Transactions with non – residents

The seminar looks at both general and practical aspects of dealing with non-residents. The seminar will be useful both for Latvian companies cooperating with non-residents doing business in Latvia and for Latvian companies doing business abroad.

Although the principles of transactions with non-residents have not changed, the new Corporate Income Tax entered into force on 1 January 2018, which is conceptually new and therefore introduces a number of adjustments in matters such as payments to non-residents, determination of non-resident taxable income, avoidance of double taxation, in dividends received from and paid to non-residents, etc. Therefore, in the seminar we link the well-known principles of non-residents with the requirements of the new corporate income tax law.

Content of the seminar:

(1) General principles of taxation of non-residents:

• residence and earning (source):
  • permanent establishment, its types – general principle, construction site and dependent agent
  • management and advisory services
  • dividends
  • royalties
  • percent
  • capital gains
  • income from real estate
• Latvia’s new corporate income tax: how it works and how it is applied in transactions with non-residents

(2) Principles for the application of bilateral tax conventions for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes (tax conventions)

• prevention of residency conflict
• narrowed definitions
• clarification of the definition of permanent establishment
• the allocation of the power to impose taxes between the Contracting States
  • business profit
  • independent and dependent personal services
  • other income
• methods of avoiding double taxation
• Non – discrimination
• Other provisions.

(3) Permanent Representation

• Types of Permanent Representation –
• Determination of the taxable income of a permanent establishment
• Avoidance of double taxation

(4) Withholding taxes

• Management and advisory services – how to apply for a residence permit in order to avoid withholding tax
• income from real estate
• Reporting – When to Deduct Income from Taxes and Other Taxes

(5) Anti-avoidance standards

• the essence of the transaction v. legal form
• withholding taxes cost low tax countries
• transfer prices
• exclusion of low-tax countries from the holding regime
• interest expense restrictions

(6) Transactions with companies in low-tax countries (offshore)

(7) Regime of the holding company and types of formation

• In which cases a holding company is recommended
• How to finance a holding company
• How to use a holding company for investment purposes.

(8) Practicum

11 practical situations in transactions with non-residents involving permanent establishment and withholding tax risks.

Some of the situations considered:

• The Latvian company is building a hospital building in Sweden that will last 5 months and an office building that will last another 5 months. Will a permanent representation be set up? Will it be like this if two office buildings are built together in 10 months?
• The company receives training services related to the purchased goods. Do I have to withhold any taxes?
• The German company installs a ventilation system that lasts more than 1 year. Fans cost 5 million, work – 500 thousand. What taxes are due?
• A Latvian company sells the goods of a foreign company, the prices are set by a foreign company. The Latvian company compiles the requests, sends them to the seller and issues invoices. How does the situation change if a Latvian company has the right to grant discounts?