Dividends will not be taxable income from January 1, 2013, and so Latvia is introducing and recognizing a holding company. The exemption applies to residents and non-residents as well as natural and legal persons who are not registered in low-tax countries and areas (tax havens). It is expected to facilitate business through Latvian companies and restrict transactions with offshore companies.

The changes in the Corporate Income Tax Act provide that from January 1, 2013, income from share transfers and income from dividends, regardless of whether the person is a resident or non-resident, are not taxable. However, the regulations do not apply to states and territories included on the list of offshores (also known as tax havens).

As for taxes, not all offshore countries are included in the list of low tax and free tax zones and territories for tax purposes. The list is established by Cabinet Decree No. 276, adopted on June 26, 2001. The regulations were recently updated and currently cover sixty-four countries and territories.

Benefits of the new incentive
It is common practice in Europe to maintain the hold regulation. The new developments are intended to help Latvia attract investors and promote the business environment.

With regard to holding companies, the frequency of dividend distribution, the length of time that shares are held, and the number of shares held can all play a crucial role. The Latvian regulation does not foresee any obstacles in this regard. The Latvian Corporate Income Tax Act does not prescribe any express deadlines for holding shares or the number of shares. Thus, Latvian law offers an advantage over legal systems such as Cyprus, Germany or Malta.
Another advantage is the lack of specific requirements for foreign business people. For example, there are no barriers or restrictions on being a foreigner, director or shareholder, ie citizenship or residence is not critical. Also, there is no special requirement to use a Latvian bank account and foreign bank accounts are allowed.
According to Latvian company law, dividends are paid once a year based on the shareholder's profit decision.
Comparison with countries of the European Union
Compared to other EU Member States, the tax principles in Latvia, Estonia and Lithuania are similar. Although there are differences from Scandinavian countries where, in addition to the restrictions on offshore companies, there are provisions aimed at increasing tax payments on transactions with offshore companies. For example, in Finland, Sweden and Denmark, corporation tax of less than 10% is required to be subject to an additional tax in the respective country. In this case, regulation in Latvia and other Baltic states is preferable and offers advantages.

According to research, published on gazette Dienas Bizness, there is no prohibition to provide services for companies located in offshores. For example, if the person opens a company in offshore and register a subsidiary company in the same country where the person is resident and where the services is provided, then in accordance with Latvian, Estonian or Lithuanian legislation there are no significant restrictions comparing with companies incorporated in other countries than offshores. It is not prohibited to provide services through self-owned companies.

In conclusion, the new regime and incentive to introduce holding regime in Latvia in terms of tax law, should give preferences to opt for company establishment in Latvia. The amendments in Latvian Corporate Income Tax law will enter into force on 1st January, 2013.

https://www.baltic-legal.com/latvia-holding-company-structure-eng.htm