Tax Residency in Latvia
Determining tax residency in Latvia is crucial for individuals and entities to fulfill their tax obligations accurately. The country's tax laws establish specific criteria to define tax residency, and international tax treaties may introduce modifications or exceptions to these criteria.
Criteria for Tax Residency in Latvia
According to Article 4 of the Personal Income Tax Law, an individual is considered a resident of Latvia for tax purposes if they meet any of the following conditions:
- Residing in Latvia for more than 183 days in a calendar year
- Having a permanent place of residence in Latvia
- Being employed in Latvia for more than 183 days in a calendar year
- Being a member of the board of a Latvian company
- Being a shareholder in a Latvian company with a shareholding of at least 25%
For entities, the Corporate Income Tax Law defines tax residency based on the following criteria:
- Being incorporated in Latvia
- Having its registered office in Latvia
- Being managed and controlled in Latvia
These criteria aim to ensure that individuals and entities with substantial ties to Latvia contribute to the country's tax revenues.
Impact of International Tax Treaties
Latvia has entered into numerous tax treaties with other countries to avoid double taxation and promote cross-border economic activities. These treaties may modify or provide exceptions to the standard criteria for tax residency.
For example, the Latvia-United States tax treaty modifies the residency criteria for individuals. Under the treaty, an individual is considered a resident of Latvia if they have a permanent home available to them in Latvia and spend more than 183 days in Latvia during the tax year.
The treaty also includes tie-breaker rules to determine residency in cases where an individual is considered a resident of both Latvia and the United States under their respective domestic laws.
Conclusion
Understanding the criteria for determining tax residency in Latvia is essential for individuals and entities to comply with their tax obligations. International tax treaties may introduce modifications or exceptions to these criteria, and it is important to consider their impact when determining tax residency status.
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