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Par Latvijas Republikas un Amerikas Savienoto Valstu konvenciju par nodokļu dubultās uzlikšanas un nodokļu nemaksāšanas novēršanu attiecībā uz ienākuma nodokļiem (Konvencijas teksts)
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Par Latvijas
Republikas un Amerikas Savienoto Valstu konvenciju par nodokïu
dubultâs uzlikðanas un nodokïu nemaksâðanas novçrðanu attiecîbâ
uz ienâkuma nodokïiem
Convention Between The Republic Of
Latvia And The United States Of America For The Avoidance Of
Double Taxation And The Prevention Of Fiscal Evasion With Respect
To Taxes On Income
The Republic of Latvia and the
United States of America, desiring to conclude a Convention for
the avoidance of double taxation and the prevention of fiscal
evasion with respect to taxes on income, have agreed as
follows:
ARTICLE 1
General
Scope
1. This Convention shall apply to
persons who are residents of one or both of the Contracting
States, except as otherwise provided in the Convention.
2. The Convention shall not
restrict in any manner any exclusion, exemption, deduction,
credit, or other allowance now or hereafter accorded:
a) by the laws of either
Contracting State; or
b) by any other agreement between
the Contracting States.
3. Notwithstanding the provisions
of subparagraph 2 b):
a) the provisions of Article 26
(Mutual Agreement Procedure) of this Convention exclusively shall
apply to any dispute concerning whether a measure is within the
scope of this Convention, and the procedures under this
Convention exclusively shall apply to that dispute; and
b) unless the competent
authorities determine that a taxation measure is not within the
scope of this Convention, the nondiscrimination obligations of
this Convention exclusively shall apply with respect to that
measure, except for such national treatment or
most-favored-nation obligations as may apply to trade in goods
under the General Agreement on Tariffs and Trade. No national
treatment or most-favored-nation obligation under any other
agreement shall apply with respect to that measure.
c) For the purpose of this
paragraph, a "measure" is a law, regulation, rule, procedure,
decision, administrative action, or any similar provision or
action.
4. Notwithstanding any provision
of the Convention except paragraph 5 of this Article, a
Contracting State may tax its residents (as determined under
Article 4 (Resident)), and by reason of citizenship may tax its
citizens, as if the Convention had not come into effect. For this
purpose, the term "citizen" shall include a former citizen or
long-term resident whose loss of such status had as one of its
principal purposes the avoidance of tax, but only for a period of
10 years following such loss.
5. The provisions of paragraph 4
shall not affect:
a) the benefits conferred by a
Contracting State under paragraph 2 of Article 9 (Associated
Enterprises), under paragraphs 2 and 5 of Article 18 (Pensions,
Social Security, Annuities, Alimony, and Child Support), and
under Articles 24 (Relief from Double Taxation), 25
(Nondiscrimination), and 26 (Mutual Agreement Procedure); and
b) the benefits conferred by a
Contracting State under Articles 19 (Government Service), 20
(Students, Trainees and Researchers), and 28 (Members of
Diplomatic Missions and Consular Posts), upon individuals who are
neither citizens of, nor have been admitted for permanent
residence in, that State.
ARTICLE 2
Taxes
Covered
1. The existing taxes to which the
Convention shall apply are:
a) in the United States: the
Federal income taxes imposed by the Internal Revenue Code (but
excluding the accumulated earnings tax, the personal holding
company tax, and social security taxes), and the excise taxes
imposed with respect to the investment income of private
foundations (hereafter referred to as "United States tax");
b) in Latvia: the enterprise
income tax (uznemumu ienakuma nodoklis) and the personal income
tax (iedzivotaju ienakuma nodoklis), (hereafter referred to as
"Latvian tax").
2. The Convention shall apply also
to any identical or substantially similar taxes which are imposed
after the date of signature of the Convention in addition to, or
in place of, the existing taxes. The competent authorities of the
Contracting States shall notify each other of any significant
changes which have been made in their respective taxation laws or
other laws affecting their obligations under the Convention, and
of any official published material concerning the application of
the Convention, including explanations, regulations, rulings, or
judicial decisions.
ARTICLE 3
General
Definitions
1. For the purposes of this
Convention, unless the context otherwise requires:
a) the term "Contracting
State" means the United States or Latvia as the context
requires;
b) the term "United States"
means the United States of America, but does not include Puerto
Rico, the Virgin Islands, Guam, or any other United States
possession or territory. When used in a geographical sense, the
term "United States" includes any area adjacent to the
territorial waters of the United States within which under the
laws of the United States and in accordance with international
law, the rights of the United States may be exercised with
respect to the sea bed and its sub-soil and their natural
resources;
c) the term "Latvia" means
the Republic of Latvia and, when used in the geographical sense,
means the territory of the Republic of Latvia and any other area
adjacent to the territorial waters of the Republic of Latvia
within which under the laws of Latvia and in accordance with
international law, the rights of Latvia may be exercised with
respect to the sea bed and its sub-soil and their natural
resources;
d) the term "person"
includes an individual, an estate, a trust, a partnership, a
company, and any other body of persons;
e) the term "company" means
any body corporate or any entity which is treated as a body
corporate for tax purposes;
f) the terms "enterprise of a
Contracting State" and "enterprise of the other
Contracting State" mean, respectively, an enterprise carried
on by a resident of a Contracting State and an enterprise carried
on by a resident of the other Contracting State;
g) the term "international
traffic" means any transport by a ship or aircraft operated
by an enterprise of a Contracting State, except when such
transport is solely between places in the other Contracting
State;
h) the term "competent
authority" means:
(i) in the United States, the Secretary of the Treasury or
his delegate; and
(ii) in Latvia the Ministry of Finance or its authorized
representative.
i) the term "national"
means:
(i) any individual possessing the nationality of a
Contracting State; and
(ii) any legal person, partnership or association deriving
its status as such from the laws in force in a Contracting
State.
