department of Foreign Affairs and Trade (DFAT) has responsibility for economic messaging and supporting the country’s trade promotion agenda as well as diaspora engagement to attract investment.
  • Department of Business, Enterprise and Innovation (DBEI) supports the creation of good jobs by promoting the development of a competitive business environment in which enterprises will operate with high standards and grow in sustainable markets.

Limits on Foreign Control and Right to Private Ownership and Establishment

Irish law allows foreign corporations (registered under the Companies Act 2014 or previous legislation and known locally as a public limited company, or plc for short) to conduct business in Ireland.  Any company incorporated abroad that establishes a branch in Ireland must file certain papers with the Registrar of Companies. A foreign corporation with a branch in Ireland will have the same standing in Irish law for purposes of contracts, etc., as a domestic company incorporated in Ireland.  Private businesses are not competitively disadvantaged to public enterprises with respect to access to markets, credit, and other business operations.

No barriers exist to participation by foreign entities in the purchase of state-owned Irish companies.  Residents of Ireland may, however, be given priority in share allocations over all other investors. In 1998, the Irish government sold the state-owned telecommunications company Eircom, and Irish residents received priority in share allocations.  In 2005, the Government privatized the national airline Aer Lingus through a stock market flotation, but it chose to retain about a one-quarter stake. U.S. investors purchased shares during its privatization. In 2015, the International Airlines Group (IAG) purchased the Government’s remaining stake in the airline.

Citizens of countries other than Ireland and EU member states can acquire land for private residential or industrial purposes.  Under Section 45 of the Land Act, 1965, all non-EU nationals must obtain the written consent of the Land Commission before acquiring an interest in land zoned for agricultural use.  There are many equine stud farms and racing facilities owned by foreign nationals. No restrictions exist on the acquisition of urban land.

Ireland does not have formal investment screening legislation, but as an EU member it may need to implement any future common EU investment screening regulations/directives.

Other Investment Policy Reviews

The Economist Intelligence Unit and World Bank’s Doing Business 2019 provide current information on Ireland’s investment policies.

Business Facilitation

All firms must register with the Companies Registration Office (www.cro.ie).  As well as registering companies, the CRO also can register a business/trading name, a non-Ireland based foreign company (external company), or a limited partnership.  A firm or company registered under the Companies Act 2014 becomes a body corporate as and from the date mentioned in its certificate of incorporation. The website permits online data submission.  Firms must submit a signed paper copy of this online application to the CRO, unless the applicant company has already registered with www.revenue.ie (the website of Ireland’s tax collecting authority, the Office of the Revenue Commissioners).

Outward Investment

Enterprise Ireland assists Irish firms in developing partnerships with foreign firms mainly to develop and grow indigenous firms.

4. Industrial Policies

Investment Incentives

Three Irish organizations – IDA Ireland, Enterprise Ireland, and Udaras – currently have regulatory authority for administering grant aid to investors for capital equipment, land, buildings, training, and R&D.  Foreign and domestic business enterprises that seek grant aid from these organizations must submit investment proposals. Typically, these proposals include information on fixed assets (capital), labor, and technology/R&D components, and establish targets using criteria such as sales, profitability, exports, and employment.  These organizations treat this information in confidence, and each investment proposal is subject to an economic appraisal before they offer support.

The state investment agencies and foreign investors establish employment creation targets, which usually serve as the basis for performance requirements.  The agencies only pay grant aid after the foreign investors have attained externally audited performance targets. Grant agreements generally have a repayment term of five years after the date on which the last grant is paid.  Parent companies typically must also guarantee repayment of the government grant if the company closes before an agreed period of time elapses, normally ten years after the grant was paid. There are no requirements that foreign investors procure locally or allow nationals to own shares.

The current EU Regional Aid Guidelines (RAGs) that apply to Ireland operate until 2020.  The RAGs govern the maximum grant aid the Irish government can provide to firms/businesses, which depends on their location.  The differences in the aid ceilings reflect the less developed status of business/infrastructure in regions outside the greater Dublin area.

While investors are free, subject to planning permission, to choose the location of their investment, IDA Ireland has actively encouraged investment in regions outside Dublin since the 1990s.  Investment regionalization became Irish government policy in 2001, officially seeking to spread investment more evenly around the country. The IDA’s current strategy targets locating over 50 percent of all new FDI investments outside the two main urban centers of Dublin and Cork.  To encourage the location of firms outside Dublin, IDA Ireland has developed “magnets of attraction,” providing cluster areas of activity around the country. IDA Ireland also has supported construction of business parks in counties Galway and Louth for the biotechnology sector.

There are no restrictions, de jure or de facto, on participation by foreign firms in government-financed and/or -subsidized R&D programs on a national basis.  In fact, the government strongly encourages and incentivizes (via a partial tax break) foreign companies to conduct R&D as part of a national strategy to build a more knowledge-intensive, innovation-based economy.  Science Foundation Ireland (SFI), the state science agency, has been responsible for administering Ireland’s R&D funding since 2000. Under its current strategy, SFI is investing over USD 200 million annually in R&D activities.  It is targeting leading researchers in Ireland and overseas to promote the development of biotechnology, information and communications technology, and energy, as well as complementary worker skills.

The U.S.-Ireland Research and Development Partnership, launched in July 2006, is a unique initiative involving funding agencies across three jurisdictions:  the United States, Ireland, and Northern Ireland (NI). Under the program, a ‘single-proposal, single-review’ mechanism is facilitated by the National Science Foundation (NSF) and National Institutes of Health (NIH) in the United States, which accept submissions from tri-jurisdictional (U.S., Ireland, and NI) teams for existing funding programs.  All proposals submitted under the auspices of the Partnership must have significant research involvement from researchers in all three jurisdictions. In 2015, the program was expanded to include agricultural research topics.

A key aspect of government support is a flexible 25 percent tax credit on the cost of eligible research, development, and innovation (RDI) activity and of any building with a 35 percent RDI activity level over four years.  A number of U.S. firms have already used these tax credits to build and operate R&D facilities. In addition, the Government in 2016 introduced the Knowledge Development Box (KDB), which offers a lower tax rate for certain R&D activities carried out in Ireland.

Foreign Trade Zones/Free Ports/Trade Facilitation

The Government established Shannon duty-free Processing Zone (SDFPZ) under legislation in 1957.  At that time, companies operating in the area were entitled to a number of taxation and duty-free benefits not available elsewhere in Ireland.

All firms operating in the area, now called the Shannon Free Zone, have the same investment opportunities and tax incentives as indigenous Irish companies.  There are more than 150 companies operating within the 254-hectare business park. These include the following U.S. companies: Benex (Becton Dickinson), Connor-Winfield, Digital River, Enterasys Networks, Extrude Hone, GE Capital Aviation Services, GE Money, Sensing, Genworth Financial, Intel, Illinois Tool Works, Kwik-Lok, Lawrence Laboratories (Bristol Myers Squibb), Le Bas International, Magellan Aviation Services, Maidenform, Melcut Cutting Tools (SGS Carbide Tools), Mentor Graphics, Molex, Phoenix American Financial Services, RSA Security, Shannon Engine Support (CFM International), SPS International/Hi-Life Tools (Precision Castparts Corp), Sykes Enterprises, Symantec, Travelsavers Corp, Viking Pump, Western Well Tool, Xerox, and Zimmer.  The Shannon Group currently operates the SDFPZ, as well as Shannon Airport.

