Nicosia – Cyprus and the Republic of Latvia have signed an agreement for the avoidance of Double Taxation on income.
The new Double Tax Treaty (DTT) with Latvia was signed on 24 May 2016 and will enter into force once formal ratification procedures have been completed. The DTT is expected to further strengthen the island’s treaty network and contribute to the further development of trade and economic relations between Cyprus and Latvia. The treaty is an indication of Cyprus’ objective to continue enhancing its tax treaty network.
The agreement is based on the model agreement for the avoidance of double taxation of the OECD Model Convention for the Avoidance of Double Taxation on Income and on Capital.
Tax Withholding Rates
The relevant withholding tax rates with respect to dividends, interest and royalties are as follows:
- Dividends: 0% withholding tax will apply to dividend payments made to a company resident in the other contracting state that is the beneficial owner of that dividend. If the recipient company will not be the beneficial owner of the dividend the withholding tax rate will be 10%.
- Interest: 0% withholding tax will apply to interest payments made to a company resident in the other contracting state that is the beneficial owner of that interest. If the recipient company will not be the beneficial owner of the interest the withholding tax rate will be 10%.
- Royalties: 0% withholding tax will apply to royalty payments made to a company resident in the other contracting state that is the beneficial owner of the royalties. If the recipient company will not be the beneficial owner of the royalty the withholding tax rate will be 5%.
Other Provisions
Capital Gains: Profits incurred by a resident of Cyprus from the alienation of immovable property situated in Latvia may be taxed in Latvia.
Profits derived by a resident of Cyprus from the disposal of shares in a company deriving more than 50% of their value directly or indirectly from immovable property situated in Latvia may also be taxed in Latvia.
Profits derived by a resident of Cyprus 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.
Permanent Establishment: A building site or construction or installation project will constitute a permanent establishment only if it lasts more than nine months.
Exchange of Information: The treaty contains an OECD-compliant exchange of information article.
Entry into force: The treaty will enter into force once Cyprus and Latvia exchange notifications that their formal ratification procedures have been completed. The provisions of the treaty with respect to taxes will have effect in both countries on or after 1 January following the date the treaty enters into force.
We are at your disposal should you require additional information on the new treaty, its uses and benefits.
