1. New legal developments in real property and tax areas Valters Gencs Advocate

2. Riga, April 7, 2005 Buying land in rural areas  Land book register– how to avoid fraud;  Latvian company (SIA (LLC) or AS (JSC)) in which;  capital > 50% of citizens of Latvia;  capital > 50% of individuals or legal entities of the Netherlands;  capital > 50% of above mentioned persons jointly;  Public joint-stock company.

3. Riga, April 7, 2005 The transitional period from the 1st May 2004 till 1st May 2011 Citizens from EU as self employed farmers; live in Latvia 3 years and active agricultural activities in Latvia for 3 years. Citizens and legal entities from EU, except agricultural and forest land; After the transitional period no restrictions to citizens and legal entities from EU – period may be prolonged for 3 years.

4. Riga, April 7, 2005 Buying land in city areas  Citizens of Latvia and EU  Latvian (SIA (LLC) or AS (JSC)) company or EU  capital > 50% of citizens from Latvia or EU;  capital > 50% of individuals or legal entities from Netherlands;  capital > 50% of before mentioned persons jointly; Buying of building  Land book register (no limitations).

5. Riga, April 7, 2005 Rights of first refusal by municipality 20 days from the receiving of the purchase agreement; do not apply to the industrial objects; do not apply, if an undivided share is purchased. Owner X Owner xOwner y Owner Y Sells ½ to y Sells ½ to y on the next day

6. Riga, April 7, 2005 Joint ownership – rights of first refusal  2 months from the receiving of the purchase agreement if X sells his part, Y have pre-emption rights if Y sells his part, X have pre-emption rights Owner xOwner y

7. Riga, April 7, 2005 Land owners pre-emption rights  Land and building owners pre-emption rights if X sells his house, Y have pre-emption rights if Y sells his land, X have pre-emption rights Owner X Owner Y

8. Riga, April 7, 2005 Specific requirements for ports The term of lease agreements may not exceed 30 years; In sublease agreement rights to build a property a separate item; Consent from creditors (bank) to register warehouse in the land book; Port can encumber the land of the port owned by legal or natural persons with the necessary easements.

9. Riga, April 7, 2005 Stamp duty & taxes  Sale of shares – no fee;  Stamp duty 2 % from the highest value;  Fee for moveable fixtures;  9 LVL for the Land book certificate;  Costs for the notary public about 10-15 LVL;  Costs for several statements 15-50 LVL;  Till December 31, 2006 – 1,5% of balance value.

10. Riga, April 7, 2005 Checklist Check, if the property registered with the Land book register, who is the owner, is the property not pledged or otherwise encumbered; Check, if there are any illegal constructions on the building; To conclude the deposit agreement (if the seller will breach from the contract, he/she has to pay the deposit back in double amount, but if the buyer will breach from the contract – he/she will loose the deposit);

11. Riga, April 7, 2005 Checklist To conclude the purchase agreement and submit it to the persons who have the pre-emption rights; To sign the registration request by the notary public; To pay the purchase price in the escrow account or to submit the bank guarantee to the seller; To register the title of the property with the Land book register; The bank transfers the money to the account of the seller after receiving the certificate of the Land book with the title of the property on the name of the buyer.

12. Riga, April 7, 2005 Sale of real property Payer Offshore/ onshore Tax free income Sale of real property hold for more than 12 month Latvian resident - individual LV or foreign property

13. Riga, April 7, 2005 Capital gain Payer Offshore/ onshore Tax free income Sale of shares Latvian resident - individual LV or foreign property

14. Riga, April 7, 2005 Tax free dividends Dividends (EU or LV) - no tax exemptions current or prior year; - no partnerships. Latvian resident – tax free 15% corporate tax (LV)

15. Riga, April 7, 2005 Suspect transactions Cash LVL 40000 (except salary, pension and social fee); Cash LVL 1000 change of small nominal; Cash LVL 10000 traveler checks purchases; Currency exchange more than LVL 5000; Transfers for LVL 40000 without opening account or taking from account.