Performance and Data Localization Requirements

Visa, residence, and work permit procedures for foreign investors are non-discriminatory and, for U.S. citizens (as investors or employees), generally liberal.  No restrictions exist on the numbers and duration of employment of foreign managers brought in to supervise foreign investment projects, though they must renew work permits annually.  There are no discriminatory export policies or import policies affecting foreign investors.

Data Storage

The Government does not follow forced localization nor does it require foreign IT providers to turn over source code and/or provide access to surveillance (e.g., backdoors into hardware and software, or encryption keys).  There are no rules on maintaining minimum amounts of data storage in Ireland.

Israel

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Israel is open to foreign investment and the government actively encourages and supports the inflow of foreign capital.

The Israeli Ministry of Economy and Industry’s ‘Invest in Israel’ office serves as the government’s investment promotion agency facilitating foreign investment.  ‘Invest in Israel’ offers a wide range of services including guidance on Israeli laws, regulation, taxes, incentives, and costs, and facilitation of business connections with peer companies and industry leaders for new investors.  ‘Invest in Israel’ also organizes familiarization tours for potential investors and employs a team of advisors for each region of the world.

Limits on Foreign Control and Right to Private Ownership and Establishment

The Israeli legal system protects the rights of both foreign and domestic entities to establish and own business enterprises, as well as the right to engage in remunerative activity.  Private enterprises are free to establish, acquire, and dispose of interests in business enterprises. As part of ongoing privatization efforts, the Israeli government encourages foreign investment in privatizing government-owned entities.

Israel’s policies aim to equalize competition between private and public enterprises, although the existence of monopolies and oligopolies in several sectors stifles competition.  In the case of designated monopolies, defined as entities that supply more than 50 percent of the market, the government controls prices.

Israel does not maintain a centralized investment screening (approval) mechanism for inbound foreign investment.  Investments in regulated industries (e.g. banking and insurance) require approval by the relevant regulator. Investments in certain sectors may require a government license.  Other regulations may apply, usually on a national treatment basis.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted its fifth and latest trade policy review of Israel in July 2018.  In the past three years, the Israeli government has not conducted any investment policy reviews through the Organization for Economic Cooperation and Development (OECD) or the United Nations Conference on Trade and Development (UNCTAD).  The OECD concluded an Economic Survey of Israel in March 2018.

The 2018 OECD Economic Survey of Israel can be found at http://www.mof.gov.il/Releases/SiteAssets/Pages/OECD18/2018-oecd-economic-survey-Israel.pdf 

Business Facilitation

The Israeli government is fairly open and receptive to companies wishing to register businesses in Israel.  Israel ranked 45th in the “Starting a Business” category of the World Bank’s 2019 Doing Business Report, falling eight places from its 2018 ranking.  Israel continues to institute reforms to make it easier to do business in Israel, but some challenges remain.

The business registration process in Israel is relatively clear and straightforward.  Four procedures are required to register a standard private limited company and take 12 days to complete, on average, according to the Ministry of Finance.  The foreign investor must obtain company registration documents through a recognized attorney with the Ministry of Justice and obtain a tax identification number for company taxation and for value added taxes (VAT) from the Ministry of Finance.  The cost to register a company averages around USD 1,000 depending on attorney and legal fees.

The Israeli Ministry of Economy and Industry’s “Invest in Israel” website provides useful information for companies interested in starting a business or investing in Israel.  The website is http://www.investinisrael.gov.il/Pages/default.aspx  .

Outward Investment

The Israel Export and International Cooperation Institute is an Israeli government agency operating independently, under the Ministry of Economy, that helps facilitate trade and business opportunities between Israeli and foreign companies.  More information on their activities is available at http://www.export.gov.il/eng/About/About/  .

In general, there are no restrictions on Israeli investors seeking to invest abroad.  However, investing abroad may be restricted on national security grounds or in certain countries or sectors where the Israeli government deems such investment is not in the national interest.

4. Industrial Policies

Investment Incentives

The State of Israel encourages both local and foreign investment by offering a wide range of incentives and benefits to investors in industry, tourism, and real estate.  Israel’s Ministry of Economy places a priority on investments in hi-tech companies and R&D activities.

Most investment incentives available to Israeli citizens are also available to foreign investors.  Israel’s Encouragement of Capital Investments Law, 5719-1959, outlines Israel’s investment incentive programs.  The Israel Investment Center (IIC) coordinates the country’s investment incentive programs.

For complete information, potential investors should contact:

Investment Promotion Center
Ministry of Economy
5 Bank of Israel Street,
Jerusalem 91036
Tel: 972-2-666-2607
Fax: 972-2-666-2938
Website: www.investinisrael.gov.il  
E-Mail: Investinisrael@moital.gov.il

Israel Investment Center
Ministry of Economy
5 Bank of Israel Street,
Jerusalem 91036 490
http://economy.gov.il/English/About/Units/Pages/IsraelInvestmentCenter.aspx  
Tel: 972-2-666-2236
Fax: 972-2-666-2905

Foreign Trade Zones/Free Ports/Trade Facilitation

Israel has bilateral Qualifying Industrial Zone (QIZ) Agreements with Egypt and Jordan.  The QIZ initiative allows Egypt and Jordan to export products to the United States duty-free, as long as these products contain inputs from Israel (8 percent in the Israel-Jordan QIZ agreement, 10.5 percent in the Israel-Egypt QIZ agreement).  Products manufactured in QIZs must comply with strict rules of origin. More information is available at the Israeli Ministry of Economy’s Foreign Trade Administration website: http://economy.gov.il/English/InternationalAffairs/ForeignTrade
Administration/Pages/RegionalCooperation.aspx
 

Israel has one free trade zone, the Red Sea port city of Eilat.  More information on the Eilat Free Zone is available at: http://economy.gov.il/English/Industry/DevelopmentZoneIndustry
Promotion/ZoneIndustryInfo/Pages/EilatNShachoret.aspx
 

Performance and Data Localization Requirements

There are no universal performance requirements on investments, but “offset” requirements are often included in sales contracts with the government.  In some sectors, there is a requirement that Israelis own a percentage of a company. Israel’s visa and residency requirements are transparent. The Israeli government does not impose preferential policies on exports by foreign investors.

Italy

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Italy welcomes foreign direct investment (FDI).  As a European Union (EU) member state, Italy is bound by the Union’s treaties and laws.  Under the EU treaties with the United States, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state.  

EU and Italian antitrust laws provide Italian authorities with the right to review mergers and acquisitions for market dominance.  In addition, the Italian government may block mergers and acquisitions involving foreign firms under the “Golden Power” law if the transactions appear to raise national security concerns.  This law was enacted in 2012 and further implemented with decrees in 2015, 2017, and 2019.  The Golden Power law allows the Government of Italy (GOI) to block foreign acquisition of companies operating in strategic sectors (identified as defense/national security, energy, transportation, telecommunications, critical infrastructure, sensitive technology, and nuclear and space technology).  On March 26, 2019 the GOI issued a decree expanding the Golden Power authority to cover the purchase of goods and services related to the planning, realization, maintenance, and management of broadband communications networks using 5G technology.  Per Italian law, Parliament must confirm the decree within 60 days. The GOI’s Golden Power authority always applies in cases involving the sectors above in which the potential purchaser is a non-EU company; it is extended to EU companies if the target of the acquisition is involved in defense/national security activities.  In this respect, the GOI has a say regarding the ownership of private companies as well as ones in which the government has a stake. This law replaced the “Golden Share” which the GOI previously held in former state-owned firms that were partially privatized in the 1990s and 2000s. The law also allows the State to maintain oversight over entire strategic sectors as opposed to individual companies, and by replacing the Golden Share legislation, has enabled Italy to address accusations the Golden Shares violated European treaties.   An interagency group led by the Prime Minister’s office reviews acquisition applications and prepares the dossiers/ recommendations for the Council of Ministers’ decision.   

