Company formation and accounting in Latvia
Last updated: 2016-01-16
The Republic of Latvia has concluded agreements on the avoidance of double taxation and prevention of tax evasion with the following countries:
  • Albania
  • Armenia
  • Austria
  • Azerbaijan
  • Belarus
  • Belgium
  • Bulgaria
  • Canada
  • China
  • Croatia
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Georgia
  • Germany
  • Greece
  • Hungary
  • Iceland
  • India
  • Ireland
  • Israel
  • Italy
  • Kazakhstan
  • Korea (South Korea)
  • Kuwait
  • Kyrgyzstan
  • Lithuania
  • Luxembourg
  • Macedonia
  • Malta
  • Mexico
  • Moldova
  • Montenegro
  • Morocco
  • Norway
  • Poland
  • Portugal
  • Qatar
  • Romania
  • Russia
  • Serbia
  • Singapore
  • Slovakia
  • Slovenia
  • Spain
  • Sweden
  • Switzerland
  • Tajikistan
  • The Netherlands
  • The United Kingdom of Great Britain and Northern Ireland
  • The United States of America
  • The United Arab Emirates
  • Turkey
  • Turkmenistan
  • Ukraine
  • Uzbekistan

General content of the conventions.

Conventions define:
  • Persons, to which the conventions apply (residents of one or both countries).
    According to conventions, a resident is any person, who according to legislation of a country, is subject to taxation, based on place of residence, place of management, place of registration (incorporation) or based on any other criterion.
  • Taxes, to which the conventions apply. Conventions are related to income and capital taxes (the personal income tax, the corporate income tax and the tax related with use of immovable property).
  • Permanent representation (establishment), that is certain place of business, where company wholly or partially does business.
    Meaning of permanent representation includes, for example, place of management of a company, a (branch) office, a factory, a workshop, a place of extraction of natural resources.
  • Taxation of following income and profit:
    • Income from an immovable property.
    • Profit of a company (enterprise).
    • Profit from operation of ships or aircraft in international traffic.
    • Profit from activities of associated companies.
    • Dividends.
    • Interest.
    • Royalties.
    • Capital gains.
    • Income from independent personal services (professional services), like scientific, literary, artistic, educational or teaching services and services of doctors (physicians), lawyers, engineers, architects, dentists and accountants.
    • Salaries and wages, including salaries of directors.
    • Income of artistes and sportsmen.
    • Pensions.
    • Income of public (civil) services employees.
    • Payments, received by students.
    • Income of certain professors and scientists.
  • Prevention of double taxation. In general if a resident of one country (first country) has paid certain tax in the another country (second country), then the resident has right to reduce payable tax in the first country.
  • Prevention of discrimination. In general, residents of one country have the same tax liabilities as residents of the another country.
  • Exchange of information between certain authorities (tax authorities) of both countries.

Why the conventions are necessary?

If two countries have not concluded tax agreement (convention), then profit of a resident of one country (if the resident works in another country) may be subject to taxation in both countries.
Application of the conventions makes it possible to prevent the double taxation of income and profit.
Also, the application of the conventions gives rights to apply a lower rate of a tax (if the convention provides a lower tax rate, compared to the national legislation).

How to apply tax reliefs, defined in the conventions?

In Latvia exists special rules of the Cabinet of ministers.

To apply lower tax rate according to a convention, if Latvian resident pays certain payments to resident of another country (a party in convention), then the recipient of a payment submits to Latvian resident residence certificate of approved form (4 copies).
A payer must submit the copies to the tax authority for approval.
After approval, one copy remains at the tax authority, one must submit to the receiver of payment and 2 copies goes to the payer.

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