International investors can explore information about the double tax treaties Latvia has signed with countries worldwide before starting a company here. Please read this article and reach out to our Latvian agents with experience in company formation and related matters.
| Quick Facts | |
|---|---|
| Main objectives of DTTs signed by Latvia | – avoiding double taxation on incomes, – eliminating fiscal evasion, – preventing discrimination in tax matters |
DTT objectives | To offer a stable and correct tax regime to the investors of each contracting state in the other contracting state (where Latvia is signatory) |
Incomes covered | – business profits, – from immovable property, – dividends, – royalties, – interest, – director’s fee, etc. |
| Withholding tax on dividends | Not imposed, except tax-haven companies (20%) |
| Withholding tax on interest | 0%, but exceptions apply |
| Withholding tax on royalties | 0%, in most DTTs. A 20% rate applies on all interest and royalty payments to tax-haven companies. |
| Taxation of personal income | Personal income tax does not apply on work contract income derived and levied in another EU/EEA member state or in a country that signed a convention with Latvia. |
| Foreign tax relief | Foreign tax paid on revenue included in the tax base is allowed as a credit against personal income tax (PIT) based on income evidence earned, paid, and approved by the foreign tax authority. |
| Other provisions | Latvian companies must first withhold the applicable tax, while the foreign enterprises/non-residents can recover tax in excess of 20% charged on registered profit. |
| Where there is no DTT signed | Tax matters are solved only according to the national laws. |
| Corporate tax in Latvia | 20% applied to the taxable base |
| Multilateral Convention to Implement Tax Treaty Related Measures | Came into force in 2020. Latvia signed this type of convention with around 25 countries. |
| Are credits available? (YES/NO) | YES |
| Number of signed treaties (approx.) | Around 74, but at the moment only 64 are effective. |
| How can our Latvian lawyers help you? | We offer assistance in taxation matters and explain the provisions of the double taxtion treaties signed by Latvia. |
Table of Contents
What is the purpose of a double taxation treaty?
- to prevent tax evasion,
- to avoid paying taxes twice on the same income.
Are there any specific requirements to benefit from the DTTs signed by Latvia?
To prove the company/business has a permanent establishment in Latvia.
How are double taxation treaties known in Latvia?
- DTTs,
- Double taxation agreements.
How many DTTs has Latvia signed so far?
Around 64 in force, including with countries like the USA, UK, Canada, Japan, China, Switzerland, etc.
Who can benefit from the protection of the double tax treaties signed by Latvia?
Both company owners and individuals with tax residency in Latvia.
What are the types of taxes covered by the DTTs signed by Latvia?
- Corporate income tax,
- Personal income tax,
- Taxes on dividends, royalties and interest,
- Capital gains, etc.
Explore this infographic with details on this topic:
What stands at the base of DTTs signed by Latvia?
The OECD Model Tax Convention.
NOTE: Latvia also implemented the Multilateral Instrument (MLI), which allows for the adoption of new anti-avoidance rules and methods to resolve tax disputes.
Are there any tax reductions?
Yes, the withholding tax on dividends, royalties and interest can be reduced, depending on the double tax treaty signed.
What are the methods to prevent double taxation in Latvia?
- through tax exemption,
- through tax credit.
What are the withholding tax rates accepted through DTTs signed by Latvia?
- 0% WHT on dividends, royalties, and interest when paid to international companies, for most DTTs signed by Latvia,
- 20% WHT is imposed on management and consultancy fees, and it can be reduced to 0% under certain conditions.
NOTES:
- 5% is the WHT for direct investment dividends for specific double taxation treaties signed by Latvia,
- In some DTTs, the WHT on dividends is 15%, on interest payments is limited to 10%, and ranges from 5% to 10% for royalties.
What is the taxation of real estate owned in Latvia?
5% WHT applies to gross income received by non-residents from real estate rent located in Latvia.
Are there any precautions on DTTs signed by Latvia?
- the Latvian authorities continue to implement and also update the anti-abuse laws & frameworks on existing and future double taxation treaties,
- the treaty benefits are not granted automatically, which is why documentation must be drafted and deposited first when making a claim,
- The Certificate of Residence is required when claiming a tax credit in Latvia,
- the double taxation agreement signed with Russia is not active at the moment.
Would you like to know more about the DDTs signed by Latvia? Are you interested in applying for a tax credit? You may explore our online services and contact our specialists in company formation in Latvia for guidance and advice.