A Convention to avoid double taxation and the prevention of fiscal evasion with respect to taxes on income was signed in Brussels on the 24th of May 2016 and it is based on the OECD Model Convention for the Avoidance of Double Taxation on Income and Capital. The Treaty enters into force as of 1st of January 2017.
Following Taxes are Included:
- Latvian personal and corporate income tax,
- Cyprus personal and corporate income tax, capital gains, special contribution (SDC tax).
The main provisions of the Double Tax Treaty include
Tax withholding rates
- Dividends and Interest: 0% withholding tax will apply to dividend/interest payments to a resident company in the other contracting state that is the beneficial owner of the company. In case where the recipient company is not the beneficial owner of the dividend/interest the withholding tax rate is 10%.
- Royalties: 0% withholding tax will apply to dividend payments to a resident company in the other contracting state that is the beneficial owner of the company. In case where the recipient company is not the beneficial owner of the dividend the withholding tax rate is 5%.
Capital Gains
Income and/or Profits incurred by a Cyprus Resident or the contracting state from the alienation of immovable property situated in Latvia may be liable for tax in Latvia or the contracting state in which the property is situated. Profits derived by a Cyprus Resident from the disposal of shares in a company deriving more than 50% of their value directly or indirectly from immovable property situated in Latvia or any other contracting state may also be taxed in Latvia. Profits derived by a Cyprus Resident from the disposal of shares other than those referred to above will be taxable only in Cyprus being the country of tax residence of the person disposing the shares.
Other important provisions
Article 5 of the DDT – Permanent Establishment – provides for a 9-month period that a building site, construction or assembly or installation project or a connected supervisory or consultancy activity must exist in order to constitute a permanent establishment.
Exchange of Information: Compliant with OECD exchange information provisions.
