18 10 2012

Latvia plans to compete Cyprus

Since January 1, 2013 profits will be withdrawn from the tax from the sale of Latvian companies interests in other legal entities, as well as dividends and royalties paid or received from non-local businesses.

 It is no secret that there are two main centers - Cyprus and the Baltic States for the Russian business in the banking sector. Periodic cash flows are moved from one center to another, but in general, there is a conditional equilibrium. At the same time, part of the International Tax Planning Cyprus has always been a clear favorite in the dispute between the two centers. Now the Latvian authorities want to attract foreign business to them - in Latvia introduced a new tax regime.

    A variety of taxes levied on local businesses doing business with foreign partners was canceled from 1 January 2013. Profits will be withdrawn from under the tax, from the sale of Latvian companies interests in other legal entities, as well as dividends and royalties paid or received from non-local businesses, if the latter are within the EU and are not recognized tax havens. A similar rule will apply with respect to Russian companies, but in 2014. From that moment interest payments are freed from taxes to foreign contractors Latvian companies.

     Promised tax benefits are not the only gift for foreign investors. On July 1, 2012 in the country reduced VAT rate c 22 to 21%, and also decided to reduce the income tax - from 25 to 20% within three years. Latvia's rate of income tax is 15%.

     It should be noted that the Baltic republic gained attention after it was allowed to obtain a residence permit when buying property in Latvia.
     Many experts seriously doubt that Latvia will be able to seriously compete with Cyprus, while others believe that Latvia had a very good potential and in a few it can oust Cyprus. Who is right? Two financial center of Russian business will judge the time.