2. As regards the application of
the Convention at any time by a Contracting State, any term not
defined therein shall, unless the context otherwise requires or
the competent authorities agree to a common meaning pursuant to
the provisions of Article 26 (Mutual Agreement Procedure), have
the meaning which it has at that time under the laws of that
State for the purposes of the taxes to which the Convention
applies, any meaning under the applicable tax laws of that State
prevailing over a meaning given to the term under other laws of
that State.
ARTICLE 4
Resident
1. For the purposes of this
Convention, the term "resident of a Contracting State" means any
person who, under the laws of that State, is liable to tax
therein by reason of his residence, domicile, citizenship, place
of management, place of incorporation, or any other criterion of
a similar nature.
2. a) However, the term "resident
of a Contracting State" does not include any person who is liable
to tax in that State in respect only of income from sources in
that State;
b) in the case of income derived
or paid by a partnership, estate, or trust, this term applies
only to the extent that the income derived by such partnership,
estate, or trust is subject to tax in that State as the income of
a resident, either in its hands or in the hands of its partners
or beneficiaries; and
c) if an individual is liable to
tax as a resident because the individual is a citizen or
permanent resident of a Contracting State and such resident is
not also a resident of the other Contracting State, then the
other State shall consider that individual to be a resident of
the first-mentioned State only if the individual has a
substantial presence, permanent home or habitual home in the
first-mentioned State. If the individual is a resident of both
Contracting States, his State of residence shall be determined
under paragraph 4.
3. The term "resident of a
Contracting State" includes:
a) that State, a political
subdivision, or a local authority thereof, and any agency or
instrumentality of any such State, subdivision or authority;
and
b) a legal person organized under
the laws of a Contracting State and that is generally exempt from
tax in that State because it is established and maintained in
that State either:
(i) exclusively for a religious, charitable, educational,
scientific, or other similar purpose; or
(ii) to provide pensions or other similar benefits to
employees pursuant to a plan.
4. Where by reason of the
provisions of paragraph 1 an individual is a resident of both
Contracting States, then his status shall be determined as
follows:
a) he shall be deemed to be a
resident of the State in which he has a permanent home available
to him; if he has a permanent home available to him in both
States, he shall be deemed to be a resident of the State with
which his personal and economic relations are closer (center of
vital interests);
b) if the State in which he has
his center of vital interests cannot be determined, or if he does
not have a permanent home available to him in either State, he
shall be deemed to be a resident of the State in which he has an
habitual abode;
c) if he has an habitual abode in
both States or in neither of them, he shall be deemed to be a
resident of the State of which he is a national;
d) if he is a national of both
States or of neither of them, the competent authorities of the
Contracting States shall settle the question by mutual
agreement.
5. Where by reason of the
provisions of paragraph 1 a company is a resident of both
Contracting States, the competent authorities of the Contracting
States shall endeavor to settle the question by mutual agreement.
In the absence of such agreement, such company shall not be
considered to be a resident of either Contracting State for the
purposes of enjoying benefits under this Convention.
6. Where by reason of the
provisions of paragraph 1 a person other than an individual or a
company is a resident of both Contracting States, the competent
authorities of the Contracting States shall settle the question
by mutual agreement and determine the mode of application of the
Convention to such person.
ARTICLE 5
Permanent
Establishment
1. For the purposes of this
Convention, the term "permanent establishment" means a fixed
place of business through which the business of an enterprise is
wholly or partly carried on.
2. The term "permanent
establishment" includes especially:
a) a place of management;
b) a branch;
c) an office;
d) a factory;
e) a workshop; and
f) a mine, an oil or gas well, a
quarry or any other place of extraction of natural resources.
3. The term "permanent
establishment" also includes a building site or construction or
installation project, but only if it lasts more than 6
months.
4. Notwithstanding the preceding
provisions of this Article, the term "permanent establishment"
shall be deemed not to include:
a) the use of facilities solely
for the purpose of storage, display, or delivery of goods or
merchandise belonging to the enterprise;
b) the maintenance of a stock of
goods or merchandise belonging to the enterprise solely for the
purpose of storage, display, or delivery;
c) the maintenance of a stock of
goods or merchandise belonging to the enterprise solely for the
purpose of processing by another enterprise;
d) the maintenance of a fixed
place of business solely for the purpose of purchasing goods or
merchandise, or of collecting information, for the
enterprise;
e) the maintenance of a fixed
place of business solely for the purpose of carrying on, for the
enterprise, any other activity of a preparatory or auxiliary
character;
f) the maintenance of a fixed
place of business solely for any combination of the activities
mentioned in subparagraphs a) to e), provided that the overall
activity of the fixed place of business resulting from this
combination is of a preparatory or auxiliary character.
5. Notwithstanding the provisions
of paragraphs 1 and 2, where a person (other than an agent of an
independent status to whom paragraph 6 applies) is acting on
behalf of an enterprise and has, and habitually exercises, in a
Contracting State an authority to conclude contracts in the name
of the enterprise, that enterprise shall be deemed to have a
permanent establishment in that State in respect of any
activities which that person undertakes for the enterprise,
unless the activities of such person are limited to those
mentioned in paragraph 4 which, if exercised through a fixed
place of business, would not make this fixed place of business a
permanent establishment under the provisions of that
paragraph.
6. An enterprise shall not be
deemed to have a permanent establishment in a Contracting State
merely because it carries on business in that State through a
broker, general commission agent, or any other agent of an
independent status, provided that such persons are acting in the
ordinary course of their business. However, where the activities
of such an agent are devoted wholly or almost wholly on behalf of
that enterprise, and where the conditions between the agent and
the enterprise differ from those which would be made between
independent persons, such agent shall not be considered an agent
of independent status within the meaning of this paragraph. In
such case the provisions of paragraph 5 shall apply.
