India and Latvia signed an agreement for providing tax stability to residents of both countries and facilitate economic cooperation by stimulating flow of investment, technology and services.
The Agreement and the Agreed Note for Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income (DTAA) were signed by External Affairs Minister Salman Khurshid and his Latvian counterpart Edgars Rinkevics here.

Latvia is the third Baltic country with which India has signed the DTAA. Earlier, DTAAs have been signed with Lithuania and Estonia which have already come into force.

The DTAA provides that business profits will be taxable in the source if the activities of an enterprise constitute a permanent establishment (PE) in the source state.

It also provides for fixed place PE, building site, construction or assembly PE, service PE, Off-shore exploration/exploitation PE and agency PE.

The Agreement incorporates para two in Article concerning Associated Enterprises.

This would enhance recourse to Mutual Agreement Procedure to relieve double taxation in cases involving transfer pricing adjustments.