International tax planning is getting more difficult as countries around the world are increasing co-operation and exchange of information. Last year the European Union and Switzerland signed a tax transparency agreement which results in automatic share of data on residents’ financial accounts. The change will take place from the beginning of 2018. The agreement means an end to Swiss banking secrecy for the EU residents.
According to the agreement the shared data between two sides will include names, dates of birth, addresses, tax identification numbers and a broad set of other financial and account balance information. Member States will receive this data on an annual basis.
The agreement is partly based and consistent with the new OECD/G20 global standard for the automatic exchange of information. Switzerland has also agreed to share tax information with Singapore. Due to international pressure in last year, Switzerland published names of foreign tax evaders. The country received numerous requests from France, Germany, Russia, India and some other countries.
Furthermore The European Commission is currently concluding negotiations or has already signed similar agreements with Andorra, Liechtenstein, Monaco and San Marino. The European Commission describes the agreement:
“This new transparency should not only improve Member States' ability to track down and tackle tax evaders, but it should also act as a deterrent against hiding income and assets abroad to evade taxes.”
As it appears, international tax planning is getting more difficult for the residents of the EU. However it must be noted that a person (whether a natural or legal) can gain significant advantages within the internal market of the EU 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 can gain your company a competitive advantage within the internal market and help your business to grow.