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Austria and Latvia, Tax Exemption for Dividends in Europe

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In a world where tax exemption by Offshore companies is highly criticized, we discovered that it was unnecessary to have recourse to tax havens to avoid paying taxes on dividends, read on:

The European directive on the  “mother-daughter” regime eliminates taxes

The Directive 2003/123/EC (of 22/12/ 2003) improves the Council directive 90/435/EEC by removing tax barriers levied on the distribution of profits within groups of companies in the European Union by eliminating deductions at the source on dividend payments between associated companies in different Member States, to prevent the double taxation of parent companies with regard to the profits of their subsidiaries.

No taxation on income derived from dividends

In practice, a German or French company (or a company in any European state) having an activity of any nature on its territory held by a holding company in a Member State of the European Community, may, after payment of the corporate tax, pay dividends to the parent company absolutely free of tax.

Once these profits have been domiciled in the holding, the local tax system for dividend income will be applied. In Austria or Latvia no tax is levied on this type of income.

“Austria is increasingly recognised as a favourable holding jurisdiction, but in practice, it is still under-estimated and under-utilised”, declared Sibylle Novak and Martin Zuffer, of the law firm CMS Reich-Rohrwig Hainz in Vienna, Austria. Latvia, known for its excellent banking network, took a step forward on May 2nd, 2013 by the voice of its parliament, the Saeima, to promulgate a final reading confirming the amendment of legislation to exempt profits from dividend income from July 1st, 2013 according to Remi Troch from cabinet BDO (group Deloitte).

Holding in Vienna or Riga, subsidiary in Europe, result “tax optimization”

It is, therefore, unnecessary to go around the world to find the ideal Holding, it’s enough just to set up a holding company in Riga or Vienna to hold the shares of the daughter company and pay out dividends annually to the parent company, tax free.


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