16. Riga, April 7, 2005 Tax free deposits Bank Deposits (EU or LV) - all foreign (EU) tax is creditable in LV Latvian resident – tax free

17. Riga, April 7, 2005 EU Savings Directive EU will introduce it’s EU Savings Tax Directive on July 1st, 2005. All EU members (except Belgium, Luxembourg and Austria) will introduce a system of automatic information exchange!

18. Riga, April 7, 2005 Switzerland -Switzerland’s agreement with the EU in no way compromises client confidentiality “termed EU-withholding” for individual clients having an account with a Swiss domiciled Bank, or domiciled in one of the above mentioned three countries.

19. Riga, April 7, 2005 Withholding tax rates Such an individual client has the option of voluntary disclosure in order to avoid the following withholding rates: starting from July 1st, 2005 - 15%; starting from July 1st, 2008 - 20%; and finally from July 1st, 2011 - 35%.

20. Riga, April 7, 2005 Who is affected?  Account in Switzerland, Liechtenstein, Monaco, Andorra and San Marino and you are domiciled (the country of domicile not the nationality!) in an EU country.

21. Riga, April 7, 2005 Exceptions Applies to: Cross-border interest payments to individuals who are residents in one of the above mentioned countries; Not applies to : Investment income (dividends); Public and organizations or institutional investors; To legal entities.

22. Riga, April 7, 2005 Withholding taxes Dividends 10% or 0% (2 year holding period with 20% required); Participation in partnership – 15%; Consulting fee – 10%; Interest to related party – 10%; Copyright royalty – 15%; Other royalty – 10%; Use of property – 5%; Sale of real property – 2%; Low tax country 15%, except: Dividends Interest from bank Supply of goods; Tax clearance received.

23. Riga, April 7, 2005 List of Low Tax Countries AndorraGrenada Turks and Caicos Islands AnguillaGuatemala Tonga Antigua & BarbudaHong Kong Uruguay Netherlands AntillesJamaica Vanuatu United Arab EmiratesNew Caledonia Venezuela BahamasJordan Kenya BahrainCayman Islands Montserrat BarbadosCyprus St.Peter and Michael BelizeCook Islands Seychelles BermudaKampione St.Kitts and Nevis KuwaitNauru Liberia PanamaLibya San Marino British Virgin IslandsMadeira and St.Maria Island Bruney MacaoDominical Republic Republic of Maldives JerseyMarshall Islands St.Vincent and Grenada EcuadorIsland of Men St.Helens GuernseyMonaco Tahiti (French Polynesia) GibraltarCosta Rica

24. Riga, April 7, 2005 Dutch taxes Progressive Dutch personal income tax rate on labour income amounts to: 1st bracket (<EUR 16.893) 34,40% (including 32,6% national insurance contribution); 2nd bracket (<EUR 30.357) 41,95% (including 32,6% national insurance contribution); 3rd bracket (<EUR 51.762) 42%; 4th bracket (>EUR 51.762) 52%; Latvian tax 25% - saving from 9,4% to 27%.

25. Riga, April 7, 2005 E 101 certificate Sent for 12 month – pay in home country: Register for social fee in home country; 12 month may be extended to 5 years; Home country company shall send; Close connection to the employer.

26. Riga, April 7, 2005 Government proposal to abolish Dutch capital tax Contributions to the share capital of Dutch resident corporate entities are subject to Dutch capital tax at a rate of 0.55%; On 24 March 2005, the Dutch government announced to issue a proposal to abolish the Dutch capital tax as per 1 January 2006; The main reason for the proposal is to improve the competitive position of Dutch investment funds as opposed to foreign investment funds.

27. Riga, April 7, 2005 Thank you for your attention! For additional information please contact: Valters Gencs Law offices of Valters Gencs Riga, Valdemara Center, 3 rd floor, Kr. Valdemara street 21, Republic of Latvia, LV - 1010 Phone: +371 7240090 Fax: +371 7240091 E - mail: valters.gencs@gencs.lvvalters.gencs@gencs.lv www.gencs.lv