Latvia has signed double tax treaties with: Albania, Armenia, Austria, Azerbaijan, Belarus, Belgium, Bulgaria, Canada, China, Croatia, Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Kazakhstan, Korea, Kyrgyzstan, Lithuania, Luxembourg, Macedonia, Malta, Moldova, Morocco, Netherlands, Norway, Poland, Portugal, Romania, Serbia, Singapore, Slovakia, Slovenia, Spain, Sweden, Switzerland, Tajikistan, Turkey, Ukraine, United Kingdom, United States of America and Uzbekistan.
It is mandatory for these treaties to be approved by the Ministry of Finance and then published in the Latvian Official Gazette.
The most important provisions of the double tax treaties are related to the corporate tax for the companies with subsidiaries in Latvia or in a partner country. The usual corporate tax of 15% (7% in case of a small company) can be credited (paid in Latvia and received a credit in the country of origin) or exempt (not paid at all in Latvia).
Other provisions are related to the withholding tax on dividends, interests and royalties paid to the companies in the foreign country which can be minimized or even exempt. This tax may vary from 0 to 15% in case of a treaty country.
The double tax treaties are agreements meant to cancel the double taxation of capital and income in the country of residence and also in Latvia.
For these countries, the double taxation is avoided through credit (the income is taxed, but a credit is received from the residence country) or through exemption (the income is taxed only in the country of residence).
The withholding taxes on dividends, interest and royalties are lower than those for the non-treaty countries and may vary from 0% to 15%.
The treaties elaborated after the OECD models have at their end provisions related to the tax information exchanges between the parties. Due to those, the Latvian tax authorities are allowed to request information regarding a tax payer from another country and the other way around.
Usually if those provisions are missing, the involved countries are concluding tax exchange information agreements, but so far Latvia hasn’t signed one yet. However, the necessary information can be obtained since Latvia has the status of EU member and enjoys full responsibility and rights just like the rest of the members and one of these duties is to deliver the necessary information to the concern states.
If you need more details about the taxation in Latvia, you may ask our Latvian lawyers.