According to the latest figures available from the Italian Trade Agency (ITA), foreign investors own significant shares of 12,768 Italian companies.  These companies employed 1,211,872 workers with overall sales of EUR 573.6 billion. ITA operates under the umbrella of the Italian Ministry of Economic Development.

The Italian Trade Agency (ITA) operates Invest in Italy: http://www.investinitaly.com/en/.   The Foreign Investments Attraction Department is a dedicated unit of ITA for facilitating the establishment and the development of foreign companies in Italy.  As of April 2019, ITA maintained a presence in 65 countries to assist foreign investors.  

Invitalia is the national agency for inward investment and economic development, owned by the Italian Ministry of Economy and Finance.  The agency focuses on strategic sectors for development and employment.  It places an emphasis on southern Italy, where investment and development lag in comparison to the rest of the country.  Invitalia finances projects both large and small, targeting entrepreneurs with concrete development plans, especially in innovative and high-added-value sectors.  For more information, see https://www.invitalia.it/eng  .  The Ministry of Economic Development also has a program to attract innovative investments: https://www.mise.gov.it  

Italy’s main business association (Confindustria) also provides assistance to companies in Italy: https://www.confindustria.it/en  

Limits on Foreign Control and Right to Private Ownership and Establishment

Under EU treaties and OECD obligations, Italy is generally obliged to provide national treatment to U.S. investors established in Italy or in another EU member state.  

EU and Italian antitrust laws provide Italian national local authorities with the right to review mergers and acquisitions over a certain financial threshold.  The Italian government may block mergers and acquisitions involving foreign firms if national security concerns are raised or on the principle of reciprocity if the government of the foreign firm applies discriminatory measures against Italian firms.  Foreign investors in the defense or aircraft manufacturing sectors are more likely to encounter resistance from the many ministries involved in reviewing foreign acquisitions.  

Italy maintains a formal national security screening process for inbound foreign investment in the sectors of defense/national security, transportation, energy, telecommunications, critical infrastructure, sensitive technology, and nuclear and space technology under its “Golden Power” legislation, and where there may be market concentration (antitrust) issues.  Italy’s Golden Power legislation was expanded on March 26, 2019 to include the purchase of goods and services related to the planning, realization, maintenance, and management of broadband communications networks using 5G technology. (Per Italian law Parliament must confirm the law within 60 days for it to remain in force.) To our knowledge, U.S. investors have not been disadvantaged relative to other foreign investors under the mechanisms described above.

Other Investment Policy Reviews

An OECD Economic Survey was published for Italy in April 2019.  https://www.oecd.org/economy/surveys/Italy-2019-OECD-economic-survey-overview.pdf 

Business Facilitation

Italy has a business registration website, available in Italian and English, administered through the Union of Italian Chambers of Commerce: http://www.registroimprese.it.    The online business registration process is clear and complete.  Foreign companies may use the online process. Before registering a company online, applicants must obtain a certified e-mail address and digital signature, a process that may take up to five days.  A notary is required to certify the documentation. The precise steps required for the registration process depend on the type of business being registered. The minimum capital requirement also varies by type of business.  Generally, companies must obtain a value-added tax account number (partita IVA) from the Italian Revenue Agency, register with the social security agency Istituto Nazionale della Previdenza Sociale (INPS), verify adequate capital and insurance coverage with the Italian workers’ compensation agency Istituto Nazionale per L’Assicurazione contro gli Infortuni sul Lavoro (INAIL), and notify the regional office of the Ministry of Labor.  According to the World Bank Doing Business Index 2018, Italy is ranked 67 out of 190 countries in terms of the ease of starting a business: it takes six procedures and six days to start a business in Italy.  Additional licenses may be required, depending on the type of business to be conducted.

Invitalia and the Italian Trade Agency’s Foreign Direct Investment Unit assist those wanting to set up a new business in Italy.  Many Italian localities also have one-stop shops to serve as a single point of contact for potential investors and provide advice in obtaining necessary licenses and authorizations.  These services are available to all investors.

Outward Investment

Italy neither promotes, restricts, or incentivizes outward investment nor restricts domestic investors from investing abroad.

4. Industrial Policies

Investment Incentives

The GOI offers modest incentives to encourage private sector investment in targeted sectors (e.g., innovative companies) and economically depressed regions, particularly in southern Italy. The incentives are available to eligible foreign investors as well.  Incentives include grants, low-interest loans, deductions and tax credits. Some incentive programs have a cost cap, which may prevent otherwise eligible companies from receiving the incentive benefits once the cap is reached. The GOI applies cost caps on a non-discriminatory basis, typically based on the order that applications were filed.  The government does not have a practice of issuing guarantees or jointly financing foreign direct investment projects.

Italy provides an incentive for investments by SMEs in new machinery and capital equipment (“New Sabatini Law”), available to eligible companies regardless of nationality.  This investment incentive provides financing, subject to an annual cost cap. Sector-specific investment incentives are also available in targeted sectors.

In January 2018, the GOI also provided “super amortization” and “hyper amortization” (essentially, generous tax deductions) on investments in special areas of the economy.  Of these only “hyper amortization” was renewed in the 2019 budget law. The GOI is considering reintroducing the “super amortization” by decree law in the second half of 2019 in order to stimulate investment.  The GOI has not yet renewed the broader “Industry 4.0” initiative launched by the previous government in 2017 to improve the Italian industrial sector’s competitiveness through a combination of policy measures and research and infrastructure funding.

The Italian tax system does not generally discriminate between foreign and domestic investors, though a digital services tax approved in principle by the Parliament in December 2018, but not yet implemented, would primarily impact U.S. companies.  The corporate income tax (IRES) rate is 24 percent. In addition, companies may be subject to a regional tax on productive activities (IRAP) at a 3.9 percent rate. The World Bank estimates Italy’s total tax rate as a percent of commercial profits at 53.1 percent in 2018, higher than the OECD high-income average of 39.8 percent.  

Several U.S. multinationals have sought U.S. Embassy assistance in dealing with Italy’s tax enforcement, with some expressing concerns that the Italian Revenue Agency unfairly targeted large companies.  According to the companies, Italian tax investigations may focus on corporate accounting practices deemed legitimate in other EU Member States, creating inconsistencies and uncertainty.

Foreign Trade Zones/Free Ports/Trade Facilitation

The main free trade zone in Italy is located in Trieste, in the northeast.  The goods may undergo transformation free of any customs restraints. An absolute exemption is granted from any duties on products coming from a third country and re-exported to a non-EU country.  Legislation to create other FTZs in Genoa and Naples exists, but has yet to be implemented. A free trade zone operated in Venice for a period but is currently being restructured.