7. The fact that a company which
is a resident of a Contracting State controls or is controlled by
a company which is a resident of the other Contracting State, or
which carries on business in that other State (whether through a
permanent establishment or otherwise), shall not of itself
constitute either company a permanent establishment of the
other.
ARTICLE 6
Income From
Immovable (Real) Property
1. Income derived by a resident of
a Contracting State from immovable (real) property (including
income from agriculture or forestry) situated in the other
Contracting State may be taxed in that other State.
2. The term "immovable (real)
property" shall have the meaning which it has under the law of
the Contracting State in which the property in question is
situated. The term shall in any case include property accessory
to immovable (real) property, livestock and equipment used in
agriculture and forestry, rights to which the provisions of
general law respecting landed property apply, any option or
similar right to acquire immovable (real) property, usufruct of
immovable (real) property and rights to variable or fixed
payments relating to the production from, or the right to work,
mineral deposits, sources and other natural resources; ships,
boats and aircraft shall not be regarded as immovable (real)
property. For the purposes of this Convention, the term
"immovable (real) property" also includes rights to assets to be
produced by the exploration or exploitation of the sea bed and
sub-soil and their natural resources in the Contracting State,
including rights to interests in, or to the benefits of, such
assets.
3. The provisions of paragraph 1
shall apply to income derived from the direct use, letting, or
use in any other form of immovable (real) property.
4. Where the ownership of shares
or other corporate rights in a company entitles the owner of such
shares or corporate rights to the enjoyment of immovable (real)
property held by the company, the income from the direct use,
letting, or use in any other form of such right to enjoyment may
be taxed in the Contracting State in which the immovable (real)
property is situated.
5. The provisions of paragraphs 1,
3 and 4 shall also apply to the income from immovable (real)
property of an enterprise and to income from immovable (real)
property used for the performance of independent personal
services.
6. A resident of a Contracting
State who is liable to tax in the other Contracting State on
income from immovable (real) property situated in the other
Contracting State may elect to compute the tax on such income on
a net basis. In the case of the United States tax, an election to
apply the preceding sentence shall be binding for the taxable
year of the election and all subsequent taxable years unless the
competent authority of the United States agrees to terminate the
election.
ARTICLE 7
Business
Profits
1. The business profits of an
enterprise of a Contracting State shall be taxable only in that
State unless the enterprise carries on business in the other
Contracting State through a permanent establishment situated
therein. If the enterprise carries on business as aforesaid, the
business profits of the enterprise may be taxed in the other
State but only so much of them as is attributable to that
permanent establishment. However, profits derived from the sale
of goods or merchandise of the same or similar kind as those
sold, or from other business activities of the same or similar
kind as those effected, through that permanent establishment may
be considered attributable to that permanent establishment if it
is established that such sales or activities were structured in a
manner intended to avoid taxation in the State where the
permanent establishment is situated.
2. Subject to the provisions of
paragraph 3, where an enterprise of a Contracting State carries
on business in the other Contracting State through a permanent
establishment situated therein, there shall in each Contracting
State be attributed to that permanent establishment the business
profits which it might be expected to make if it were a distinct
and independent enterprise engaged in the same or similar
activities under the same or similar conditions.
3. In determining the business
profits of a permanent establishment, there shall be allowed as
deductions expenses that are incurred for the purposes of the
permanent establishment, including a reasonable allocation of
research and development expenses, interest, and other similar
expenses and executive and general administrative expenses,
whether incurred in the State in which the permanent
establishment is situated or elsewhere. A Contracting State may,
consistent with its law, impose limitations on deductions, so
long as these limitations are consistent with the concept of net
income.
4. Nothing in this Article shall
affect the application of any law of a Contracting State relating
to the determination of the tax liability of a person in cases
where the information available to the competent authority of
that State is inadequate to determine the profits to be
attributable to a permanent establishment, provided that, on the
basis of the available information, the determination of the
profits of the permanent establishment is consistent with the
principles stated in this Article.
5. No business profits shall be
attributed to a permanent establishment by reason of the mere
purchase by that permanent establishment of goods or merchandise
for the enterprise.
6. For the purposes of the
Convention, the business profits to be attributed to the
permanent establishment shall be determined by the same method
year by year unless there is good and sufficient reason to the
contrary.
7. For the purposes of the
Convention, the term "business profits" means profits derived
from any trade or business. It includes, for example, profits
from manufacturing, mercantile, fishing, transportation,
communications or extractive activities, and from the furnishing
of personal services of another person, including the furnishing
by a company of the personal services of its employees. It does
not include income received by an individual for his performance
of personal services either as an employee or in an independent
capacity.
8. Where business profits include
items of income which are dealt with separately in other Articles
of the Convention, then the provisions of those Articles shall
not be affected by the provisions of this Article.
9. In applying paragraphs 1 and 2
of this Article, paragraph 4 of Article 10 (Dividends), paragraph
5 of Article 11 (Interest), paragraph 4 of Article 12
(Royalties), paragraph 3 of Article 13 (Capital Gains), Article
14 (Independent Personal Services) and paragraph 2 of Article 22
(Other Income), income or gain may be attributable to a permanent
establishment or fixed base even if the income or gain is
deferred until after such permanent establishment or fixed base
has ceased to exist.
ARTICLE 8
Shipping and Air
Transport
1. Profits of an enterprise of a
Contracting State from the operation of ships or aircraft in
international traffic shall be taxable only in that State.
