Latvian black list of low tax territories / 2016

14 June 2016

Latvia has listed 62 countries on a list of low or no tax states. Transactions with these countries have special regulations and are subject to particular taxes applicable for individuals and legal persons. Special attention is directed towards financial transactions with countries in list below, it is important to know what additional rules and taxes apply to these matters.

Income tax on business income

According to Art. 8 of law of company tax, company tax of 15% is withhold from all payments and dividends, which resident of Latvia or independent representatives of non-residents who are located in Latvia pay to legal, physical or other persons which are located or established in Cabinet of Ministry stated list of low-tax countries. Independent of any regulations of this law, company tax is withheld in following rates from payments to persons located in low-tax countries:

From payment of interest 5%, if interest is paid by credit institution registered in Republic of Latvia, or 15% from all other interest payment;
Payments for intellectual property- 15%;
From urgent dividends- 30%.

States revenue service have rights to not withhold taxes from above mentioned payments, except dividends, if payer can prove that mentioned payments are not made for purposes of not paying or decreasing payers amount of taxes to be paid in Latvia. State revenue service can annul granted permit, if information about true circumstances of transactions have been covered.

Special regulations for individuals

Art. 8.¹4 of law of personal income tax states that, if individual borrow money from lender who is established or located in low-tax country and money is not borrowed for economical activity, contract for lending money have to be concluded in form of notaries act. Personal income tax of 25% is withheld from all payments made to individuals or legal persons who are located or established in low-tax countries from individuals who are residents or non residents of Latvia, who have to annually declare their income.