The protocol to amend the Switzerland-Latvia tax treaty entered into force on September 3, 2018, and will take effect from January 1, 2019.
The protocol implements certain developments from the base erosion and profit shifting project. Specifically, it introduces an anti-abuse clause that focuses on the main purpose of an arrangement or a transaction. The basic features of this clause correspond to the anti-abuse clauses that Switzerland has agreed in most of its recent tax treaties.
The current residual tax of five percent on dividends paid to companies that have stakes of at least ten percent will be abolished.
The current ten percent residual tax on royalties will be reduced to five percent. Royalties paid by companies to other companies will now be taxed only in the beneficial owner’s state of domicile.
Finally, the tax treaty will be supplemented by an arbitration clause that will ensure greater legal certainty for taxpayers.