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Double Taxation Agreement Uk Latvia

Double Taxation Agreement between UK and Latvia: A Comprehensive Guide for Businesses

In today`s global economy, businesses operate across borders and often encounter tax issues due to different tax laws in different countries. This can lead to double taxation, where a business is taxed twice on the same income or profit by two different countries. However, the UK and Latvia have entered into a Double Taxation Agreement (DTA) to avoid such situations and provide relief to businesses. This article will provide a comprehensive guide on the Double Taxation Agreement between UK and Latvia.

What is a Double Taxation Agreement?

A Double Taxation Agreement (DTA) is an agreement between two countries that aims to prevent double taxation of income or profits earned by residents of both countries. It sets out the rules for how the two countries will tax the income or profits, and provides relief from double taxation. A DTA also establishes the procedures for exchange of information and resolution of disputes between the two countries, promoting transparency and fairness.

What does the Double Taxation Agreement between UK and Latvia cover?

The UK and Latvia signed a DTA in 1994, which was updated in 2015. The DTA covers the following types of income:

– Business income: Income from a business carried out in one country by a resident of the other country is taxed in the country where the business is located.

– Dividends: Dividends paid by a resident of one country to a resident of the other country are taxed in the country of residence of the recipient, subject to certain conditions.

– Interest: Interest arising in one country and paid to a resident of the other country is taxed in the country of residence of the recipient, subject to certain conditions.

– Royalties: Royalties arising in one country and paid to a resident of the other country are taxed in the country of residence of the recipient, subject to certain conditions.

– Capital gains: Capital gains from the sale of immovable property (real estate) are taxed in the country where the property is located. Capital gains from the sale of other assets are taxed in the country of residence of the seller, subject to certain conditions.

How does the Double Taxation Agreement work?

Under the DTA, the income or profits earned by a resident of one country in the other country are taxed in accordance with the rules set out in the DTA. This means that if a UK resident has a business in Latvia, the income from that business will be taxed in Latvia, and not in the UK. The DTA also provides relief from double taxation by allowing the country of residence to provide a tax credit for taxes paid in the other country.

For example, if a UK resident earns dividend income from a Latvia company, Latvia will withhold tax on the dividend at the source. However, the UK resident can claim a credit for the Latvian tax paid on their UK tax return, thus avoiding double taxation.

The DTA also contains provisions for exchange of information and dispute resolution between the UK and Latvia tax authorities. This promotes transparency and fairness, and helps to prevent tax evasion and avoidance.

Conclusion

The Double Taxation Agreement between UK and Latvia provides relief from double taxation for businesses operating in both countries, and establishes procedures for exchange of information and dispute resolution. It covers a wide range of income types, including business income, dividends, interest, royalties, and capital gains. Businesses should consult with tax experts to ensure compliance with the DTA and take advantage of the tax benefits it provides.

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