Application of Latvian Income Taxes to Income from Financial Instruments

Offering the financial instruments’ custody and record-keeping services, ABLV Bank (hereinafter – the bank) ensures withholding of the taxes on income from financial instruments in accordance with the procedures and amount set forth in normative acts of the Republic of Latvia – laws “On Personal Income Tax” and “On Enterprise Income Tax”.

The application of income taxes depends on the type of financial instrument and payable income, as well as on whether the client is a tax resident of the Republic of Latvia (hereinafter – LR).

Definition of the client’s tax residency for income tax application in accordance with the normative acts of LR

In accordance with the law “On Taxes and Fees”, an individual is considered LR resident for taxation purposes if:

  • the declared place of residence of the individual is LR, or
  • the individual stays in LR for 183 days or more during any 12-month period beginning or ending in a tax year, or
  • the individual is LR citizen employed in a foreign country by the government of LR.

In case the individual does not meet the abovementioned criteria, the same is not considered LR resident for taxation purposes.

Pursuant to the law “On Taxes and Fees”, a legal entity is considered LR resident for taxation purposes if it was established and registered or if it should have been established and registered in LR in accordance with the laws of LR. Other entities are considered non-residents of LR for taxation purposes.

If non-resident is a resident of a country with which tax convention is made, the tax benefits set forth in the tax convention are applied. The procedure for applying the benefits is set in the LR Cabinet Regulations No. 178 “Procedures for Application of Tax Relief Determined in International Agreements for Prevention of Double Taxation and Tax Evasion” adopted on 30 April 2001.

Before making a decision about investments in financial instruments, the client should independently, or engaging a tax advisor if necessary, evaluate the taxes applicable to the investment (also where the investor is the person obliged to declare and pay the tax) pursuant to both legal acts of LR and foreign legal acts in case the client is not a resident of LR.

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Please be informed that ABLV Bank does not provide advice and recommendations on tax matters. This notice is for information only and cannot be treated as advice or recommendation on tax matters, as well as the same does not provide complete coverage on application of the laws “On Personal Income Tax” and “On Enterprise Income Tax”, and other normative acts of the LR.