External Affairs Minister Salman Khurshid and Latvian Minister of Foreign Affairs Edgars Rinkevics signed the Double Taxation Avoidance Agreement (DTAA) on Thursday.
Latvia is the third Baltic country with which India has signed the DTAA.
Earlier, India had signed DTAAs with Lithuania and Estonia.
The DTAA ensures that business profits become taxable at the source if activities of an enterprise constitute a Permanent Establishment (PE) in the source state.
The agreement includes para 2 in Article concerning Associated Enterprises. This enhances recourse to Mutual Agreement Procedure to relieve double taxation in cases involving transfer pricing adjustments.
The low rate of 10% of withholding of taxation for dividend, interest and royalties and fees for technical services ensures a promotion for greater investments, flow of technology and technical services between the two countries.
The DTAA guarantees tax stability to the residents of both countries, as it will encourage mutual economic cooperation between India and Latvia.
