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Latvian banks started deoffshorization

After several months of persuasion, Latvian banks began to close the accounts of companies registered in offshore zones. Including those that belong to the Ukrainians. The reason is the EU deoffshorization program.

Latvian banks have sent letters to their clients in which they refuse to serve companies registered in non-EU countries, in Malta, the UK, and Canada. Banks are ready to make an exception only for companies with a “long-term customer history” and transparent business confirmed by public sources. The counterparties of the client company must meet the same requirements. Otherwise, the bank will refuse to process payments. Having sent out “letters of happiness” in early 2016, banks began to close accounts in the spring of those companies that did not re-register from offshore companies to one of the mentioned jurisdictions.

What is happening in Latvia and the EU in general? Deoffshorization, as part of this program, banks are required to find out detailed information about the financial condition of offshore companies and their beneficiaries. This is due to the accession of the EU countries to the automatic exchange of tax information. “The automatic exchange takes place based on a model international agreement for the exchange of information (MCAA) and approved standards (CRS) based on the Directive 2011/16 / EU on assistance in the field of tax administration (Mutual Assistance Directive) with the changes in 2014,” said Elena Kalinina.

Picture from a drone of the huge Latvian flag above AB dam taken on an early spring morning whilst the sun is rising. River Daugava with it’s bridges can be seen on the left.

Now all banks in countries that have joined the system for automatic exchange of information are required to provide information to the country’s tax authorities of residence of the beneficial owner or information on the legal entity’s activities and financial condition. Information about interest charges, dividends, insurance policy turnover, a property sale is sent separately.

“Now many banks will close accounts for classic offshore companies, whose legislation completely exempts from taxation and any financial and accounting,” says Elena Kalinina.

You can save your bank accounts, such as in same Latvia, by providing him with all the information he requires. What is left for companies that do not want to do this? Transfer accounts to other countries. “You can turn your attention to Liechtenstein, but maintaining companies in this jurisdiction will be quite expensive. There are also such low-tax jurisdictions in Europe as Bulgaria, Cyprus or Estonia. With the correct construction of the business structure, it is possible to minimize taxation in such European countries as Denmark and Great Britain,” recalls the managing partner of ABG Law Firm Dmitry Gutgarts.

By the way, Ukraine has not yet joined the system of automatic exchange of tax information. Therefore, information about companies with Ukrainian owners who have opened accounts in the European Union will not be automatically transferred to Ukraine’s tax authorities. There is simply no standard algorithm for this. And not automatically – there are no guarantees from this.