2. For the purposes of this
Article, the term "profits from the operation of ships or
aircraft in international traffic" includes profits derived from
the rental of ships or aircraft on a full (time or voyage) basis.
It also includes profits from the rental of ships or aircraft on
a bareboat basis by an enterprise engaged in the operation of
ships or aircraft in international traffic, if such rental
activities are incidental to the activities described in
paragraph 1. Profits derived by an enterprise from the inland
transport of property or passengers within either Contracting
State are treated as profits from the operation of ships or
aircraft in international traffic if such transport is undertaken
as part of international traffic by the enterprise.
3. Profits of an enterprise of a
Contracting State engaged in the operation of ships or aircraft
in international traffic from the use, maintenance, or rental of
containers (including trailers, barges, and related equipment for
the transport of containers) used in international traffic shall
be taxable only in that State.
4. The provisions of paragraphs 1
and 3 shall also apply to profits from the participation in a
pool, a joint business, or an international operating agency.
ARTICLE 9
Associated
Enterprises
1. Where:
a) an enterprise of a Contracting
State participates directly or indirectly in the management,
control or capital of an enterprise of the other Contracting
State, or
b) the same persons participate
directly or indirectly in the management, control, or capital of
an enterprise of a Contracting State and an enterprise of the
other Contracting State,
and in either case conditions are
made or imposed between the two enterprises in their commercial
or financial relations which differ from those which would be
made between independent enterprises, then any profits which
would, but for those conditions, have accrued to one of the
enterprises, but, by reason of those conditions, have not so
accrued, may be included in the profits of that enterprise and
taxed accordingly.
2. Where a Contracting State
includes in the profits of an enterprise of that State, and taxes
accordingly, profits on which an enterprise of the other
Contracting State has been charged to tax in that other State,
and the profits so included are profits which would have accrued
to the enterprise of the first-mentioned State if the conditions
made between the two enterprises had been those which would have
been made between independent enterprises, then that other State
shall make an appropriate adjustment to the amount of the tax
charged therein on those profits. In determining such adjustment,
due regard shall be had to the other provisions of this
Convention and the competent authorities of the Contracting
States shall if necessary consult each other.
3. The provisions of paragraph 1
shall not limit any provisions of the law of either Contracting
State which permit the distribution, apportionment, or allocation
of income, deductions, credits, or allowances between persons,
whether or not residents of a Contracting State, owned or
controlled directly or indirectly by the same interests when
necessary in order to prevent evasion of taxes or clearly to
reflect the income of any of such persons.
ARTICLE 10
Dividends
1. Dividends paid by a resident of
a Contracting State and beneficially owned by a resident of the
other Contracting State may be taxed in that other State.
2. However, such dividends may
also be taxed in the Contracting State of which the payor is a
resident, and according to the laws of that State, but if the
beneficial owner of the dividends is a resident of the other
Contracting State, the tax so charged shall not exceed:
a) 5 percent of the gross amount
of the dividends if the beneficial owner is a company which holds
directly at least 10 percent of the voting shares of the company
paying the dividends;
b) 15 percent of the gross amount
of the dividends in all other cases.
Subparagraph a) shall not apply in
the case of dividends paid by a United States person that is a
Regulated Investment Company or a Real Estate Investment
Trust.
Subparagraph b) shall apply in the
case of dividends paid by a Regulated Investment Company. In the
case of dividends paid by a United States person that is a Real
Estate Investment Trust, subparagraph b) shall apply only if the
dividend is beneficially owned by an individual holding a less
than 10 percent interest in the Real Estate Investment Trust;
otherwise, the rate of withholding applicable under domestic law
shall apply.
This paragraph shall not affect
the taxation of the company in respect of the profits out of
which the dividends are paid.
3. The term "dividends" as used in
this Article means income from shares or other rights, not being
debt-claims, participating in profits, as well as income from
other corporate rights which is subjected to the same taxation
treatment as income from shares by the laws of the State of which
the company making the distribution is a resident. The term
"dividends" also includes income from arrangements, including
debt obligations, carrying the right to participate in profits,
to the extent so characterized under the law of the Contracting
State in which the income arises. 4. The provisions of paragraph
2 shall not apply if the beneficial owner of the dividends, being
a resident of a Contracting State, carries on business in the
other Contracting State of which the payor is a resident, through
a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base
situated therein, and the dividends are attributable to such
permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits) or Article 14
(Independent Personal Services), as the case may be, shall
apply.
5. A company that is a resident of
one of the Contracting States and that has a permanent
establishment that is subject to tax on its business profits in
the other Contracting State or that is subject to tax in the
other State on a net basis on its income that may be taxed in the
other State under Article 6 (Income from Immovable (Real)
Property) or under paragraph 1 of Article 13 (Capital Gains) may
be subject in that other State to a tax in addition to the tax on
profits. Such tax, however, may not exceed 5 percent of the
portion of the profits of the company subject to tax in the other
State that represents the dividend equivalent amount of such
profits.
6. Where a resident of a
Contracting State derives profits or income from the other
Contracting State, that other State may not impose any tax on the
dividends paid by that resident, except insofar as such dividends
are paid to a resident of that other State or insofar as the
holding in respect of which the dividends are paid forms part of
the business property of a permanent establishment or a fixed
base situated in that other State, even if the dividends paid
consist wholly or partly of profits or income arising in such
other State.
ARTICLE 11
Interest
1. Interest arising in a
Contracting State and beneficially owned by a resident of the
other Contracting State may be taxed in that other State.
2. However, such interest may also
be taxed in the Contracting State in which it arises and
according to the laws of that State, but if the beneficial owner
of the interest is a resident of the other Contracting State, the
tax so charged shall not exceed 10 percent of the gross amount of
the interest.
