How does tax withholding work on Capitalia?
When the tax withholding happens:
- You invest in a project.
- The borrower makes a payment that covers interest (interest or late interest).
- Once the received payment is processed and is being distributed to investors, a part of the interest payment is automatically deducted from repayment to your account as withholding tax based on the applicable tax rate.
- When you declare your income in your country of tax residence, you might be able to reduce the tax payable in your country by the withheld amount. Please consult your local tax legislation and seek professional advice if needed.
- You can see the withheld amount as a separate entry in the account statement, as well as in the bank transfer payment details text. The total withheld amount will be visible on your tax report which you can download from the Account statement page. Note: for repayments starting from the 1st of September, 2023.
Please note that no withholding tax is deducted from investors - legal entities.
The withholding tax rate depends on your country of tax residence. Currently, the following rates are applicable:
- For investors who are tax residents of Latvia, the withholding tax rate is 20%, in line with the Personal Income Tax Act.
- Investors who invest as private persons and are tax residents of Lithuania can reduce their withholding tax rate to 0% if they provide a tax resident certificate. Note: In case your income on Capitalia platform is over EUR 5,000 the original tax resident certificate must be submitted to our office in Vilnius or Riga via post or in person. Tax resident certificates must be renewed every year and submitted to us no later than the 31st of January of the new year.
- For all other investors who invest as private persons, the standard withholding tax rate is 20%. The rate can be reduced if the investor provides a tax resident certificate. Note: In case your annual income on Capitalia platform is over EUR 5,000 the original tax resident certificate (2 copies) must be mailed to our office in Riga via post. Tax resident certificates must be renewed every year and submitted to us no later than the 31st of January of the new year. Please see the full list of reduced applicable tax rates:
Country Double tax treaty rate (%) Country Double tax treaty rate (5) EU Non-EU Austria 10 Albania 10 Belgium 10 Armenia 10 Bulgaria 5 Azerbaijan 10 Croatia 10 Belarus 10 Cyprus 10 Canada 10 Czech Republic 10 China 10 Denmark 10 Georgia 10 Estonia 10 Hong Kong SAR 10 Finland 10 Iceland 10 France 10 India 10 Germany 10 Israel 10 Greece 10 Japan 10 Hungary 10 Kazakhstan 10 Ireland 10 Korea (ROK) 10 Italy 10 Kosovo 10 Lithuania 0 Kuwait 5 Luxembourg 10 Kyrgyzstan 5 Malta 10 Mexico 10 Netherlands 10 Moldova 10 Poland 10 Montenegro 10 Portugal 10 Morocco 10 Romania 10 North Macedonia 5 Slovakia 10 Norway 10 Slovenia 10 Qatar 5 Spain 10 Saudi Arabia 5 Sweden 10 Serbia 10 Singapore 10 Switzerland 10 Tajikistan 7 Turkiye 10 Turkmenistan 10 Ukraine 10 United Arab Emirates 2.5 United Kingdom 10 United States 10 Uzbekistan 10 Vietnam 10
To register your tax residence and apply a reduced withholding tax rate, we are required to receive a tax resident certificate from you. Check with your local tax authorities to see how you can obtain a tax resident certificate in your country of tax residence. Your tax resident certificate must meet the following requirements to be accepted:
- It must contain your full name and tax identification number
- It must confirm your tax residence for the current year
- It should specify that it applies to income generated in Latvia
- It must be in English and signed by the issuing tax office
The reduced withholding tax will be applied from the next month after Capitalia has received and processed your tax resident certificate. If the tax resident certificate is provided later, but not more than 3 years after the date of receiving interest, you can request repayment from the Latvian tax authorities.
Unless stated otherwise, your tax resident certificate remains valid until the end of the specified calendar year. You will need to submit a new tax resident certificate to reduce your tax withholding rate in the next calendar year.
An additional form only needs to be provided when you generate more than €5000 in income during one calendar year.