Italy’s “Decree for the South” law (Law 91 of 2017) foresees eight Special Economic Zones (ZES – Zone Economica Speciale) managed by port authorities in Italy’s less-developed south and islands (the regions of Abruzzo, Basilicata, Calabria, Campania, Molise, Puglia, Sardinia and Sicily).  Investors will be able to access up to EUR 50 million in tax breaks, hiring incentives, reduced bureaucracy, and reimbursement of the IRAP regional business tax, covered by national allotments of EUR 250 million for 2019 and 2020.  The GOI announced plans to increase the allotment by another EUR 300 million, but the increase has not passed into law yet. The Region of Campania approved the strategic plan for implementing the law on March 28, 2018, but the plan still awaits final approval from the Chamber of Deputies to become operational. The Naples ZES will encompass over 54 million square meters of land in the ports of Naples, Salerno and Castellamare di Stabia, as well as industrial areas and transport hubs in 37 cities and towns in Campania.  Incentives are not automatic, as investments will be approved by local government bodies in a procedure governed by the Port Authority of the Central Tyrrhenian Sea.  The Campania Region forecasts that the ZES will create and/or save between 15 and 30 thousand jobs. A proposed ZES encompassing the port cities of Bari and Brindisi on the Adriatic is expected to finish the approval procedure in 2019, followed by a ZES planned around the transshipment port of Gioia Tauro in Calabria and the other five zones: eastern Sicily (Augusta, Catania, and Siracusa), western Sicily (Palermo), Sardinia (Cagliari), ZES Ionica (Taranto in Puglia and the region of Basilicata), and a ZES to be shared between the ports in Abruzzo and Molise.

A special free trade zone was established in late 2015 in the areas within the Emilia-Romagna region that were hit by a May 2012 earthquake and by a January 2014 flood.  The measure aimed to assist the recovery of these areas through tax exemptions amounting to EUR 39.6 million for the years 2015 and 2016 for small enterprises headquartered in these areas.

Currently, goods of foreign origin may be brought into Italy without payment of taxes or duties, as long as the material is to be used in the production or assembly of a product that will be exported.  The free-trade zone law also allows a company of any nationality to employ workers of the same nationality under that country’s labor laws and social security systems.

Performance and Data Localization Requirements

Italy does not mandate local employment.  Non-EU nationals who would like to establish a business in Italy must have a valid residency permit or be nationals of a country with reciprocal arrangements, such as a bilateral investment agreement, as described at: https://www.esteri.it/mae/en/servizi/stranieri/  .

Work permits and visas are readily available and do not inhibit the mobility of foreign investors.  As a member of the Schengen Area, Italy typically allows short-term visits (up to 90 days) without a visa.  The Italian Ministry of Foreign Affairs has specific information about visa requirements: http://vistoperitalia.esteri.it/home/en  .

As a member of the EU, Italy does not follow forced localization policies in which foreign investors must use domestic content in goods or technology.  Italy does not have enforcement procedures for investment performance requirements. Italy does not require local data storage. Companies transmitting customer or other business-related data within or outside of the EU must comply with relevant EU privacy regulations.

Japan

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Toward Foreign Direct Investment

Direct inward investment into Japan by foreign investors has been open and free since the Foreign Exchange and Foreign Trade Act (the Forex Act) was amended in 1998.  In general, the only requirement for foreign investors making investments in Japan is to submit an ex post facto report to the relevant ministries.

The Japanese Government explicitly promotes inward FDI and has established formal programs to attract it.  In 2013, the government of Prime Minister Shinzo Abe announced its intention to double Japan’s inward FDI stock to JPY 35 trillion (USD 318 billion) by 2020 and reiterated that commitment in its revised Japan Revitalization Strategy issued in August 2016.  At the end of June 2018, Japan’s inward FDI stock was JPY 29.9 trillion (USD 270 billion), a small increase over the previous year. The Abe Administration’s interest in attracting FDI is one component of the government’s strategy to reform and revitalize the Japanese economy, which continues to face the long-term challenges of low growth, an aging population, and a shrinking workforce.

In April 2014, the government established an “FDI Promotion Council” comprised of government ministers and private sector advisors.  The Council remains active and continues to release recommendations on improving Japan’s FDI environment. The Ministry of Economy, Trade and Industry (METI) and the Japan External Trade Organization (JETRO) are the lead agencies responsible for assisting foreign firms wishing to invest in Japan.  METI and JETRO have together created a “one-stop shop” for foreign investors, providing a single Tokyo location—with language assistance—where those seeking to establish a company in Japan can process the necessary paperwork (details are available at http://www.jetro.go.jp/en/invest/ibsc/  ).  Prefectural and city governments also have active programs to attract foreign investors, but they lack many of the financial tools U.S. states and municipalities use to attract investment.

Foreign investors seeking a presence in the Japanese market or seeking to acquire a Japanese firm through corporate takeovers may face additional challenges, many of which relate more to prevailing business practices rather than to government regulations, though it depends on the sector.  These include an insular and consensual business culture that has traditionally been resistant to unsolicited mergers and acquisitions (M&A), especially when initiated by non-Japanese entities; exclusive supplier networks and alliances between business groups that can restrict competition from foreign firms and domestic newcomers; cultural and linguistic challenges; and labor practices that tend to inhibit labor mobility.  Business leaders have communicated to the Embassy that regulatory and governmental barriers are more likely to exist in mature, heavily regulated sectors than in new industries.

The Japanese Government established an “Investment Advisor Assignment System” in April 2016 in which a State Minister acts as an advisor to select foreign companies with “important” investments in Japan.  The system aims to facilitate consultation between the Japanese Government and foreign firms. Of the nine companies selected to participate in this initiative to date, seven are from the United States.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign and domestic private enterprises have the right to establish and own business enterprises and engage in all forms of remunerative activity.  Japan has gradually eliminated most formal restrictions governing FDI. One remaining restriction limits foreign ownership in Japan’s former land-line monopoly telephone operator, Nippon Telegraph and Telephone (NTT), to 33 percent.  Japan’s Radio Law and separate Broadcasting Law also limit foreign investment in broadcasters to 20 percent, or 33 percent for broadcasters categorized as “facility-supplying.” Foreign ownership of Japanese companies invested in terrestrial broadcasters will be counted against these limits.  These limits do not apply to communication satellite facility owners, program suppliers or cable television operators.

The Foreign Exchange and Foreign Trade Act governs investment in sectors deemed to have national security or economic stability implications.  If a foreign investor wants to acquire over 10 percent of the shares of a listed company in certain designated sectors, it must provide prior notification and obtain approval from the Ministry of Finance and the ministry that regulates the specific industry.  Designated sectors include agriculture, aerospace, forestry, petroleum, electric/gas/water utilities, telecommunications, and leather manufacturing.

U.S. investors, relative to other foreign investors, are not disadvantaged or singled out by any ownership or control mechanisms, sector restrictions, or investment screening mechanisms.

Other Investment Policy Reviews

The World Trade Organization (WTO) conducted its most recent review of Japan’s trade policies in March 2017 (available at https://www.wto.org/english/tratop_e/tpr_e/tp451_e.htm  ).

The OECD released its biennial Japan economic survey results on April 15, 2019 (available at http://www.oecd.org/economy/surveys/japan-economic-snapshot/  ).

