The French tax authority issued a notice on 16 October 2014, regarding the implementation of the most favoured nation (MFN) clause in the 1997 tax treaty with Latvia.
This convention, signed in Paris on 14 April 1997, includes a most-favoured nation clause in points 8 and 9 of its protocol.
MFN refers to a status granted by a clause in which one country agrees to treat another country as favourably as it treats any other country that benefits from preferential treatment. MFN clauses are commonly found in bilateral investment treaties..
The clause allows for exemptions or reduced withholding tax rates, as defined in agreements Latvia has signed with other OECD member countries. This provision is expected to enhance cooperation and investment between the two nations.
The implementation of the MFN clause is effective from 5 July 2017.
The definition of royalties in the France-Latvia tax treaty is consistent with that in the Japan-Latvia tax treaty, which leads to the exclusion of any payments for the use of, or the right to use, copyrights related to television and radio films, recordings, as well as for industrial, commercial, or scientific equipment.
Royalties generated in one Contracting State and owned by a resident of the other are taxed solely in the resident’s state.
Interest paid by one Contracting State on loans from a credit institution, which is owned by a resident of the other Contracting State, is taxed solely in the resident’s state, thereby exempting it from withholding tax.
