“Offshore tax” may have adverse effects on Latvia’s accession to OECD

The introduction of the so-called “offshore tax” in Latvia may have adverse effects on Latvia’s accession to the Organization for Economic Cooperation and Development (OECD), reports LETA.

The OECD has informed Latvia about this, urging the country to consider the potential effects of the “offshore tax” on its progress towards the EU membership.

Following a suggestion by the Latvian Chamber of Industry ad Commerce, the ruling bloc All For Latvia-For Fatherland And Freedom/LNNK (VL-TB/LNNK) this fall initiated a debate on the “offshore tax” or, in fact, a reduced corporate income tax rate that would apply to the companies doing business outside the EU and only using the Latvian banking infrastructure for payments.

The ruling coalition parties agreed to put the proposal before the parliamentary sub-committee on taxes which decided not to uphold it. Nevertheless, the lawmakers believe that other options in relation to the suggestion should be considered in the future.

The Finance Ministry warned that the proposed tax cut by 85% (from 15% to 2.25% for certain categories of non-resident companies) was contradictory to the internal market policy and would not be approved by the European Commission.

Latvia is currently in the process of negotiating its accession to the OECD.