Latvian holding company regime
31 July 2014
Such locations as Cyprus, Malta, Luxemburg and the Netherlands currently appear to be the top and most preferred choices for holding companies in Europe. There are good reasons for that. But this does not mean that this is it for Europe. Latvia has all technical pre-conditions to successfully compete with above mentioned jurisdictions thanks to favorable holding company regime introduced in 2013, skilled and motivated workforce, excellent banking system, direct flight options from Riga, capital of Latvia to more than 80 destinations to name the few. All what is left is just to spread the word about it actively.
To this end it is worth noting key features of the Latvian holding company regime:
- Dividends received by a Latvian company from its investees are exempt from Latvian corporate income tax. Capital gains received by a Latvian company from the sale of shares in an investee are exempt from Latvian corporate income tax. The exemption from corporate income tax applies regardless of the residency of investee (except for investees resident in low tax or zero tax jurisdiction as defined by the Cabinet of Ministers of Latvia), and there is no minimum holding period or participation requirement.
- Dividend distributions by Latvian companies to corporate shareholders are exempt from withholding tax (WHT).
- Withholding tax exemption as well applies to interest and royalty payments to entities irrespective of their place of location unless such payments are made to low-or zero tax jurisdictions as defined by the Cabinet of Ministers of Latvia. In latter case, payments are subject to 15% WHT.