The following types of payments to non-residents, and in certain cases under Latvian transfer pricing rules to related Latvian companies using CIT reliefs, are subject to WHT.

Management and consulting fees are subject to a 20% WHT. The term ‘management and consulting’ means activities a non-resident carries out directly or through outsourced personnel to ensure the management of a Latvian company or to provide necessary advice.

A Latvian company can rely on a DTT to reduce the rate of WHT to zero for management fees if the non-resident does not create a PE. To this end, the Latvian company must obtain a valid residence certificate for each type of payment to each recipient before filing the annual CIT return. A valid residence certificate is one approved by the foreign tax authority and the SRS.

A 3% WHT applies to proceeds from real estate disposals. This also applies to income arising on the disposal of shares or other participation in a Latvian or foreign-registered company or other entity if real estate in Latvia made up more than 50% of the asset value of that company, whether directly or indirectly through shareholdings in one or more other entities established in Latvia or abroad, in the period of disposal or the previous period.

WHT at a 5% rate is applied to gross income received by non-residents from rent of real estate located in Latvia.

Dividends paid to residents of tax havens are subject to a 20% WHT.

Interest and royalty payments attract WHT only if made to companies in tax havens. A 20% rate applies on all interest and royalty payments to tax havens.

In the case of management fees and real estate disposal, EU/DTT country residents may choose between a WHT charge on total fees or a 20% tax on profit, provided the non-resident can present proof of expense. The Latvian company must first withhold the applicable tax, and the non-resident may later recover tax in excess of 20% charged on profit (income less expenses) by submitting a separate tax return.

Companies are required to notify the SRS of all amounts paid to non-residents on transactions made on or after 1 January 2017, regardless of whether the payment was subject to WHT. This is in line with the requirements of Council Directive 2011/16/EU on administrative cooperation in the field of taxation, which provides for automatic exchange of information on non-residents’ revenues.

Please see the table for WHT rates applicable to the payments described above.

The list of tax havens provided by Cabinet Regulation No. 655 of 7 November 2017 has been amended on 1 January 2021 to ensure compliance with the EU list of tax havens. Currently it lists 12 jurisdictions.

Here is a list of countries and territories that are considered tax havens.