The Regulations of the Cabinet of Ministers of Latvia No. 276 of 26 June 2001 “Terms on low-tax and tax-free countries or territories” contains the list of countries and territories that Latvia considers to be low-tax or tax-free. Seychelles are listed among them.
The main consequence for a country of being “blacklisted” in the above document is a 15 per cent withholding tax in Latvia on payments made by Latvian companies to residents of such country (according to par. 8 of article 3 of the Latvian Corporate Income Tax Act 1995).
However, according to the information received from the State Revenue Service of the Latvian Republic, the Republic of Seychelles is no more considered to be a low-tax and tax-free country beginning with the 1 October 2015, pursuant to par. 2 of the abovementioned Regulations No. 276.
This is due to the fact that both Latvia and Seychelles became the participants in the OECD Convention on Mutual Administrative Assistance in Tax Matters 1988 (as amended by the Protocol of 2010). It obliges the participating countries to provide each other with legal assistance in the field of taxation, including tax information exchange. The Convention entered into force for Latvia from 1 November 2014, and for Seychelles – from 1 October 2015.
A country which committed an obligation to provide tax information exchange with Latvia (either within a bilateral or multilateral mechanism) ceases to be considered offshore, and the 15 per cent income tax on payments to residents of such country is not levied. Therefore, payments made by Latvian companies to Seychelles companies are not taxed at source in Latvia.
Please view the response of the Tax Department of the State Revenue Service of Latvia, which contains the above conclusion, in и languages (the unofficial translation into English is made by our Company).
Additionally, the mentioned Convention on Mutual Administrative Assistance in Tax Matters (as amended by the Protocol of 2010) has entered into force for many other “classic” offshore jurisdictions such as Belize, British Virgin Islands, Jersey, Mauritius, St. Kitts and Nevis, St. Vincent and the Grenadines etc.
It is also important to note that besides the abovementioned Convention, both Latvia and Seychelles participate in the Multilateral Competent Authority Agreement on Automatic Exchange of Financial Account Information (CRS MCAA). The automatic exchange between the two countries will be applied for tax periods starting with the 1 January 2016.