Business Facilitation

The Japan External Trade Organization (JETRO) is Japan’s investment promotion and facilitation agency.  JETRO operates six Invest Japan Business Support Centers (IBSCs) across Japan that provide consultation services on Japanese incorporation types, business registration, human resources, office establishment, and visa/residency issues.  Through its website (https://www.jetro.go.jp/en/invest/setting_up  /), the organization provides English-language information on Japanese business registration, visas, taxes, recruiting, labor regulations, and trademark/design systems and procedures in Japan.  While registration of corporate names and addresses can be completed through the internet, most business registration procedures must be completed in person. In addition, corporate seals and articles of incorporation of newly established companies must be verified by a notary.

According to the 2018 World Bank “Doing Business” Report, it takes 12 days to establish a local limited liability company in Japan.  JETRO reports that establishing a branch office of a foreign company requires one month, while setting up a subsidiary company takes two months.  While requirements vary according to the type of incorporation, a typical business must register with the Legal Affairs Bureau (Ministry of Justice), the Labor Standards Inspection Office (Ministry of Health, Labor, and Welfare), the Japan Pension Service, the district Public Employment Security Office, and the district tax bureau.  In April 2015, JETRO opened a one-stop business support center in Tokyo so that foreign companies can complete all necessary legal and administrative procedures in one location; however, this arrangement is not common throughout Japan. JETRO has announced its intent to develop a full online business registration system, but it was not operational as of March 2019.

No laws exist to explicitly prevent discrimination against women and minorities regarding registering and establishing a business. Neither special assistance nor mechanisms exist to aid women or underrepresented minorities.

Outward Investment

The Japan Bank for International Cooperation (JBIC) provides a variety of support to Japanese foreign direct investment.  Most support comes in the form of “overseas investment loans,” which can be provided to Japanese companies (investors), overseas Japanese affiliates (including joint ventures), and foreign governments in support of projects with Japanese content, typically infrastructure projects.  JBIC often seeks to support outward FDI projects that aim to develop or secure overseas resources that are of strategic importance to Japan, for example, construction of liquefied natural gas (LNG) export terminals to facilitate sales to Japan. More information is available at https://www.jbic.go.jp/en/index.html  .

There are no restrictions on outbound investment; however, not all countries have a treaty with Japan regarding foreign direct investment (e.g., Iran).

4. Industrial Policies

Investment Incentives

The Japan External Trade Organization (JETRO) maintains an English-language list of national and local investment incentives available to foreign investors on their website: https://www.jetro.go.jp/en/invest/incentive_programs/  .

Foreign Trade Zones/Free Ports/Trade Facilitation

Japan no longer has free-trade zones or free ports.  Customs authorities allow the bonding of warehousing and processing facilities adjacent to ports on a case-by-case basis.

The National Strategic Special Zones Advisory Council chaired by the Prime Minister has established a total of twelve National Strategic Special Zones (NSSZ) to implement selected deregulation measures intended to attract new investment and boost regional growth.  Under the NSSZ framework, designated regions request regulatory exceptions from the central government in support of specific strategic goals defined in each zone’s “master plan,” which focuses on a potential growth area such as labor, education, technology, agriculture, or healthcare.  Any exceptions approved by the central government can be implemented by other NSSZs in addition to the requesting zone. Foreign-owned businesses receive equal treatment in the NSSZs; some measures aim specifically to ease customs and immigration restrictions for foreign investors, such as the “Startup Visa” adopted by the Fukuoka NSSZ.

The Japanese government has also sought to encourage investment in the Tohoku (northeast) region which was devastated by the earthquake, tsunami, and nuclear “triple disaster” of March 11, 2011.  Areas affected by the disaster have been included in a “Special Zone for Reconstruction” that features eased regulatory burdens, tax incentives, and financial support to encourage heightened participation in the region’s economic recovery.

Performance and Data Localization Requirements

Japan does not maintain performance requirements or requirements for local management participation or local control in joint ventures.

Japan has no general restrictions on data storage.  Previously, separate and inconsistent privacy guidelines among Japanese ministries created a burdensome regulatory environment with regard to the storage and general treatment of personally identifiable information.  However, amendments to Japan’s Personal Information Protection Act, which came into full effect on May 30, 2017, transferred all enforcement powers from the individual ministries to an independent third party authority.  This Personal Information Protection Commission (PPC) issued guidelines for businesses on the protection of personal data and oversees implementation of the Personal Information Protection Act amendments, including new rules for the protection and electronic transmission of personal data.

Latvia

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

The Latvian government actively encourages foreign direct investment (FDI) and works with investors to improve the country’s business climate.  To strengthen these efforts, the Latvian government introduced the POLARIS process (http://www.liaa.gov.lv/en/invest-latvia/investment-services-and-contacts/polaris-process  ), a mechanism designed to create an alliance between the public sector (including national and local governments), the private sector (including national and international companies), and major Latvian academic and research institutions to encourage FDI and spur economic growth.  The Latvian government also meets annually with the Foreign Investors Council in Latvia (FICIL), which represents large foreign companies and chambers of commerce, with the express purpose of improving the business environment and encouraging foreign investment. The Coordination Council for Large and Strategically Important Investment Projects is chaired by the Prime Minister.  In January 2019, FICIL published its Sentiment Index 2018 – a survey of current foreign investors on the investment climate in Latvia. It is available at: https://www.ficil.lv/wp-content/uploads/2019/01/FICIL-Sentiment-Index-2018-report_eng.pdf .

Limits on Foreign Control and Right to Private Ownership and Establishment

In March 2017, Latvia passed legislation that, on the basis of national security concerns, requires governmental approval prior to transfers of significant ownership interests in the energy, telecommunications, and media sectors.  Latvia reserves the right to enact policies and legislation that discriminates against foreign investors in the following areas: control of defense industries; manufacturing and sale of narcotics, weapons and explosives; control of newspaper, television and radio broadcasting stations, or news agencies; recovery of all renewable and non-renewable natural resources including resources found on the continental shelf; fishing; hunting; air transportation services and port management; ownership and control of land; brokerage or real property; gambling and lotteries; private security and surveillance services; auditing services; the cross-border provision of banking and financial services; and the cross-border provision of insurance and private pension services.  

With these limited exceptions, physical and legal persons who are citizens of Latvia or of other EU countries may freely purchase real property.  In general, physical and legal persons who are citizens of non-EU countries (third-country nationals) may also freely purchase developed real property.  However, third-country nationals may not directly purchase certain types of agricultural, forest, and undeveloped land. Such persons may acquire ownership interest in such land through a company registered in the Register of Enterprises of the Republic of Latvia, provided that more than 50 percent of the company is owned by: (a) Latvian citizens and/or Latvian governmental entities; and/or (b) physical or legal persons from countries with which Latvia signed and ratified an international agreement on the promotion and protection of investments on or before December 31, 1996; or for agreements concluded after this date, so long as such agreements provide for reciprocal rights to land acquisition.  The United States and Latvia have such an agreement (a bilateral investment treaty in force since 1996). In addition, foreign investors can lease land without restriction for up to 99 years. In 2014 changes in the Law on Land Privatization in Rural Areas allowed EU citizens to purchase Latvia’s agricultural land and forests. Other restrictions apply (to both Latvian citizens and foreigners) regarding the acquisition of land in Latvia’s border areas, Baltic Sea and Gulf of Riga dune areas, and other protected areas.  