3. Notwithstanding the provisions
of paragraph 2:
a) interest arising in a
Contracting State, derived and beneficially owned by the
Government of the other Contracting State, including political
subdivisions and local authorities thereof, the Central Bank or
any financial institution wholly owned by that Government, or
interest derived on loans guaranteed or insured by that
Government, subdivision, authority or institution shall be exempt
from tax in the first-mentioned State;
b) interest arising in a
Contracting State shall be exempt from tax in that State if the
beneficial owner of the interest is an enterprise of the other
Contracting State, and the interest is paid with respect to an
indebtedness arising as a consequence of the sale on credit by an
enterprise of that other State, of any merchandise, or
industrial, commercial or scientific equipment to an enterprise
of the first-mentioned State, except where the sale or
indebtedness is between related persons;
c) the United States may tax an
excess inclusion with respect to a residual interest in a Real
Estate Mortgage Investment Conduit in accordance with its
domestic law; and
d) interest paid by a resident of
a Contracting State and that is determined with reference to
receipts, sales, income, profits or other cash flow of the debtor
or a related person, to any change in the value of any property
of the debtor or a related person or to any dividend, partnership
distribution or similar payment made by the debtor to a related
person also may be taxed in that State, and according to its
laws, but if the beneficial owner is a resident of the other
Contracting State, the gross amount of the interest may be taxed
at a rate not exceeding the rate prescribed in subparagraph b) of
paragraph 2 of Article 10 (Dividends).
4. The term "interest" as used in
this Convention means income from debt-claims of every kind,
whether or not secured by mortgage and, subject to paragraph 4 of
Article 10 (Dividends), whether or not carrying a right to
participate in the debtor's profits, and in particular, income
from government securities and income from bonds or debentures,
including premiums or prizes attaching to such securities, bonds
or debentures, as well as all other income that is treated as
interest by the taxation law of the Contracting State in which
the income arises. Penalty charges for late payment shall not be
regarded as interest for the purpose of this Article.
5. The provisions of paragraphs 2
and 3 shall not apply if the beneficial owner of the interest,
being a resident of a Contracting State, carries on business in
the other Contracting State, in which the interest arises,
through a permanent establishment situated therein, or performs
in that other State independent personal services from a fixed
base situated therein, and the interest is attributable to such
permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits) or Article 14
(Independent Personal Services), as the case may be, shall
apply.
6. Interest shall be deemed to
arise in a Contracting State when the payor is a resident of that
State. Where, however, the person paying the interest, whether he
is a resident of a Contracting State or not, has in a Contracting
State a permanent establishment or a fixed base in connection
with which the indebtedness on which the interest is paid was
incurred, and such interest is borne by such permanent
establishment or fixed base, then such interest shall be deemed
to arise in the State in which the permanent establishment or
fixed base is situated.
7. Where, by reason of a special
relationship between the payor and the beneficial owner or
between both of them and some other person, the amount of the
interest, having regard to the debt-claim for which it is paid,
exceeds the amount which would have been agreed upon by the payor
and the beneficial owner in the absence of such relationship, the
provisions of this Article shall apply only to the last-mentioned
amount. In such case, the excess part of the payments shall
remain taxable according to the laws of each Contracting State,
due regard being had to the other provisions of the
Convention.
8. A resident of a Contracting
State may be subject to tax in the other Contracting State in
respect of interest expenses allocable to its profits
attributable to a permanent establishment in the other
Contracting State or subject to tax in the other Contracting
State under Article 6 (Income from Immovable (Real) Property) or
paragraph 1 of Article 13 (Capital Gains) over the interest paid
by or from that permanent establishment or trade or business. In
this case, the allocable interest expense in excess of interest
paid shall be deemed to be interest arising in the other
Contracting State and be beneficially owned by a resident of the
first-mentioned Contracting State.
ARTICLE 12
Royalties
1. Royalties arising in a
Contracting State and beneficially owned by a resident of the
other Contracting State may be taxed in that other State.
2. However, such royalties may
also be taxed in the Contracting State in which they arise and
according to the laws of that State, but if the beneficial owner
of the royalties is a resident of the other Contracting State,
the tax so charged shall not exceed:
a) 5 percent of the gross amount
of the royalties paid for the use of industrial, commercial or
scientific equipment;
b) 10 percent of the gross amount
of the royalties in all other cases.
3. The term "royalties" as used in
this Convention means payments of any kind received as a
consideration for the use of, or the right to use, any copyright
of literary, artistic or scientific work, including computer
software, cinematographic films and films or tapes and other
means of image or sound reproduction for radio or television
broadcasting, any patent, trademark, design or model, plan,
secret formula or process, or other like right or property, or
for the use of, or the right to use, industrial, commercial or
scientific equipment, or for information concerning industrial,
commercial or scientific experience.
The term "royalties" also includes
payments derived from the disposition of any such right or
property which are contingent on the productivity, use or further
disposition thereof.
4. The provisions of paragraphs 1
and 2 shall not apply if the beneficial owner of the royalties,
being a resident of a Contracting State, carries on business in
the other Contracting State in which the royalties arise, through
a permanent establishment situated therein, or performs in that
other State independent personal services from a fixed base
situated therein, and the royalties are attributable to such
permanent establishment or fixed base. In such case the
provisions of Article 7 (Business Profits) or Article 14
(Independent Personal Services), as the case may be, shall
apply.
5. Where, by reason of a special
relationship between the payor and the beneficial owner or
between both of them and some other person, the amount of the
royalties, having regard to the use, right, or information for
which they are paid, exceeds the amount which would have been
agreed upon by the payor and the beneficial owner in the absence
of such relationship, the provisions of this Article shall apply
only to the last-mentioned amount. In such case, the excess part
of the payments shall remain taxable according to the laws of
each Contracting State, due regard being had to the other
provisions of the Convention.
