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Double Tax Treaty between Cyprus and Latvia signed

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Contributed by Patrikios Pavlou & Associates LLC
20 June, 2016


The Republic of Cyprus and the Government of the Republic of Latvia signed in Brussels, on 24 May 2016, a Treaty for the Avoidance of Double Taxation on Income ('DTT').

The DTT was signed by the Minister of Finance, Harris Georgiades, on behalf of the Republic of Cyprus, and the Minister of Economics, Dana Reizniece-Ozola, on behalf of the Republic of Latvia.

The treaty is based on the "model convention for the avoidance of double taxation on income and capital" of the Organisation of Economic Cooperation and Development ('OECD'). Maintenance and further development of the existing network of DTTs, aim at further enhancing and attracting foreign investments and promoting Cyprus as an international business centre. This DTT will enter into force once Cyprus and Latvia exchange notifications that their formal ratification procedures have been completed. The provisions thereof with respect to taxes will have effect in both countries on or after 1 January following the date the treaty enters into force.

Tax Withholding Rates: The main withholding tax rates with respect to dividends, interest and royalties are mentioned below:

  1. Dividends: 0% withholding tax will apply to dividend payments made to a company resident in the other contracting state that is the beneficial owner thereof. If the recipient company will not be the beneficial owner of the dividend the withholding tax rate will be 10%.
  2. Interest: 0% withholding tax will apply to interest payments made to a company resident in the other contracting state that is the beneficial owner thereof. If the recipient company will not be the beneficial owner of the interest the withholding tax rate will be 10%.
  3. Royalties: 0% withholding tax will apply to royalty payments made to a company resident in the other contracting state that is the beneficial owner thereof. If the recipient company will not be the beneficial owner of the royalty the withholding tax rate will be 5%.

Capital Gains: Profits made by a resident of Cyprus from the alienation of immovable property situated in Latvia may be liable for tax in Latvia.

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 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.

Permanent Establishment: A building site or construction or installation project will constitute a permanent establishment only if it lasts more than 9 months.

Exchange of Information: The treaty is compliant with OECD exchange of information provisions.

 

Contributed by:  Stavros Pavlou - Senior & Managing Partner, Patrikios Pavlou & Associates LLC

E: spavlou@pavlaw.com

W: www.pavlaw.com




 

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