In May 2017, the President of Latvia promulgated the amendments to the Law on Land Privatization in Rural Areas to simplify and clarify the process for local farmers to purchase land.  The law, however, prohibits foreigners who are not permanently residing in Latvia from purchasing agricultural land. It additionally requires that any person who wishes to purchase agricultural land must possess knowledge of the Latvian language at a level sufficient to present their plan for the future agricultural use of the land in Latvian.  

The Latvian constitution guarantees the right to private ownership.  Both domestic and foreign private entities have the right to establish and own business enterprises and engage in all forms of commercial activity, except those expressly prohibited by law.

Other Investment Policy Reviews

The Organization for Economic Cooperation and Development (OECD) published an Economic Survey of Latvia in September 2017 (http://www.oecd.org/economy/surveys/economic-survey-latvia.htm  ).  Although there have been no trade policy reviews specifically involving Latvia, the WTO completed its latest review of the European Union in July 2017.  (https://www.wto.org/english/tratop_e/tpr_e/tp457_e.htm  ).  Additionally, in October 2017, the World Bank published a review of Latvia’s tax system (http://documents.worldbank.org/curated/en/587291508511990249/Latvia-tax-review  )).  Previously, the World Bank carried out a similar review of Latvia’s port infrastructure in 2013 (http://www.worldbank.org/en/news/press-release/2013/11/27/world-bank-reviews-competitiveness-of-latvian-ports  ).

Business Facilitation

Latvia has implemented special legislation to encourage startup ventures through favorable tax treatment.  For more information please see here: http://www.liaa.gov.lv/en/invest-latvia/start-up-ecosystem   and here: https://labsoflatvia.com/en/resources  .  

The official website of the Latvian Commercial Register has been fully revised and now provides detailed information in English on business registration process in Latvia – https://www.ur.gov.lv/en/  .  The World Bank’s Doing Business project has performed a detailed review of the business registration process in Latvia, which is available here: http://www.doingbusiness.org/data/exploreeconomies/latvia/#starting-a-business  .

In addition, the Latvian Investment and Development Agency has prepared a guide with step-by-step information on starting a business in Latvia: http://www.liaa.gov.lv/en/trade/market-entry/business-forms-and-registration  .  The agency prides itself on the fact that a business can be registered in Latvia in a single day.

Using the European Commission definitions of micro-, small-, and medium- enterprises (MSMEs), Latvia has established a special tax regime for micro-enterprises.  Under the micro-enterprise tax, qualifying businesses (those employing up to five employees and with less than 40,000 euros in revenue) pay a single tax that covers social security contributions, personal income tax, and business risk tax for employees, and includes corporate income tax if the micro- business taxpayer is a limited liability company.  This special tax regime is available to foreign nationals. For additional details on the micro-enterprise tax, see: https://www.vid.gov.lv/en/node/57223  

Outward Investment

The Latvian government does not incentivize outward investment or restrict Latvians from investing overseas.

4. Industrial Policies

Investment Incentives

Latvia has established a National Industrial Policy (NIP), which aims to promote structural changes in the economy, to foster the manufacture of goods and services with higher added value.  More information on the NIP is available here: https://www.em.gov.lv/en/sectoral_policy/industrial_policy/  .

In addition, Latvia has identified the following sectors as having the highest potential for new investment: woodworking, metalworking and mechanical engineering, transport and storage, information technology (including global business services), green technology, health care, life sciences, and food processing.  Relevant information is publicized via the Latvian Investment and Development Agency’s official website (http://liaa.gov.lv/invest-latvia/sectors-and-industries  ), and through its representative offices (http://liaa.gov.lv/contacts/representative-offices  ).

Because the Latvian government extends national treatment to foreign investors, most investment incentives and requirements apply equally to local and foreign businesses.  Latvia has three special economic zones and two free ports in which companies benefit from various tax rebates (real estate, dividend, and corporate income) and do not pay VAT.  The full list of investment incentives is available here: http://www.liaa.gov.lv/en/invest-latvia/investor-business-guide/business-incentives  .

Foreign Trade Zones/Free Ports/Trade Facilitation

There are five free trade areas in Latvia.  Free ports have been established in Riga and Ventspils, and special economic zones (SEZ) have been created in Liepaja, a port city in western Latvia, and Rezekne, a city in the middle of the eastern Latvian region that borders Russia.  Latvia has also established an additional SEZ in part of Latgale, an economically challenged region in Latvia, which borders Russia and Belarus.

Somewhat different rules apply to each of the five zones.  In general, the two free ports provide exemptions from indirect taxes, including customs duties, VAT, and excise tax.  The SEZs offer additional incentives, such as an 80-100 percent reduction of corporate income taxes and real estate taxes.  To qualify for tax relief and other benefits, companies must receive permits and sign agreements with the appropriate authorities: the Riga and the Ventspils Port Authorities, for the respective free ports; the Liepaja SEZ Administration; the Rezekne SEZ Administration; or the Latgale SEZ Administration.  The SEZs are expected to be in place until 2035.

Performance and Data Localization Requirements

Except for specific requirements for investors acquiring former state enterprises through the privatization process, there are no performance requirements for a foreign investor to establish, maintain, or expand an investment in Latvia.  In the privatization process, performance requirements for investors, both foreign and domestic, are determined on a case-by-case basis.  

Under Latvian Immigration Law, foreign citizens can enter and reside in Latvia for temporary business activities for up to three months in any six-month period.  For longer periods of time, foreigners are required to obtain residence and work permits. The Latvian Investment and Development Agency, together with the Office of Citizenship and Migration Affairs, has created a guide to help third-country nationals interested in working in Latvia obtain work permits: http://workinlatvia.liaa.gov.lv/     

A third-country national may obtain a five-year temporary residence permit if he or she has made certain minimum equity investments in a Latvian company, certain subordinated investments in a Latvian credit institution, or purchased real estate for certain designated sums, subject to limitations in each case.  More information is available here: http://www.liaa.gov.lv/en/trade-latvia/market-entry/working-and-living  .

Latvia’s Law on Personal Data Processing, implementing the EU’s General Data Protection Regulation, entered into force in July 2018.  More information is available here: https://www.dvi.gov.lv/en/  .

Lithuania

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Lithuania’s laws assure equal protection for both foreign and domestic investors.  No special permit is required from government authorities to invest foreign capital in Lithuania.  State institutions have no right to interfere with the legal possession of foreign investors’ property.  In the event of justified expropriation, investors are entitled to compensation equivalent to the market value of the property expropriated.  The law obligates state institutions and officials to keep commercial secrets confidential and requires compensation for any loss or damage caused by illegal disclosure.  As a member of European Union, Lithuania is subject to WTO investment requirements. Invest Lithuania is the government’s principal institution dedicated to attracting foreign investment.  It serves as a one-stop-shop to: provide information on business costs, labor, tax and legal considerations, and other business concerns; facilitate the set up and launch of a company; provide help in accessing government financial support; and, advocate on behalf of investors for more business friendly laws.  In addition to its offices in Vilnius and major Lithuanian cities, Invest Lithuania has representative offices in Belgium, Kazakhstan, and the United States (Chicago). Every year the government holds a conference with foreign investors to discuss their concerns and ways to improve investment climate in Lithuania.