6. For purposes of this
Article:
a) Royalties shall be treated as
arising in a Contracting State when the payor is a resident of
that State. Where, however, the person paying the royalties,
whether he is a resident a Contracting State or not, has in a
Contracting State a permanent establishment or a fixed base in
connection with which the liability to pay the royalties was
incurred, and such royalties are borne by such permanent
establishment or fixed base, then such royalties shall be deemed
to arise in the State in which the permanent establishment or
fixed base is situated.
b) Where subparagraph a) does not
operate to treat royalties as arising in a Contracting State, and
the royalties are for the use of, or the right to use, in a
Contracting State any property or right described in paragraph 3,
then such royalties shall be deemed to arise in that State and
not in the State of which the payor is resident.
c) Notwithstanding the preceding
provisions of this paragraph, payments received as consideration
for the use of containers (including trailers, barges, and
related equipment for the transport of containers) used in
transportation of passengers or property (other than
transportation solely between places in a Contracting State), not
dealt with in Article 8 (Shipping and Air Transport) shall be
deemed to arise in neither Contracting State.
ARTICLE 13
Capital
Gains
1. Gains or income derived by a
resident of a Contracting State from the alienation of immovable
(real) property situated in the other Contracting State may be
taxed in that other State.
2. For the purposes of this
Article, the term "immovable (real) property situated in the
other Contracting State" includes immovable (real) property
referred to in Article 6 (Income From Immovable (Real) Property)
which is situated in that other State. It also includes shares of
stock of a company the property of which consists at least 50
percent of immovable (real) property situated in that other
State, and an interest in a partnership, trust or estate to the
extent that its assets consist of immovable (real) property
situated in that other State. In the United States the term
includes a "United States real property interest."
3. Gains from the alienation of
movable property forming part of the business property of a
permanent establishment which an enterprise of a Contracting
State has in the other Contracting State, or of movable property
pertaining to a fixed base which is available to a resident of a
Contracting State in the other Contracting State for the purpose
of performing independent personal services, including such gains
from the alienation of such a permanent establishment (alone or
with the whole enterprise) or fixed base, may be taxed in that
other State.
4. Gains derived by an enterprise
of a Contracting State operating ships or aircraft in
international traffic from the alienation of ships, aircraft or
containers operated or used in international traffic or movable
property pertaining to the operation or use of such ships,
aircraft or containers shall be taxable only in that State.
5. Payments described in paragraph
3 of Article 12 (Royalties) shall be taxable only in accordance
with the provisions of Article 12.
6. Gains from the alienation of
any property other than property referred to in paragraphs 1
through 5 shall be taxable only in the Contracting State of which
the alienator is a resident.
ARTICLE 14
Independent
Personal Services
1. Income derived by an individual
who is a resident of a Contracting State in respect of
professional services or other activities of an independent
character shall be taxable only in that State unless such
services are performed in the other Contracting State and he has
a fixed base regularly available to him in the other Contracting
State for the purpose of performing his activities. In such case,
the income may be taxed in the other State, but only so much of
it as is attributable to that fixed base. For this purpose, where
an individual who is a resident of a Contracting State stays in
the other Contracting State for a period or periods exceeding in
the aggregate 183 days in any twelve-month period commencing or
ending in the taxable year concerned, he shall be deemed to have
a fixed base regularly available to him in that other State and
the income that is derived from his activities referred to in the
first sentence of this paragraph shall be attributable to that
fixed base.
2. For the purposes of paragraph
1, the income that is taxable in the other Contracting State
shall be determined in the same way as income of a resident of
that other State derived in respect of professional services or
other activities of an independent character. However, nothing in
this paragraph shall be construed as obliging a Contracting State
to grant to residents of the other Contracting State any personal
allowances, reliefs and reductions for taxation purposes on
account of civil status or family responsibilities that it grants
to its own residents.
3. The term "professional
services" includes especially independent scientific, literary,
artistic, educational or teaching activities as well as the
independent activities of physicians, lawyers, engineers,
architects, dentists and accountants.
ARTICLE 15
Dependent
Personal Services
1. Subject to the provisions of
Articles 16 (Directors' Fees), 18 (Pensions, Social Security,
Annuities, Alimony, and Child Support), 19 (Government Service)
and 20 (Students, Trainees and Researchers), salaries, wages and
other remuneration derived by a resident of a Contracting State
in respect of an employment shall be taxable only in that State
unless the employment is exercised in the other Contracting
State. If the employment is so exercised, such remuneration as is
derived therefrom may be taxed in that other State.
2. Notwithstanding the provisions
of paragraph 1, remuneration derived by a resident of a
Contracting State in respect of an employment exercised in the
other Contracting State shall be taxable only in the
first-mentioned State if:
a) the recipient is present in the
other State for a period or periods not exceeding in the
aggregate 183 days in any twelve-month period commencing or
ending in the taxable year concerned, and
b) the remuneration is paid by, or
on behalf of, an employer who is not a resident of the other
State, and
c) the remuneration is not borne
by a permanent establishment or a fixed base which the employer
has in the other State.
3. Notwithstanding the preceding
provisions of this Article, remuneration in respect of an
employment as a member of the regular complement of a ship or
aircraft operated by an enterprise of a Contracting State in
international traffic may be taxed in that Contracting State.
ARTICLE 16
Directors'
Fees
Directors' fees and other
compensation derived by a resident of a Contracting State in his
capacity as a member of the board of directors or any similar
organ of a company that is a resident of the other Contracting
State may be taxed in that other State.
