LATVIA

Source: IMF, International Financial Statistics, July 2021.

• The Latvian central bank is the Bank of Latvia (LB – bank.lv).
• The LB is a member of the European System of Central Banks (ESCB) and operates certain activities, such as issuing currency, under the authority of the European Central Bank (ECB – www.ecb.europa.eu).

Bank supervision

• In November 2014, the ECB, via the Single Supervisory Mechanism (SSM), assumed responsibility for supervising the financial stability of banks operating within the euro zone. However, while the ECB has final supervisory authority over all banks operating within the euro zone, it will only directly supervise those banks classified as ‘significant’ under the terms of the SSM (115 significant banking groups have been recognized to date). ‘Less significant’ banks will continue to be supervised by the national supervisory authority, i.e. the Financial and Capital Market Commission (FKTK – www. fktk.lv).

• Lifting fees are not applied on payments between resident and non-resident accounts.

• Credit transfers are used by companies to pay salaries and suppliers, and to make tax and treasury payments.
• SEPA credit transfers can be settled via EKS, STEP2 or via correspondent banking networks. Eighteen banks in Latvia participate in the SEPA credit transfer scheme.
• Instant payments (maximum EUR 100,000) are available are processed via the EKS. Instant payments are offered by Citadele Bank, SEB Banka, Swedbank, Signet Bank and BlueOrange Bank. Instant payments are available to 90% of the country’s population. In 2020, EKS processed 20 million instant payments, with a value of EUR 4.4 billion.
• Proxy Registry Instant Links enable users to send money using only mobile phone number. At the end of 2020, 321 thousand instant links were registered with the Proxy Registry "Instant Links", i.e. 13 times more than at the end of 2019.
• In Autumn 2021, the central bank will introduce instant payment requests at an interbank level.
• High-value and urgent EUR-denominated domestic and cross-border (within the euro zone) credit transfers can be settled in real time via TARGET2.
• Cross-border transfers can be made via SWIFT and settled through correspondent banks abroad.
• The European Payment Council’s SCT Inst scheme (a pan-European 24/7 instant payment scheme for SEPA credit transfers) enables the transfer of funds (the maximum threshold value is EUR 100,000) to another account in less than ten seconds. There are seven participants.
• EBA Clearing and Italy’s SIA Group have developed and implemented a pan-European platform for instant EUR payments called RT1. It is fully compliant with the SCT Insts scheme and is in line with the ISO 20022 global messaging standards for instant payments.
• EBA Clearing has launched a pan-European request to pay (R2P) infrastructure solution with the support of 27 payment service providers from 11 countries. The new 24/7 service is compatible with the SCT and SCT Inst schemes and allows payees to take the initiative to request a specific payment from the payer.
• TIPS is a pan-European service for the settlement of instant payments in central bank money. The service enables payment service providers and ACHs with access to TARGET2 to offer fund transfers 24/7, 365 days a year. TIPS is aligned with SCT Insts. It is primarily focused on EUR payments but is technically capable of settling payments denominated in other currencies.

• There is no national direct debit scheme in Latvia. Latvians can use e-invoice presentment and payment solutions based on credit transfers instead.
• There is one participant offering Core SDDs.

• Cheques are not used in Latvia.

• Card payments, particularly debit cards, are increasingly popular, especially for retail transactions.
• There were two million cards in circulation at the end of Q1 2021; 1.8 million of these were contactless. Of the total number of cards, 1.7 million were debit cards. There were 213,964 credit cards.
• Visa and Maestro/MasterCard-branded payment cards are the most widely issued.
• Worldline Latvia processes all card payments.
• All cards issued are SEPA-compliant with EMV chips.

• There were 908 ATMs in Latvia at the end of Q1 2021.
• There were 42 thousand EFTPOS terminals in Latvia at the end of Q1 2021. Of these, 40 thousand were contactless.
• All ATMs and POS terminals are EMV-compliant.
• Worldline Latvia operates Latvia’s ATM and POS networks.

• Electronic wallet schemes are available via reloadable pre-paid cards.
• Mobile wallet schemes, such as Google Pay and Apple Pay, are available.

• The EU has trade agreements in place with over 30 countries.
• The EU is currently in free trade negotiations with a number of countries, including the Association of Southeast Asian Nations (ASEAN), Australia, Indonesia, Mercosur (the Southern Common Market), Uruguay, and the USA.
• The EU-UK Trade and Cooperation Agreement came into force on 1 May 2021.

Source: IMF, International Financial Statistics, July 2021.

• Licences are required for importing items with quantitative restrictions that originate from outside the EU and for items from another EU country that are deemed to be of national interest or a strategic nature.
• An import licence is required for strategic goods, dual-use goods, steelwork, certain textile products, protected fauna and flora, narcotic and psychotropic substances, and radioactive materials.

• Tariffs are set according to the EU customs code for all imports from outside the EU, with higher tariffs for agricultural imports.
• The rate of customs duty is generally between 0% and 20% of the value of imported goods.
• The standard VAT rate on imports is 21%.

• None.

• None.

• Latvia prohibits the import of certain items in line with EU regulations and UN Security Council resolutions.
• Specific imports are prohibited in order to protect fauna and flora, for health and safety or moral reasons, and/or for national security.

• Licences are required for exporting strategic goods, dual-use goods, protected fauna and flora, narcotic and psychotropic substances, and historical artefacts.

• None.

• None.

• Latvia has implemented the EU directive on export credit insurance.
• Altum, Latvia’s national export credit agency, provides state-supported export credit insurance.
• Export credit insurance is also available from private insurance companies.
• Export financing is available from commercial banks.

• Latvia prohibits the exports of certain items in line with EU regulations and UN Security Council resolutions.

• Latvia does not apply exchange controls.

• An advance tax and advance pricing agreement ruling, which is binding on the State Revenue Service, may be obtained from the tax authorities to ascertain their opinion on the application of tax and transfer pricing rules.

• Capital gains are, in general, taxable as ordinary income (at the rate of 20%) and losses are deductible against ordinary income.

• 20 % tax on consultancy and management services except when a lower rate applies based on a tax treaty.

• Latvia has 62 double tax treaties in force.
• The MLI entered into force for Latvia on 1 February 2020.

• Thin capitalisation restrictions apply to interest payments exceeding a specified amount.
• One method is available for interest payments of up to EUR 3 million: a debt-to-equity ratio of 4:1.
• A second method (30% EBITDA) is available for interest payments exceeding EUR 3 million.

• Latvia follows the principles of the OECD guidelines in the application of transfer pricing methods.
• Mandatory preparation (without submission) of a master file is required if the total annual value of related party transactions exceeds EUR 5 million. The master file must be submitted where (i) annual turnover exceeds EUR 50 million and the total value of related party transactions exceeds EUR 5 million or (ii) the total value of related party transactions exceeds EUR 15 million.
• A local file must be prepared where the total annual value of related party transactions exceeds EUR 250,000 and submitted to the tax authorities where such transactions exceed EUR 5 million.
• Latvia has adopted country-by-country reporting.

• Stamp duty at 2% is levied on the higher of the sales price or the cadastral value when real estate is registered in the land register.

• Latvia has no specific rules with respect to cash pooling arrangements.

• Latvia has no specific tax rules with respect to financial transactions and/or banking services.

All tax information supplied by Deloitte Touche Tohmatsu and Deloitte Highlight 2021 (www.deloitte.com).