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On 24 May 2016, a Treaty for the Avoidance of Double Taxation on Income (‘DTT’) was signed between the Republic of Cyprus and the Government of the Republic of Latvia signed in Brussels. The DTT is based on the OECD Model also encompassing provisions from the 2011 United Nations Model Double Taxation model between developed and developing countries (the UN Model).  This is expected to enter into force on the 1st of January, following the date of the ratification by both countries.

The most significant provisions of the new treaty are highlighted below:

Dividends and interest:

0% withholding tax shall apply to dividend payments made to a company (other than a partnership) resident in the other contracting state that is the beneficial owner of the dividends/interest. In all other cases the withholding tax will be 10%.

Royalties:

0% withholding tax shall apply to royalty payments made to a company (other than a partnership) resident in the other contracting state that is the beneficial owner. In case the recipient company will not be the beneficial owner of the royalty then the withholding tax rate will be 5%.

Capital Gains:

Gains derived by a resident of a contracting state from the disposal of immovable property situated in the other contracting state may be taxed in that other state.

Gains derived by a resident of a contracting state from the disposal of shares in a company deriving more than 50% of their value directly or indirectly from immovable property situated in the other contracting state may be taxed in that other state. 

Gains derived by a resident of a contracting state from the disposal of shares other than those referred to above will be taxable only in state of residence of the person disposing the shares.