Latvia. Year 2014. Beginning of new era
Latvia inaugurates 2014 by officially entering a euro-zone assembled by a record number of amendments in taxation and commerce law.
Immigration Law is awaiting big changes too. The President returned to Saima the latest amendments for corrections.
Meanwhile, we will point out several amendments that are confirmed to go live in 2014:
- Switching to Euro
1) Minimum share capital is EUR 2,846 for all limited companies registered after July 9th 2013.
2) All existing companies having share capital in Lats are required to re-register share capital in Euro. This must be done not earlier than January 1st 2014 and not later than July 1st 2016.
The following documents must be submitted to the Register of Enterprises:
– amended Memorandum of Articles
– resolution of the shareholders
– register of the shareholders. (NB! This document must be certified by the notary and legalized where required)
3) On January 1st 2014 all funds on bank accounts in Latvian Lats will be converted to Euro automatically at Latvian Bank official rate 1 EUR = 0,702804 LVL.
- Holding regime
4) 0% tax on incoming dividends received by the Latvian Company from any foreign entity (with the exception of black listed offshore states) (from January 1st 2013)
5) 0% tax on capital gains from distribution of foreign Company’s shares (with the exception of black listed offshore states) (from January 1st 2013)
Withholding tax for payments from the Latvian Company to any foreign entity with the exception of black listed offshore states):
6) 0% for payment of dividends (с 01.01.2013)
7) 0% for payment of royalties (с 01.01.2014)
8) 0% for payment of interests (с 01.01.2014)
- New in the Law of Commerce
9) About distribution of dividends:
It was so: Dividends can be paid to the shareholders only once a year upon shareholders resolution on income distribution.
It will be so: Profit can be distributed to dividends as often as necessary on each and any shareholders’ meeting.
10) In order to protect taxpayers from corporate raiders, all documentation on share transfer, share capital change or M&A amendments must be certified at the notary.
- New in Law on Taxes and Fees
11) In order to combat bogus companies tax office is now authorized to block Company’s activity without written warning, if the tax office finds grounds for this. For example, no one on behalf of the Company is found at the registered office.
12) Other companies dealing with their Latvian partners will be responsible to check if such partner is not black listed, i.e. whether Company’s activity is not in termination.
13) Dividends and loans paid out in cash are now limited to maximum 5,000 lats.
- Jurisdictions exiting the black list of tax havens
14) Netherlands Antilles are no longer on the black list of tax havens (according to Cabinet regulations #276)
15) Next offshore states to exit the black list will be Saint Martin Island and Curacao.
16) Double Taxation Treaty is signed with United Arab Emirates and in force from June 11th 2013.
- New in Law on Personal Income Tax
One can consider himself a Latvian Personal Income Tax payer if this person lives in Latvia over 183 days per year. A residence permit alone does not prove tax residency on personal level.
17) Those individuals residing in Latvia and receiving income from offshore companies are now taxed at Personal Income Tax rate of 24%.
- Purchase of real estate by companies
18) It was so: 2% was taxed from the total purchase deal
It will be so: the Company has right to settle 15% tax on the difference resulted in sale-purchase of the real estate (such company must be registered in EU or DDT state)
- Finally, the most controversial amendment – salary to Board members and employees
19) As soon as the Company hits turnover of LVL 7,500 it must start paying monthly salary to its Board Member and/or employ staff. Minimum salary in Latvia is LVL 200 per month. Together with salary taxes, the minimum amount spent by the Company comes to about EUR 350 monthly, of which monthly tax payments are EUR 161 and salary „on hand” is EUR 192.
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