Limits on Foreign Control and Right to Private Ownership and Establishment

Foreign investors have the right to repatriate profits, income, or dividends, in cash or otherwise, or to reinvest the same without any limitation, after paying taxes.  The law establishes no limits on foreign ownership or control. Foreign investors have free access to all sectors of the economy with some limited exceptions:

  1. The Law on Investment prohibits investment of foreign capital in sectors related to the security and defense of the State.
  2. The Law on Investment also requires government permission and licensing for commercial activities that may pose risks to human life, health, or the environment, including the manufacturing of, or trade in, weapons.
  3. As of May 2014, foreign citizens are allowed to buy agricultural or forest land.

The Law on Investment specifically permits the following forms of investment in Lithuania:

  • establishment of an enterprise or acquisition of a part, or the whole, of the authorized capital of an operating enterprise registered in Lithuania;
  • acquisition of securities of any type;
  • creation, acquisition, and increase in the value of long-term assets;
  • lending of funds or other assets to business entities in which the investor owns a stake, allowing control or considerable influence over the company; and
  • performance of concession or leasing agreements.
  • Foreign entities are allowed to establish branches or representative offices.  There are no limits on foreign ownership or control. Foreign investors can contribute capital in the form of money, assets, or intellectual or industrial propertyThe State Property Bank screens the performance record and size of companies bidding on state or municipal property and has halted privatizations when it determined that the bidders were not suitable, i.e., for criminal or other reasons.

In 2018, the Lithuanian parliament passed a new edition of the law on the Protection of Objects Important to National Security.  The law is aimed at enforcing additional safeguards to avoid threats related to investments into companies of strategic national importance, thus requiring a special government commission to screen investments in identified strategic sectors.

Other Investment Policy Reviews

http://www.oecd.org/countries/lithuania/economic-survey-lithuania.htm  

Business Facilitation

The process of company registration in Lithuania involves the following steps that can be accomplished online at http://www.registrucentras.lt/en/  :

  1. Check and reserve the name of the company (limited liability company).  It takes about one day and costs approximately EUR 16.
  2. Register at the Company Register, including registration with State Tax Inspectorate (the Lithuanian Revenue Authority) for corporate tax, VAT, and State Social Insurance Fund Board (SODRA).  It takes one day and costs approximately EUR 57.
  3. Complete VAT registration.  It takes three days to complete at no charge.

Outward Investment

The Lithuanian government neither incentivizes nor restricts outward investment.

4. Industrial Policies

Investment Incentives

The Lithuanian government taxes corporate income and capital gains at 15 percent and the personal income tax rate is 20 percent.  The value added tax is 21 percent, and the annual real estate tax ranges from 0.3 to three percent, depending on the market value of a property.  For more details, please visit https://investlithuania.com/investor-guide/running-your-business/  

Lithuanian municipalities provide special incentives to investors who create jobs or invest in infrastructure.  Municipalities may tie designation criteria to additional factors, such as the number of jobs created or environmental benefits.  Strategic investors’ benefits could include favorable tax incentives for up to ten years. Municipalities may grant special incentives to induce investments in municipal infrastructure, manufacturing, and services.

Foreign Trade Zones/Free Ports/Trade Facilitation

Lithuania has seven Free Economic Zones (FEZs) located near the cities of Kaunas, Klaipeda, Siauliai, Kedainiai, Panevezys, Akmene, and Marijampole.  The FEZs in Kaunas and Klaipeda have attracted the most business; there are 15 companies operating in the Klaipeda FEZ, and 20 in the Kaunas FEZ.  Companies operating in FEZs must follow the same accounting and reporting rules as companies operating in the rest of the country.

Companies that invest or are operating within the zones enjoy:

  1. six years’ exemption from corporate income tax and a 50 percent reduction during the following 10 years, if the company invests more than USD 1.2 million as an initial investment;
  2. exemption from real estate tax;
  3. no tax on foreign company dividends.

Performance and Data Localization Requirements

In January 2017, the parliament passed legislation providing for a Startup Visa, designed for non-EU entrepreneurs wishing to start or expand information technology, biotech, nanotech, mechatronics, electronics, or laser technology businesses.  For more information on the new Startup Visa, visit: http://www.startuplithuania.lt/en/news/lithuanias-startup-visa-scheme-explained  .

Lithuania also participates in the EU BlueCard program, which simplifies the residency and work permit application process for highly-skilled non-EU citizens.  Once secured, the BlueCard is valid for up to three years and can be extended for an additional three years. BlueCard holders are also eligible to apply for permanent residency after five years.  For more information on the BlueCard program, visit: http://www.eubluecard.lt/  .

Nevertheless, foreign investors that do not qualify for these programs, including U.S. citizens, may face difficulties obtaining and renewing residency permits.  U.S. citizens can stay in Lithuania no more than 90 days without a visa (and no more than 90 days in any six-month period). Those who stay longer face fines and deportation.  However, foreigners may only submit residency permit applications after they arrive in Lithuania. Therefore, the Embassy recommends applicants work with Lithuanian embassies and consulates to review documentation required for a permit well in advance of their first visit to Lithuania.  For more information on the various types of visas and their requirements, visit: http://www.migracija.lt/index.php?-1488882078  .

Lithuania provides special incentives to strategic investors.  The criteria by which the national government or a municipality designates a strategic investor vary from project to project.  In general, the national government requires that a strategic investor initially invest USD 50 million or more. Municipalities may tie the designation criteria to additional or other factors, such as the number of jobs created and the environmental benefits that accrue.  Strategic investors’ rewards include special business conditions, such as favorable tax incentives for up to ten years. Significant tax incentives apply to foreign investments made before 1997. Municipalities may grant special incentives to induce investments in municipal infrastructure, manufacturing, and services.

The Lithuanian government does not follow “forced Localization” policy and foreign investors can use domestic and foreign content in goods or technology alike.  As a member of the European Union, Lithuania follows the General Data Protection Regulation. Enforcement is carried out by the State Data Protection Inspectorate.  Foreign IT providers are not required to turn over source code and/or provide access to the encryption.

Luxembourg

1. Openness To, and Restrictions Upon, Foreign Investment

Policies Towards Foreign Direct Investment

Luxembourg offers a public policy framework and political stability, which remain highly attractive for foreign investors, particularly for U.S. investors, given the focus on growth sectors and the historically strong bilateral relationship between the two countries.  The government has increased its outreach toward companies looking to expand in Europe.

In the March 2017 Regional Competitiveness Index published by the European Union (EU), Luxembourg is ranked one of the best European regions to attract business.  Ranked seventh with a score of 91 out of 100 (behind London and other regions of the United Kingdom; Utrecht, Netherlands; Stockholm, Sweden; Copenhagen, Denmark; Paris, France; and Munich, Germany), Luxembourg demonstrates “the ability to provide an attractive and sustainable environment for attracting businesses and citizens.”

Key points considered are health, infrastructure, higher education, labor efficiency, and innovation.  According to the Index, Luxembourg ranks number one for innovation – a direct result of the increase in incentives and support for research and development, as well as for start-up ventures through the state lending agency (capital investment subsidies, financing of equipment, and seed aid to start-up entities).

