The Organisation of Economic Cooperation and Development (OECD) developed the Common Reporting Standard (CRS). CRS establishes the automatic exchange of tax information as the new global Standard (Standard for Automatic Exchange of Financial Account Information). The automatic exchange of information involves the systematic and periodic transmission of ‘bulk’ taxpayer information from the country which is the source of the payment to the taxpayer’s country of residence. CRS imposes obligations on financial institutions across the financial services market to review and collect information in order to identify an account holder’s country of residence and then to provide specified account information to the home country’s tax administration. Under the OECD Standard for Automatic Exchange of Financial Account Information, jurisdictions obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.

For exchanges between EU Member States, the EU transposed the OECD CRS by virtue of the Council Directive 2014/107/EU of 9 December 2014 amending Council Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation (Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC as amended by Council Directive 2014/107/EU of 9 December 2014).

Other relationships for exchanging CRS information will typically be based either on a bilateral agreement, such as a double tax treaty or a tax information exchange agreement, or on a multilateral agreement.

Latvia country joined an early adopter group of over 55 jurisdictions. To provide the framework for automatic exchange of tax data, Latvia amended the Taxes and Charges Act (Par nodokļiem un nodevām), the Credit Institutions Act (Kredītiestāžu likums) and the Cabinet Regulations. Early-adopter jurisdictions will see the first exchanges of information by the end of July 2017, including EU Member States, Argentina, India, Korea, tax havens such as Barbados, Gibraltar, Cayman Islands, Isle of Man, Jersey, Guernsey, and others. Other jurisdictions will start exchanging information in 2018.

Starting from 1 January 2016, financial institutions of the Republic of Latvia, including Baltic International Bank, are required to identify the residency of all their reportable customers (residence for tax purposes, taxpayer identification number). Starting from 2017, the financial institutions will be required to annually provide the financial account information to the National Revenue Authority [Valsts ieņēmumu dienests] of the Republic of Latvia. The due diligence requirements will not affect daily customer service. To satisfy the requirements, Bank has developed and implemented a new questionnaire. When filling out their questionnaires, the customers will be obligated to provide the required information to be further submitted by Bank to the National Revenue Authority. Bank will continue to protect the confidentiality of customers’ personal data and financial transactions while complying with stringent law, rules and regulations.

Fiscally transparent entities  - in certain cases a legal entity is considered a fiscally transparent entity (FTE), also known as flow-through entity or pass-through entity. FTE is a legal entity where the owners and/or beneficial owners of the entity are taxed for the income earned by the entity and not the entity itself, i.e. income „flows through” to owners and/or beneficial owners.

For purposes of the OECD’s Common Reporting Standard (CRS), a legal entity is recognised as a tax resident of the country in which the entity’s place of effective management (PoEM) is situated. According to the OECD Commentary, the place of effective management is the place where key management and commercial decisions that are necessary for the conduct of the Entity’s business as a whole are in substance made.* All relevant facts and circumstances must be examined to determine the place of effective management. If necessary, you should seek advice from tax authorities and/or consult a qualified professional adviser.

Country of tax residence                         

Each country has its own definition of ‘tax residency’.

Normally, the following below listed aspects are used to clearly define tax residency:    

  • in respect of natural persons, tax residency is a residency for tax purposes, a jurisdiction where the person is taxed based on the person’s habitual abode, centre of vital interests, occupation etc.;.
  • in respect of legal persons, tax residency is a residency for tax purposes, a jurisdiction where the person is taxed based on the person’s country of registration (incorporation), place of effective management, permanent establishment (fixed place of business) etc.  

There might be situations where a natural or legal person qualifies as a tax resident under the tax residence rules of more than one jurisdiction. This is known as dual or multiple tax residence.

Please visit the OECD website to read about indicia of tax residency. 

Please determine your tax residency under the domestic tax laws of your respective jurisdiction. To know more about your particular situation, you can seek advice from tax authorities and/or consult a qualified professional adviser. Your specific circumstances should always be taken into account. Please notify us without undue delay of all circumstances or changes in information previously provided which can affect the determination of your residency status for tax purposes.

We would like to inform you that your personal data will be processed and subsequently delivered to the National Revenue Authority [Valsts ieņēmumu dienests] of the Republic of Latvia in the manner prescribed by Section XII of Latvia’s Taxes and Charges Act and for the designated purpose.

The information contained in this section of the website is for general information purposes only. The information should not be construed, regarded or relied upon as a legal or tax research, statement of opinion, recommendation or advice. Bank is not responsible for the contents of the OECD website.
*OECD (2017), Standard for Automatic Exchange of Financial Account Information in Tax Matters, Second Edition, OECD Publishing, Paris, p.192