Canada–Latvia Income Tax Convention: “Most Favoured Nation” provision takes effect to eliminate source-state taxation rights in respect of certain royalties
Effective January 1, 2018, the withholding rate described in paragraph 2 of Article 12 of the Canada–Latvia Tax Convention has been eliminated with respect to certain royalties.
The following types of royalties paid or credited on or after January 1, 2018 are therefore exempt from tax in the state in which they arise:
- copyright royalties and other like payments in respect of the production or reproduction of any literary, dramatic, musical or artistic work (but not including royalties in respect of motion picture films nor royalties in respect of works on film or videotape or other means of reproduction for use in connection with television broadcasting);
- royalties for the use of, or the right to use, any patent or any information concerning industrial, commercial or scientific experience (but not including any such information provided in connection with a rental or franchise agreement).
This change occurs as a result of the "Most Favoured Nation" provision in paragraph 7 of Article 12 of the Convention and has been confirmed by the Latvian Competent Authority.
If, between January 1, 2018 and December 31, 2020, tax was withheld on the types of royalties defined above, taxpayers may seek to obtain a refund.
If you are a Latvian-resident taxpayer:
- Complete form NR7-R, Application for Refund of Part XIII Tax Withheld to apply for a refund of Canadian tax withheld.
- Send the application to: Non-Resident Withholding Section, Canada Revenue Agency, Post Office Box 20000, Station A, Sudbury ON P3A 5C1, CANADA.
You have two years from the end of the calendar year you paid the tax in to apply for the refund.
If you are a Canadian-resident taxpayer:
- Complete Annex 2 (Residence Certificate – Application for Refund) provided in Latvia’s Cabinet Regulation No 178 “Procedures for Application of Tax Relief Determined in International Agreements for Prevention of Double Taxation and Tax Evasion”.
- Part V of this form requires the certification of Canadian residency by the Competent Authority which can be obtained by contacting the Competent Authority Services Division.
- Once certification has been obtained by the Competent Authority, please send the application form by post to the State Revenue Service of the Republic of Latvia.
In accordance with paragraph 10 of the above-mentioned Regulation, you have three years from the day of making the tax payments to apply for a refund.