Estonia, Latvia to avoid double taxation

Estonian and Latvian officials have initialed a new agreement on double taxation that will come into force on Jan. 1. Finance ministry officials from Estonia and Latvia held a meeting in Rīga from Monday to Thursday to discuss Latvia's plans to impose an income tax on Estonian firms active in Latvia, although corporate income tax on investments has been abolished in Estonia. The agreement initialed in Rīga is in line with most Estonian tax agreements. Andrejs Birums, director of the Latvian Finance Ministry's Tax Convention Department,informed that the convention's amended draft would give each country broader rights to set taxes for the other nation's companies operating in their territories. Both countries will use the simple credit method to remove the double taxation problem, said the Estonian Finance Ministry. The right to tax dividends, interests and royalties will be divided between the source country and the resident country. Latvia has also announced plans to reduce corporate income tax to 15 percent from the current 25 percent by the year 2004.