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PROTOCOL
BETWEEN THE REPUBLIC OF LATVIA AND GEORGIA
AMENDING THE OCTOBER 13, 2004 CONVENTION FOR THE AVOIDANCE OF
DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT
TO TAXES ON INCOME AND ON CAPITAL
The Republic of Latvia and Georgia,
Desiring to conclude a Protocol amending the Convention between the Republic of Latvia and Georgia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital, signed at Riga on 13th October 2004 (hereinafter referred to as "the Convention"),
Have agreed as follows:
Article 1
Sub-paragraph g) of paragraph 1 of Article 3 of the Convention shall be deleted and replaced by the following sub-paragraph:
"g) the term "international traffic" means any transport by a ship, aircraft or road vehicle operated by an enterprise of a Contracting State, except when the ship, aircraft or road vehicle is operated solely between places in the other Contracting State;"
Article 2
The reference in paragraph 3 of Article 5 of the Convention to "six months" shall be deleted and replaced by the reference to "nine months".
Article 3
The third sentence of paragraph 2 of Article 6 of the Convention shall be deleted and replaced by the following sentence:
"Ships, aircraft and road vehicles shall not be regarded as immovable property."
Article 4
The title and paragraph 1 of Article 8 of the Convention shall be deleted and replaced by the following title and paragraph:
"Article 8
PROFITS FROM INTERNATIONAL TRANSPORT
1. Profits derived by an enterprise of a Contracting State from the operation of ships, aircraft or road vehicles in international traffic shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated."
Article 5
Article 10 of the Convention shall be deleted and replaced by the following Article:
"Article 10
DIVIDENDS
1. Dividends paid by a company which is a resident of a Contracting State to 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 company paying the dividends 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 per cent of the gross amount of the dividends if the beneficial owner is a company (other than a partnership) which holds directly at least 10 per cent of the capital of the company paying the dividends;
b) 10 per cent of the gross amount of the dividends in all other cases.
3. Notwithstanding the provisions of paragraphs 1 and 2 of this Article, dividends paid by a company which is a resident of a Contracting State shall be taxable only in the other Contracting State if the beneficial owner is a company (other than a partnership) that is a resident of that other State and holds directly at least 50 per cent of the capital of the company paying the dividends.
4. 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 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.
5. The provisions of paragraphs 1, 2 and 3 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 company paying the dividends 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 holding in respect of which the dividends are paid is effectively connected with such permanent establishment or fixed base. In such case the provisions of Article 7 or Article 14, as the case may be, shall apply.
6. Where a company which is 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 the company, 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 is effectively connected with a permanent establishment or a fixed base situated in that other State, nor subject the company's undistributed profits to a tax on the company's undistributed profits, even if the dividends paid or the undistributed profits consist wholly or partly of profits or income arising in such other State."
Article 6
1. The reference in paragraph 2 of Article 11 of the Convention to "10 per cent" shall be deleted and replaced by the reference to "5 per cent".
2. Paragraph 3 of Article 11 of the Convention shall be deleted and replaced by the following paragraph:
"3. Notwithstanding the provisions of paragraph 2, interest arising in a Contracting State and paid to a resident of the other Contracting State who is the beneficial owner thereof shall be taxable only in that other State if such interest is paid:
a) on any loan or credit of whatever kind granted by a bank;
b) to the Government of the other Contracting State, including any political subdivision or local authority thereof, the Central Bank or any financial institution controlled by that Government or on loans guaranteed by that Government."
Article 7
The reference in paragraph 2 of Article 12 of the Convention to "10 per cent" shall be deleted and replaced by the reference to "5 per cent".
Article 8
Paragraph 3 of Article 13 of the Convention shall be deleted and replaced by the following paragraph:
"3. Gains from the alienation of ships, aircraft or road vehicles operated in international traffic or movable property pertaining to the operation of such ships, aircraft or road vehicles, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated."
Article 9
Paragraph 3 of Article 15 of the Convention shall be deleted and replaced by the following paragraph:
"3. Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship, aircraft or road vehicle operated in international traffic, may be taxed in the Contracting State in which the place of effective management of the enterprise is situated."
Article 10
Paragraph 3 of Article 23 of the Convention shall be deleted and replaced by the following paragraph:
"3. Capital represented by ships, aircraft and road vehicles operated in international traffic and by movable property pertaining to the operation of such ships, aircraft and road vehicles, shall be taxable only in the Contracting State in which the place of effective management of the enterprise is situated."
Article 11
Reference 4 in the Protocol of the Convention shall be deleted and replaced by the following:
"4. With reference to Article 8, Article 13, Article 15, Article 23
It is understood that the provisions of paragraph 1 of Article 8, paragraph 3 of Article 13, paragraph 3 of Article 15 and paragraph 3 of Article 23 are not applicable until Latvia has not introduced in its domestic legislation the place of effective management as a criteria for the determination of residence, but the following provisions are applicable instead:
Article 8, paragraph 1
"Profits of an enterprise of a Contracting State from the operation of ships, aircraft or road vehicles in international traffic shall be taxable only in that State."
Article 13, paragraph 3
"Gains derived by an enterprise of a Contracting State operating ships, aircraft or road vehicles in international traffic from the alienation of ships, aircraft or road vehicles operated in international traffic or movable property pertaining to the operation of such ships, aircraft or road vehicles, shall be taxable only in that State."
Article 15, paragraph 3
"Notwithstanding the preceding provisions of this Article, remuneration derived in respect of an employment exercised aboard a ship, aircraft or road vehicle operated in international traffic by an enterprise of a Contracting State may be taxed in that State."
Article 23, paragraph 3
"Capital represented by ships, aircraft and road vehicles operated in international traffic by an enterprise of a Contracting State and by movable property pertaining to the operation of such ships, aircraft and road vehicles, shall be taxable only in that State.""
Article 12
1. The Governments of the Contracting States shall notify each other in writing through diplomatic channels when the constitutional requirements for the entry into force of this Protocol have been complied with.
2. The Protocol shall enter into force on the date of the later of the notifications referred to in paragraph 1 and its provisions shall have effect in both Contracting States:
a) in respect of taxes withheld at source, on income derived on or after the first day of January in the calendar year next following the year in which the Protocol enters into force;
b) in respect of other taxes on income and taxes on capital, for taxes chargeable for any fiscal year beginning on or after the first day of January in the calendar year next following the year in which the Protocol enters into force.
In witness whereof, the undersigned, duly authorised thereto, have signed this Protocol.
Done in duplicate at Riga this 29th day of May 2012, in the Latvian, Georgian and English languages, all three texts being equally authentic. In the case of divergence of interpretation the English text shall prevail.
| For the Republic of Latvia | For Georgia |
| Andris Razāns | Nino Kalandadze |
| Under-Secretary of State of the Ministry of Foreign Affairs | Deputy Minister of Foreign Affairs |
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