Implementation of base erosion and profit shifting (BEPS) provisions
Following the OECD initiative, Council Directive (EU) 2016/881 amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation was introduced on 25 May 2016. Under the directive, Latvia is a part of the mandatory automatic exchange of information (AEOI) mechanism in the field of taxation and has implemented the CbC report by adopting the Cabinet of Ministers’ Regulation No. 397 of 4 July 2017.
Latvia has transposed the OECD Common Reporting Standard (CRS) as well as Council Directive 2014/107/EU amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation, into domestic law. Latvian financial institutions covered by the CRS must report certain income and asset information on certain non-resident account holders to the Latvian tax authorities.
While drafting the new CIT Act, Latvia already transposed some of the rules of the Anti Tax Avoidance Directive (ATAD) (limitations on the deductibility of interest, a general anti-abuse rule, rules to tackle hybrid mismatches), and so they apply from 1 January 2018.
The CFC rules apply from 1 January 2019.
EU state aid investigations
Latvian law provides the necessary references to EC Regulation No. 651/2014, which ensures that the EU funding intensity complies with EU rules for state aid. Currently, there are no investigations on the part of the European Commission with regard to Latvian tax law.
Double tax treaties (DTTs) and intergovernmental agreements (IGAs)
Latvia has effective DTTs with 61 countries and continues developing its tax treaty network. Latvia has signed the OECD's Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
Latvia has also signed an IGA with the United States (US) government to implement the tax reporting and withholding procedures associated with the Foreign Account Tax Compliance Act (FATCA). On 2 April 2014, the US Treasury announced that the IGA was ‘in effect’ and, on 27 June 2014, the US Treasury and Latvia signed and released the IGA.