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Hong Kong-Latvia

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Tax Treaty between Hong Kong and Latvia Signed

On 13 April 2016, officials from Hong Kong and Latvia signed an income tax treaty. The treaty is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Hong Kong profits tax, salaries tax and property tax. It covers Latvian enterprise income tax and personal income tax.

Residence

If a company is considered resident in both Contracting Parties, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to claim any benefits provided by the treaty.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting Party through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 6 months within any 12-month period.

Withholding Tax Rates

  • Dividends - 0% if the beneficial owner is a company or a pension fund; otherwise 10%
  • Interest - 0% if the beneficial owner is a company or a pension fund; otherwise 10%
  • Royalties - 0% for royalties paid for the use, or the right to use, industrial, commercial or scientific equipment or for information concerning industrial, commercial or scientific experience if the beneficial owner is a company; otherwise 3%

Capital Gains

The following capital gains derived by a resident of one Contracting Party may be taxed by the other Party:

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other Party; and
  • Gains from the alienation of shares or a comparable interest of any kind deriving more than 50% of their value directly or indirectly from immovable property situated in the other Party, with an exception for:
    • Shares quoted on a stock exchange as may be agreed to by both Parties, or
    • Shares alienated or exchanged in the framework of a reorganization of a company, a merger, a division or a similar operation

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

Double Taxation Relief

Both Parties apply the credit method for the elimination of double taxation.

Entry into Force and Effect

The treaty will enter into force once the ratification instruments are exchanged, and will apply in Hong Kong from 1 April of the year following its entry into force and in Latvia from 1 January of the year following its entry into force.

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