On 24 May 2016 a tax treaty was signed between Cyprus and Latvia. The treaty provisions will take effect on the 1st of January following the exchange of notification of ratification between the two states.
The most significant provisions of the treaty are as follows:
- Dividends and interest: There will be no withholding tax on dividend and interest payments provided that the recipient is a company which is the beneficial owner of the income. In all other cases 10% will apply.
- Royalties: There will be no withholding tax on royalty payments provided that the recipient is a company which is the beneficial owner of the income. In all other cases 5% will apply.
- Capital Gains: Gains resulting from the disposal of property and of shares in companies which derive more than 50% of their value from property will be taxed in the state where the property is situated.
- Permanent Establishment: In a number of cases a permanent establishment will need to last for more than 9 months in order to be considered as such.
Please note that Cyprus domestic law states that payments of dividends and interest to non-residents are exempt from withholding tax in Cyprus. Royalties granted for use outside of Cyprus are also exempt form withholding tax in Cyprus.
Similarly, Latvia does not levy withholding tax on dividends, interest or royalty payments to persons residing in jurisdictions which are not included in the black list issued by the Latvian government.
Our View: The treaty is expected to expand trade between the two countries and attract foreign direct investments.
For more information please contact us.