ARTICLE 17
Artistes and
Sportsmen
1. Notwithstanding the provisions
of Articles 14 (Independent Personal Services) and 15 (Dependent
Personal Services), income derived by a resident of a Contracting
State as an entertainer, such as a theater, motion picture, radio
or television artiste, or a musician, or as a sportsman, from his
personal activities as such exercised in the other Contracting
State, may be taxed in that other State, except where the amount
of the gross receipts derived by such entertainer or sportsman,
including expenses reimbursed to him or borne on his behalf, from
such activities does not exceed twenty thousand United States
dollars ($20,000) or its equivalent in Latvian lats for the
taxable year concerned.
2. Where income in respect of
activities exercised by an entertainer or a sportsman in his
capacity as such accrues not to the entertainer or sportsman but
to another person, that income of that other person may,
notwithstanding the provisions of Articles 7 (Business Profits),
14 (Independent Personal Services) and 15 (Dependent Personal
Services), be taxed in the Contracting State in which the
activities of the entertainer or sportsman are exercised, unless
it is established that neither the entertainer or sportsman nor
persons related thereto participate directly or indirectly in the
profits of that other person in any manner, including the receipt
of deferred remuneration, bonuses, fees, dividends, partnership
distributions, or other distributions.
3. The provisions of paragraphs 1
and 2 shall not apply to income derived from activities exercised
in a Contracting State by a resident of the other Contracting
State as an entertainer or sportsman if the visit to the
first-mentioned State is wholly or mainly supported by public
funds of the other State or a political subdivision or local
authority thereof. In such a case, the income shall be taxable
only in the Contracting State of which the entertainer or
sportsman is a resident.
ARTICLE 18
Pensions, Social
Security, Annuities,
Alimony, and
Child Support
1. Subject to the provisions of
Article 19 (Government Service), pensions and other similar
remuneration derived and beneficially owned by a resident of a
Contracting State in consideration of past employment, whether
paid periodically or as a single sum, shall be taxable only in
that State, but the amount of any such pension or remuneration
that would be excluded from taxable income in the other
Contracting State if the recipient were a resident thereof shall
be exempt from taxation in the first- mentioned State.
2. Notwithstanding the provisions
of paragraph 1, payments made by a Contracting State under the
provisions of the social security or similar legislation of that
State to a resident of the other Contracting State or to a
citizen of the United States shall be taxable only in the
first-mentioned State.
3. Annuities derived and
beneficially owned by a resident of a Contracting State shall be
taxable only in that State. The term "annuities" as used in this
paragraph means a stated sum (other than a pension) paid
periodically at stated times during a specified number of years,
under an obligation to make the payments in return for adequate
and full consideration (other than services rendered).
4. Alimony paid by a resident of a
Contracting State, and deductible therein, to a resident of the
other Contracting State shall be taxable only in that other
State. The term "alimony" as used in this paragraph means
periodic payments made pursuant to a written separation agreement
or a decree of divorce, separate maintenance, or compulsory
support, which payments are taxable to the recipient under the
laws of the State of which he is a resident.
5. Periodic payments, not dealt
with in paragraph 4, for the support of a minor child made
pursuant to a written separation agreement or a decree of
divorce, separate maintenance, or compulsory support, paid by a
resident of a Contracting State to a resident of the other
Contracting State, shall not be taxable in that other State.
ARTICLE 19
Government
Service
1. Notwithstanding the provisions
of Articles 15 (Dependent Personal Services) and 17 (Artistes and
Sportsmen):
a) remuneration, other than a
pension, paid by, or out of the public funds of a Contracting
State or a political subdivision or a local authority thereof to
an individual in respect of dependent personal services rendered
to that State or subdivision or authority in the discharge of
functions of a governmental nature shall, subject to the
provisions of subparagraph b), be taxable only in that State;
b) such remuneration, however,
shall be taxable only in the other Contracting State if the
services are rendered in that State and the individual is a
resident of that State who:
(i) is a national of that State; or
(ii) did not become a resident of that State solely for the
purpose of rendering the services.
2. Subject to the provisions of
paragraph 2 of Article 18 (Pensions, Social Security, Annuities,
Alimony, and Child Support):
a) any pension paid by, or out of
the public funds of a Contracting State or a political
subdivision or a local authority thereof to an individual in
respect of services rendered to that State or subdivision or
authority in the discharge of functions of a governmental nature
shall, subject to the provisions of subparagraph b), be taxable
only in that State;
b) such pension, however, shall be
taxable only in the other Contracting State if the individual is
a resident of, and a national of, that State.
ARTICLE 20
Students,
Trainees and Researchers
1. a) An individual who is a
resident of a Contracting State at the beginning of his visit to
the other Contracting State and who is temporarily present in
that other Contracting State for the primary purpose of:
(i) studying at a university or other accredited educational
institution in that other Contracting State, or
(ii) securing training required to qualify him to practice a
profession or professional speciality; or
(iii) studying or doing research as a recipient of a grant,
allowance, or award from a governmental, religious,
charitable, scientific, literary, or educational
organization;
shall be exempt from tax by that
other Contracting State with respect to the amounts described in
subparagraph b) of this paragraph for a period not exceeding five
years from the date of his arrival in that other Contracting
State.
b) The amounts referred to in
subparagraph a) of this paragraph are:
(i) payments from abroad, other than compensation for
personal services, for the purpose of his maintenance,
education, study, research, or training;
(ii) the grant, allowance, or award; and
(iii) income from personal services performed in that other
Contracting State in an aggregate amount not in excess of
five thousand United States dollars ($5,000) or its
equivalent in Latvian lats for any taxable year.
2. An individual who is a resident
of a Contracting State at the beginning of his visit to the other
Contracting State and who is temporarily present in that other
Contracting State as an employee of, or under contract with, a
resident of the first-mentioned Contracting State, for the
primary purpose of:
a) acquiring technical,
professional, or business experience from a person other than
that resident of the first-mentioned Contracting State, or
b) studying at a university or
other accredited educational institution in that other
Contracting State,
shall be exempt from tax by that
other Contracting State for a period of 12 consecutive months
with respect to his income from personal services in an aggregate
amount not in excess of eight thousand United States dollars
($8,000) or its equivalent in Latvian lats.
