Russia and Latvia to avoid double taxation

Riga, Latvia, October 12, 2012, 14:30 / Advisory / Jurisdictions: Russia, Latvia, Source:

The Russian president Vladimir Putin has approved ratification of the agreement between the Russian Federation and the Republic of Latvia on avoidance of double taxation and prevention of tax evasion with regard to income and capital gains tax.

The agreement is aimed at ensuring that legal entities and individuals from both countries will be exempt from double taxation of their income and capital gains.

According to the agreement, a company’s income will be taxed in the country of its residence only, provided the company does not have a permanent establishment operating in the other country.

Where a company has a permanent establishment in the other country, the company’s income from operations of such permanent establishment may be taxed there.

Income gained by a company from operating ships, aircrafts, motor and railroad vehicles for international transportation will be taxed in the country of the company’s residence only.

If a company residing in one country pays dividends to the other country’s resident, the dividends may be taxed in the other country. At the same time, those may be also taxed in the paying company’s country of residence, but the tax may not exceed 5% of the total amount of dividends, provided the beneficiary holds at least 25% of the company’s capital and the invested capital amount is above USD 75 thousand. On all other instances, the tax may not exceed 10% of the total amount of dividends.

Regarding personal income, the agreement provides for taxation similar to that used worldwide. All income of an individual shall be taxed in the country in which this person stays for more than 183 days within a 12-month period. The exception to this rule will apply to transport crew members, performing artists, sportsmen, civil servants, pensioners, students, trainees, and probationary employees.

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