In 2017, Luxembourg’s Deputy Prime Minister and Minister of the Economy and Foreign Trade, Etienne Schneider, unveiled a strategy to promote economic growth focusing on attracting FDI and supporting companies’ moving into other markets.  The Luxembourg “Let’s Make It Happen” campaign, developed by the state Trade and Investment Board, focuses on five key objectives:

  • Improving Luxembourg-based companies’ access to international markets
  • Attracting FDI in a “targeted, service-oriented” way
  • Strengthening the country’s international “economic-promotion network”
  • Improving Luxembourg’s image as a “smart location” for high-performance business and industry
  • Ensuring the coherence of economic promotion efforts

There is no overall economic or industrial strategy that has discriminatory effects on foreign investors, either at a market-access or post-establishment phase of investment.  Luxembourg strives to attract and retain foreign investors with its unique model of “easy-access to decision-makers” and its known ability to “act swiftly.”

The Trade and Investment Board has taken the lead in investment promotion and includes representatives from the ministries of Economy, Higher Education and Research, Finance, Foreign and European Affairs, and State.  Public-private trade associations such as FEDIL (Business Federation of Luxembourg, the main employers’ trade association), the Luxembourg Chamber of Commerce, and the Chamber of Skilled Trades and Crafts, as well as Luxinnovation, are also represented.

The Board is working in cooperation with Luxembourg embassies and trade and investment offices worldwide, as well as economic and commercial attachés, honorary consuls, and foreign trade advisers, to attract FDI and retain investors. In 2016, the Ministry of the Economy expanded the role of Luxinnovation to incorporate promotion of Luxembourg abroad and to attract FDI into the country.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity.  There are no limits on foreign ownership or control, and there are no sector-specific restrictions.

General screening of foreign investment exists in line with that of domestic investment, with routine and non-discriminatory screening mechanisms.  There are no major sectors/matters in Luxembourg in which foreign investors are denied national (domestic) treatment.

Other Investment Policy Reviews

The World Bank’s Doing Business 2019 Economy Profile provides additional detail on Luxembourg’s investment climate.

Luxembourg is included in Trade Policy Reviews (TPRs) of the EU/EC; see the TPR gateway for explanations and background.

Business Facilitation

In terms of the United Nations Conference on Trade and Development (UNCTAD) Global Action Menu for Investment Facilitation, Luxembourg’s business facilitation efforts are aligned with most of the recommended action points.  Over the past decade, Luxembourg has been furthering accessibility and transparency in investment policies and regulations, as well as procedures relevant to investors.

The Government has improved the efficiency of investment administrative procedures, notably in the context of the overall “Digitalization” movement to offer a multitude of government services online or electronically.  It usually takes 2-3 months to register a business, depending on the complexity of the business itself. On a scale of 1 to 10, Luxembourg rates 6.5 in website registration clarity and completeness of instructions to register a limited liability company, according to the Global Enterprise Registration portal of the Global Entrepreneurship Network of UNCTAD.

The Government provides a website in multiple languages, including English that explains the business registration process: http://www.guichet.public.lu/en  .  A new business must register with the Registry of Commerce (Registre du Commerce: https://www.rcsl.lu/  .)  Foreign companies can use the site (after translating from the original French language), but it is best to consult with a local lawyer or fiduciary to complete the overall process.  It is necessary to engage a notary to submit the company’s by-laws for registration.

In 2017, the Government reduced the required minimum capitalization of a new company from 12,500 euro to just 1 euro (symbolic), to encourage start-up creation.  Between January 2017 and January 2018, over 680 such simplified limited liability companies (Société à responsabilité limitée simplifiée SARL-S) have registered.  According to the Luxembourgish Chamber of Commerce, one client out of three has requested information on SARL-S.

After receiving a certificate from the Registry of Commerce, companies are required by law to register with and pay annual dues to the Luxembourg Chamber of Commerce , as well as the Social Security Administration, the Tax Administration (Administration des Contributions Directes) and the Value-Added-Tax Authority (TVA = taxe à la valeur ajoutée).  The company will receive an official registration number reflecting the date of inception of the entity, and this number will be used in all business transactions and correspondence with administrative authorities.

The House of Entrepreneurship, opened in 2016 within the Luxembourg Chamber of Commerce, also provides guidance on the entire registration and creation process of a business.  Between 2016 and 2018, the House of Entrepreneurship was contacted 30,000 times.

The Ministry of Economy continues to support networks and associations acting in favor of female entrepreneurship. The Law of December 15, 2016 incorporated the principle of equal salaries in the Grand Duchy’s legislation, which makes any difference in the salaries paid to men and women carrying out the same task or work of equal value, illegal.

In general, the most promising instruments are outside the jurisdiction of the Ministry of Economy but are critical.  For example, there has been an increase in the number of childcare centers close to business districts which is helping dual career families better manage.

Outward Investment

The same government services website listed above, http://www.guichet.public.lu/en  , includes an “International Trade” tab which provides guidance on outward investment by Luxembourgish companies on various topics including intra-EU trade and services; import, export, and transit; licensing; and transport.  The Luxembourg Government promotes outward investment via the Trade and Investment Board, which functions as a promotion entity for both inward and outward investment.

The “Let’s Make It Happen” initiative, among its many missions, is working to facilitate access to international markets for Luxembourgish companies and to strengthen Luxembourg’s international economic promotion network. Luxembourg does not restrict domestic investors from investing abroad.

4. Industrial Policies

Investment Incentives

Luxembourg is considered to be a very attractive tax location for conducting business: low effective corporate tax rates of 18 percent (with an adjusted rate of 15 percent for entities with annual taxable income less than 25,000 euro); the lowest VAT (value-added tax) rate in Europe (at 17 percent;); and a variety of tax incentives, including investment tax credits, new business tax credit, subsidies for film productions, venture capital investment certificates, small business incentives, regional and national incentives, research and development incentives, and environmental incentives. The investment incentives are provided within the limitations of the EU rules on State aid.

U.S. and foreign firms are able to participate in government/authority-financed and subsidized research and development programs.

Foreign Trade Zones/Free Ports/Trade Facilitation

Luxembourg opened a free-trade zone called Le Freeport in 2014, which was built and integrated into the cargo logistics center at Luxembourg Airport.  This zone, modeled after other successful customs warehousing in premier trade regions such as Geneva and Singapore, allows the warehousing and handling of high-value merchandise (art, cars, wines) in a secure location free of fiscal obligations (no Value-Added-Tax (VAT) or import duties to be paid as long as the goods remain on the premises).  Taxation only occurs when the articles leave the zone as imports into the country of consumption (or if a bottle of wine is opened at Le Freeport, it is also subject to taxation).

Performance and Data Localization Requirements

The host Government does not mandate local employment.  The Government has improved the work visa process in past years, as a result of input from companies, embassies, and visa applicants.  If the application is in order, a work visa should normally take only two months to clear. The difficulty in obtaining a Residence permit is on par with other western European countries, once the applicant has provided all pertinent information to the authorities and the local district of residence.

These incentives are applied uniformly to both domestic and foreign investors.

Data storage has been greatly enhanced via new state-of-the-art data centers, built by the government as part of the long-term massive ICT infrastructure development plan which includes replacing old transmission lines with fiber-optic cable all across the country.  The data centers have served to optimize international connectivity to large hubs such as Paris, Amsterdam, and Frankfurt, and have attracted major ICT and e-commerce players, such as Amazon and PayPal, which located their EU headquarters in Luxembourg. The centers are rated at the highest security level for data storage.

Investment Climate Statements
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