3. An individual who is a resident
of one of the Contracting States at the time he becomes
temporarily present in the other Contracting State and who is
temporarily present in the other Contracting State for a period
not exceeding one year, as a participant in a program sponsored
by the Government of that other Contracting State, for the
primary purpose of training, research, or study, shall be exempt
from tax by that other Contracting State with respect to his
income from personal services in respect of such training,
research, or study performed in that other Contracting State in
an aggregate amount not in excess of ten thousand United States
dollars ($10,000) or its equivalent in Latvian lats.
4. This Article shall not apply to
income from research if such research is undertaken not in the
public interest but primarily for the private benefit of a
specific person or persons.
ARTICLE 21
Offshore
Activities
1. The provisions of this Article
shall apply notwithstanding the provisions of Articles 4 to 20 of
this Convention.
2. A person who is a resident of a
Contracting State and carries on activities offshore in the other
Contracting State in connection with the exploration or
exploitation of the sea bed and sub-soil and their natural
resources situated in that other State shall, subject to
paragraphs 3 and 4, be deemed in relation to those activities to
be carrying on business in that other State through a permanent
establishment or a fixed base situated therein.
3. The provisions of paragraph 2
shall not apply, where the activities are carried on for a period
or periods not exceeding in the aggregate 30 days in any
twelve-month period. However, for the purposes of this
paragraph:
a) activities carried on by a
person who is associated with another person shall be regarded as
carried on by the other person if the activities in question are
substantially the same as those carried on by the first-mentioned
person, except to the extent that those activities are carried on
at the same time as its own activities;
b) a person shall be deemed to be
associated with another person if one is controlled directly or
indirectly by the other, or both are controlled directly or
indirectly by a third person or third persons.
4. However, the provisions of this
Article shall not apply to:
a) one or any combination of the
activities mentioned in paragraph 4 of Article 5 (Permanent
Establishment);
b) towing or anchor handling by
ships primarily designed for that purpose and any other
activities performed by such ships; or
c) the transport of supplies or
personnel by ships or aircraft in international traffic.
5. a) Subject to subparagraph b)
of this paragraph, salaries, wages and similar remuneration
derived by a resident of a Contracting State in respect of an
employment connected with the exploration or exploitation of the
sea bed and sub-soil and their natural resources situated in the
other Contracting State may, to the extent that the duties are
performed offshore in that other State, be taxed in that other
State. However, such remuneration shall be taxable only in the
first-mentioned State if the employment is carried on offshore
for an employer who is not a resident of the other State and for
a period or periods not exceeding in the aggregate 30 days in any
twelve month period.
b) salaries, wages and similar
remuneration derived by a resident of a Contracting State in
respect of an employment exercised aboard a ship or aircraft
engaged in the transportation of supplies or personnel to a
location, or between locations, where activities connected with
the exploration or exploitation of the sea bed and sub-soil and
their natural resources are being carried on in a Contracting
State, or in respect of an employment exercised aboard tugboats
or other vessels operated auxiliary to such activities, may be
taxed in the Contracting State of which the employer is a
resident.
ARTICLE 22
Other Income
1. Items of income beneficially
owned by a resident of a Contracting State, wherever arising, not
dealt with in the foregoing Articles of this Convention shall be
taxable only in that State.
2. The provisions of paragraph 1
shall not apply to income, other than income from immovable
(real) property as defined in paragraph 2 of Article 6 (Income
from Immovable (Real) Property), if the beneficial owner of the
income, being a resident of a Contracting State, carries on
business in the other Contracting State through a permanent
establishment situated therein, or performs in that other State
independent personal services from a fixed base situated therein,
and the income is attributable to such permanent establishment or
fixed base. In such case the provisions of Article 7 (Business
Profits) or Article 14 (Independent Personal Services), as the
case may be, shall apply.
ARTICLE 23
Limitation on
Benefits
1. A resident of a Contracting
State shall be entitled to all the benefits of this Convention
only if it is a "qualified resident" as defined in this
Article.
2. A resident of a Contracting
State is a qualified resident for a taxable year only if it is
either:
a) an individual;
b) a Contracting State, a
political subdivision or a local authority thereof, or an agency
or instrumentality of such State, subdivision or authority;
c) a company, if:
(i) on at least half the days of the taxable year the
beneficial owners of at least 50 percent of each class of the
company's shares are qualified residents by reason of
subparagraphs a), b), e), or f) of this paragraph, or U.S.
citizens, provided that in the case of indirect ownership,
each intermediate owner is a person entitled to benefits of
the Convention under this paragraph; and
(ii) amounts paid or accrued by the company during its
taxable year:
A) to persons that are neither
qualified residents nor U.S. citizens, and
B) that are deductible for income
tax purposes in the company's State of residence (but not
including arm's length payments in the ordinary course of
business for services or tangible property),
do not exceed 50 percent of the
gross income of the company for that year;
d) a trust or estate, if the
ownership of its beneficial interests satisfies the requirement
of subparagraph c)(i) and its payments to persons who are not
qualified residents or U.S. citizens satisfy the requirement of
subparagraph c)(ii);
e) a person, if:
(i) beneficial interests representing at least 50 percent of
the value of each class of interests in that person are
substantially and regularly traded on a recognized stock
exchange; or
(ii) the direct or indirect owners of at least 50 percent of
each class of interests in that person are persons entitled
to benefits under clause i), provided that in the case of
indirect ownership, each intermediate o …
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