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Latvia signing the agreement protocol with China for the preventation of double taxation

4 November 2011
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The Protocol was signed on August 24, 2011 and it is amending the Agreement of June 7, 1996 for the prevention of double taxation. The aim of the amendments is to promote business in Latvia and China, as well as to ease the actions of Latvian investors in China and vice versa. With the Protocol from 10% to 7% is reduced the maximum tax rate, what is adjusted to Author`s royalty in the country of origin. Also Rules of exchange of information are expanded. In the Contracting State the tax shall not be imposed on interest payments for the other Contracting State`s Government insured loans.

The Parliament of the Republic of Latvia shall have to decide on the Draft law. It is planned that both parties shall fulfill the national procedures that the Protocol could enter into force on January 1, 2013.



The Parliament (Saeima) of the Republic of Latvia has adopted amendments to the Law “On Taxes and Fees”

Amendments provide from July 1, 2012 to extend time limit for current tax payments, dividing them in terms up to one year, instead of the previous three months. Tax payments, late charges and penalty fees established by Tax inspection shall be divided into time periods or postponed for up to one year and six months instead of one year. Penalty fees shall also be reduced.

The law “On Taxes and Fees” is amended in the light of plan to combat the hidden economy and ensuring fair competition, as well as taking into account the International Monetary Fund recommendations.




In the year 2011 VAT was decreased from 21 to 9 percent to the hotel businesses in order to attract more tourism into Lithuania and therefore increase the foreign investments. One of the recent important notes that Tax inspection is drawing attention to is the option to return to previously applied 21 percent tax rate for hotel businesses. The proposal is drawn by Minister of Finance I. Simonyte detailing that in 2011 companies engaged in hotel businesses did not decrease the accommodation in a hotel pricing, but rather were saving on the smaller VAT percentage. Therefore the applied 9 percent tax rate in 2011 did not bring the required results. Due to this, tax inspection informs that starting from 2012 the tax rate for hotel businesses will be increased from 9 to 21 percent as it was the case in 2010.




On October 2011 Estonian Government accepted amendments in Estonian Taxation Act and in Estonian Income Tax Act regarding taxation of accommodation costs in Estonia. Effective acts exempt accommodation costs from tax only if costs are until 77 EUR in case of domestic business travels and until 128 EUR in case of business travels abroad. Amendments in corresponding Estonian taxation acts shall abolish these tax exemption limits and in future accommodation expenses  in Estonia will be exempted from tax. Amendments are planned to enforce from January 1, 2012




In purpose to avoid tax evasion The Ministry of Finance of the Republic of Estonia has prepared draft of   Estonian Value Added Tax Act amendments that establish special arrangements for imposing reverse charge on gold supply as well. Starting from the June, 2010 the amount of the refunds of the value added tax related to transactions with gold have steeply increased. Amount of the tax evasions in Estonia is caused by implementation of reverse charge regulation on handling of metal waste and fuel, after which chiselers have moved from metal and fuel market to cold market. Implementation of reverse charge on gold supply in Estonia loses the right for deduction of input value added tax and a right to tax return.



Valters Gencs

Tax Attorney & Founding Partner

Gencs Valters Law Firm, Riga


Tel: +371 67 24 00 90


For questions, please, contact Valters Gencs, attorney at law at

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