Holding Regime
Having made a range of amendments to various regulations governing business taxes, starting from 1 January 2013 Latvia was generally recognized as a favorable area for establishing of holding companies, on a par with Cyprus and Malta.
Advantages of the holding regime in Latvia:
- Dividends – no tax on outbound dividend, withholding tax - 0%. The dividends paid out or received by a Latvian company from any non-resident are non-taxable (except black-listed jurisdictions).
- Financing – interest payouts – 0%. The interest payments where a Latvian company makes payouts to the associated company, including a non-resident of the EU are non-taxable (except black-listed jurisdictions).
- Investments – income from selling shares and long-term investments – 0%. Selling shares of the Latvian company are non-taxable. The regulation does not apply to cases when the seller of shares is a resident of a country included in the black list by the government of Latvia.
- Intellectual Property – payments for the use of licenses and trademarks, payments for other intellectual property – 0%. Payments for the intellectual property paid by a Latvian company to other companies, including companies outside EU, are non-taxable (except black-listed jurisdictions).
What does it mean?
There are no requirements for the certain period of activity in the structure of a holding or the percentage value of the share in the associated company’s capital. Any company (be it a holding company, subsidiary company, associated or non-associated company) can allocate funding to a Latvian company. Any interest payments paid by a Latvian company on this financing are not taxable.
Both an EU resident and an EU non-resident can hand over the right to use a patent, trademark, or other intellectual property rights to a Latvian company. Payments for the right to use are non-taxable.
When do you need it?
- Asset accumulation and their management (low maintenance expenditure of a holding).
- You want to receive a residence permit in a European Union member state.
- For active investment activity, because selling of shares is non-taxable.
- For tax planning, and for the purpose of corporate structuring of international business.
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In cooperation with the publishing house LLC “PVN Konsultacijas” was prepared for publishing a new book addressing the application issues of the new Law on VAT.
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