Latvia sends diplomatic note to Ukraine over tax haven status

Latvia's Ministry of Foreign Affairs (MFA) has sent a note to Ukraine - a form of initial official protest drawing attention to a topic of perceived importance - over Latvia's inclusion on a Ukrainian list of potential tax haven countries.

As previously reported by LSM, the decision to put Latvia on the list was approved by the Ukrainian parliament in December, but Latvian officials were not even aware the move had been taken until it was reported by media.

Now the MFA is upping the ante after initial approached to Kyiv requesting Latvia be removed from the list have had no effect, reports Latvian Radio.  

 

Foreign Minister Edgars Rinkēvičs said that unfortunately, the fact that there is still no positive result "forces us to do this in this way".

    According to Latvian officials, the inclusion of Latvia and Estonia on the list alongside such renowned tax havens as the Cayman Islands and British Virgin Islands is down to an incorrect understanding of rules on re-invested profits.  

    "We will continue to work and hope that what we consider to be a mistake will be eliminated as soon as possible. At the same time, our specific situation is due to the fact that the tax reform came into force in Latvia on January 1. There is a so-called zero-tax return on reinvested profits, although people have to pay taxes if they, for example, withdraw their profits in dividends," said Rinkēvičs.

    The Ministry of Finance has also previously stated that the decision of the Ukrainian government to include Latvia and Estonia in the list of countries subject to transfer pricing is unfounded and promised to work with the Foreign Ministry to exclude Latvia from this list.

    On December 27, last year, the Ukrainian government decided to include 22 countries, including Latvia and Estonia, among the jurisdictions that Ukraine regards as tax havens.

    Included in this list is that income tax and value added tax (VAT) of 30% are immediately applicable to goods and services purchased from such jurisdictions. Similarly, corporate and bank supervision is becoming more rigorous. 

    Estonia also announced that the decision to include Estonia in the list was made in error and the Estonian Foreign Ministry is working to resolve the situation.

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