Influential investors demand dividend tax changes for non-residents

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Nine influential business organizations, including both foreign and domestic investors, business and industry associations, called on the Latvian government July 4 to change the law to prevent investors in third countries paying "double taxation" on dividends.

"At a time when Latvia lags further behind its neighbors in economic growth and development, it is imperative to remove all barriers reducing its international competitiveness," said a joint statement addressed to the Prime Minister, Ministers and respective Saeima’s Committees.

According to the organizations’ representatives, when Latvia changed its corporate tax system in 2018, the new system resulted in "adverse tax treatment for individual investors who live abroad or who may be liable for tax in other jurisdictions".

"As a result, profits from investments are taxed both in Latvia and in the country of the investor’s residence, leaving negative impact on Latvia’s ability to attract new and maintain existing investments compared to other jurisdictions in our region," said a release.

Since 2020, the Foreign Investors Council in Latvia, the American Chamber of Commerce (AmCham) and other organizations have called on Latvian government institutions to provide a "fiscally neutral solution, which would allow taxpayers to make an election to treat up to 10% of the corporate income tax paid on dividends to be reclassified as a withholding tax or personal income tax for the purpose of applying tax treaty benefits."

To date no action has been taken to either implement the recommendation or find an alternate solution, it was stated by signatories to the appeal.

“This negatively affects not only foreign investors who have invested in Latvian companies, but also Latvian investors who move to foreign countries, trying to find new markets and expand their business. It also affects Latvian re-emigrants who are willing to return to Latvia to do business, but at the same time retaining tax obligations in other jurisdictions. For these reasons, we believe it is important to do everything possible to attract new investors and allow local investors to expand their business in foreign markets without subjecting them to the burden of increased taxes,” said Zinta Jansons, Head of AmCham's Tax Work Group.

As well as AmCham, signatories of the appeal include the Latvian Export Association, the Foreign Investors Council in Latvia, the Norwegian Chamber of Commerce, the Latvian American Chamber of Commerce, the World Federation of Free Latvians, the American Latvian Association, the Latvian Electrical Engineering and Electronics Association and the British Chamber of Commerce.

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