Advantages of a holding:
▸ a unified management and supervision system;
▸ asset systematisation;
▸ rational distribution of cash flows;
▸ option of transferring and distributing losses;
▸ option of attracting external investment and loans with more beneficial provisions;
▸ tax optimisation;
▸ a holding company often acts as a bridge between an individual (or a company established in a tax haven) and all companies within the group.
A holding company:
▸ an hold equity in subsidiaries and receive dividends,
▸ can provide financing and derive income from interest,
▸ can hold intellectual property and receive royalties for granting the rights to use it.
Core advantages of holdings in Latvia
A Latvian holding company has no restrictions on equity participation, duration of holding shares, line of business of subsidiaries etc.
(The only restriction is that the holding regime does not apply to income received from and paid to tax havens on the blacklist maintained by the Cabinet of the Republic of Latvia).
▸ from 2013, income from selling capital shares and stocks, dividends is not taxed;
▸ from 2013, payments of dividends to foreign companies are not taxed at the source;
▸ from 2014, payments of interest and royalties to foreign companies are not taxed at the source;
▸ no regulations on controlled foreign companies;
▸ one of the lowest corporate income tax rates in Europe – 15%;
▸ geographical location at a transit hub;
▸ solid infrastructure, qualified personnel who are proficient in Russian as well as English;
▸ possibility of attracting European funding for to organise production and business in the services sector (also for overseas investors).
A treaty between Latvia and Russia on avoiding double taxation has come into force, envisaging the following tax relief measures for holding companies in Latvia:
▸ more favourable conditions relating to permanent presence;
▸ payments for international forwarding or lease of transport used for such forwarding will not be taxed 10% at the source in Russia;
▸ other enterprise profits and capital gains (except use and sale of real estate and shares in real estate companies) will not be taxed at the source;
▸ independent and dependent individual services will not be taxed at the source in the other country if work takes place outside that country, or if the individual does not reside therein for more than 183 days;
▸ possibility of reducing (offsetting) taxes payable in Russia by the amount of tax paid in Latvia.
The effect of EU Directives on parent companies and subsidiaries, interest and royalties, as well as a long list of treaties on avoiding double taxation (concluded with 51 countries, including nearly every European country, the U.S., Canada, China, Belarus, the Ukraine, Kazakstan, Uzbekistan, Azerbaijan and Russia) allow Latvian holdings to avoid or reduce taxation at the source for dividends, interest, royalties and other income paid to Latvia, as well as to ensure holding regime functioning.
Key regulations for a Latvian holding company:
▸ Minimum stock capital for a Latvian holding: LVL 2000 (~EUR 2850);
▸ Founders/shareholders of a Latvian holding may include resident individuals and legal entities, as well as non-residents of Latvia, in unlimited numbers;
▸ Directors of a Latvian holding may be individuals only – residents as well as non-residents of Latvia, in unlimited numbers;
▸ The term of registration for a Latvian holding takes from 2 business days (if the founding individual arrives in person) to 10 business days (if the company is established remotely and the founder is a foreign legal entity);
▸ Registration of a Latvian holding as a VAT payer takes 10 business days.
Residence permits: please click here for more details: http://www.pmlp.gov.lv/en/home/services/residence-permits