Taxes for Czechs in Latvia /part 2/
Latvia offers great incentives to incorporate for the Czech. Additionally, EU law implemented in the Latvia allows to exempt dividends withholding tax, as well as tax on interest and royalties. It is worth noting that double taxation treates are also concluded with Lithuania and Estonia.
Royalties and Interest rates between Czech Republic and Latvia
The tax rate applied for Royalties and Interest between Czech Republic and Latvia is 10%.
European Union Law tax benefits applied to Latvian and Czech distribution of Royalties and Interest
Corporations may also use the EU Interest & Royalties Directive 2003/49/EC, which stipulates that interest and royalty payments arising in a Member State shall be exempt from any taxes imposed on those payments in that State, provided that the beneficial owner of the interest or royalties is a company of another Member State or a permanent establishment situated in another Member State of a company of a Member State.
Limitations of the Directive in relation to the “beneficial owner” are stipulated in Art.1(4):” A company of a Member State shall be treated as the beneficial owner of interest or royalties only if it receives those payments for its own benefit and not as an intermediary, such as an agent, trustee or authorized signatory, for some other person.”
Directive also accepts the notion of “associated companies” when:
- the first company has a direct minimum holding of 25 % in the capital of the second company, or
- the second company has a direct minimum holding of 25 % in the capital of the first company, or
- a third company has a direct minimum holding of 25 % both in the capital of the first company and in the capital of the second company.
To find out more about tax benefits for Czech, especially in the Baltics (Estonia, Latvia, Lithuania), please contact our attorneys at law at info@gencs.eu.
T: +371 67 24 00 90
F: +371 67 24 00 91