A new holding empire?

After significant changes in tax laws, Latvia has become a suitable European jurisdiction for establishing a holding company. If you are considering setting up a holding company or transferring one abroad, you might want to try this Baltic state. Recently, we have informed you about the planned changes in Cyprus and about the impact the changes will have on further investments from a tax perspective. Today, we bring you a tip for a new location offering tax benefits very close, if not exceeding, those of Cyprus: Latvia. To many of you, this might be a surprise – but all the more realistic.

Tax exemption on dividends and capital gains

As of 1 January 2013, Latvia has implemented in its tax laws provisions on the tax exemption of dividends and capital gains on share transfers without any further condition. As a result, Latvia has become a very attractive county for establishing a holding structure.

What is new in Latvia in 2013:

  • Dividend income and capital gains on share transfers are not subject to corporate income tax without any limitation, i.e. there is no minimum holding period or minimum shareholding to qualify for the exemption
  • No withholding tax on dividends paid
  • No withholding tax on interest and royalties paid to an affiliate company within the EU (and also outside the EU from 2014)
  •  The above does not apply to payments to/from countries classified as tax havens.

Other benefits:

  • Low corporate income tax rate of 15%
  • Services related to company incorporation and management considerably cheaper than in Cyprus
  • Like Cyprus, Latvia has a number of double tax treaties in place.
With this in mind, now may be the time to consider Latvia as the right foreign location for a holding company. For more information, please contact us.