On 27th of January 2016, 31 countries signed the OECD’s Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of information. The exchange of information will be done by so called country-by-country reports (CbC).
According to OECD Secretary General Angel Gurria: “Country-by-Country Reporting will have an immediate impact in boosting international co-operation on tax issues, by enhancing the transparency of multinational enterprises’ operations. Under this multilateral agreement, information will be exchanged between tax administrations, giving them a single, global picture on the key indicators of multinational businesses. This is a much-needed tool towards the goal of ensuring that companies pay their fair share of tax, and would not have been possible without the BEPS Project.”
Altogether the 31 countries that signed the MCAA were: Australia, Austria, Belgium, Chile, Costa Rica, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Malaysia, Mexico, the Netherlands, Nigeria, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland and the UK.
Under this new multilateral agreement, tax authorities will co-operate on tax issues and exchange of information. The key goal of the agreement is to enhance the transparency of multinational enterprises.
As it appears, international tax planning is getting more difficult for the residents of the listed OECD countries. However it must be noted that a company can still gain significant advantages in global competition by choosing the right place of permanent establishment.
In Latvia the flat corporate income tax rate is 15% of the taxable income. Payments of dividends between domestics companies are not subject to corporate income tax. Dividends paid to a legal entity – a resident of a European Union member state or a resident of the European Economic Area – are exempt from taxation. Dividends paid to a legal entity outside the European Union or the European Economic Area, are subject to a 10% tax payable at the time of their payment. One should also notice that in Latvia there exists a special tax rate for small sized companies. Starting from January 1st, 2017 micro company tax will be 5 % that will be applicable for companies with turnover till 7000 EUR, but companies with turnover from 7001 EUR to 100 000 EUR will be subject for 8 % tax rate. Personal income tax in Latvia is based on a flat tax rate of 23%.
Low tax rates of Latvia and it´s location in the European Economic Area can gain your company a competitive advantage in global markets and help your business to grow.