New Tax Treaty Between Mexico And Latvia

On February 27, 2013, the Tax Treaty signed between Mexico and Latvia and its Protocol were published in the Mexican Official Gazette. According to its Article 27, the Treaty will enter in force on January 1, 2014. With this new tax treaty, Mexico will have a tax treaty network with 52 countries. This new Treaty follows the Mexican common practice in negotiating tax treaties, i.e., using the OECD Model Tax Convention on Income and on Capital but incorporating some features from the UN Model Tax Convention. These include, for example, Article 5 (six-month period for converting a construction site into a permanent establishment), Article 15 (independent personal services), and Article 21 (other income taxed in the source country). In addition, Article IX of the Protocol of this new Tax Treaty provides that published commentaries of the OECD Model Tax Convention on Income and on Capital will apply only to those provisions of the Treaty that correspond to the above-mentioned provisions of the UN Model Tax Convention. The withholding rates and special source taxation features of this new Treaty are as follows: Dividends. A 5 percent rate is imposed when the beneficial owner of the dividends is a company (other than a partnership) and has direct ownership of at least 10 percent of the legal entity distributing the dividends. A 10 percent rate is imposed in every other...