Russia suspended and denounced agreements with Latvia over taxation

Moscow, February 15 – The State Duma adopted two laws, one of which suspends and the other denounces the intergovernmental agreement with Latvia on the avoidance of double taxation and the prevention of tax evasion with regard to income and capital taxes.

“Latvia’s failure to comply with the provisions of the agreement is a violation of its terms, and accordingly, the Russian Federation suspended its operations. Given that Latvia’s return to fulfilling its obligations under the agreement is unlikely, it is also suggested that the agreement be denounced,” Deputy Finance Minister Alexei Sazanov explained at a meeting of the State Duma .

The agreement sets out procedures for taxation of profits from commercial activities, income from real estate, income from business, directors’ fees, and income from artists and athletes. At the same time, it includes provisions on non-discrimination, exchange of information, and limitation of tax benefits, and also sets out procedures for mutual agreement and elimination of double taxation procedures.

And Latvia previously suspended this agreement in connection with the special military operation of Russia in Ukraine, after it notified the Russian side of this. Latvia considers the decision of Ukraine’s national defense to be a violation of international law and puts forward the conditions for “the withdrawal of the Russian Federation of its armed forces from the territory of Ukraine, the full restoration of the territorial integrity and sovereignty of Ukraine”, as well as “full compensation for the damage caused to Ukraine”.

The explanatory notes to both laws say that the reasons cited by the Latvian side for suspending the agreement are “unfounded and, as a result, the unilateral suspension of the agreement is not justified from the international legal point of view.” Russia considers such actions by Latvia a material breach of the agreement in accordance with Article 60 of the Vienna Convention on the Law of Treaties, as stated there.