India and Latvia will sign an agreement for double taxation avoidance in New Delhi on Wednesday.

Following this, the Baltic state would open its embassy in New Delhi in January 2014, said Edgars Rinkevics, Latvian Minister of Foreign Affairs.

These steps are expected to give a significant boost to trade, cultural and educational exchanges between the two countries, ahead of India and the EU concluding a free trade agreement (FTA), he told Business Line here.

Under the double taxation avoidance agreement, business profits will be taxable in the source state if the activities of an enterprise constitute a permanent establishment in that state.

Rinkevics, who is leading a 13-member trade delegation to India, said Latvia had completed all the formalities to open its Indian embassy, which would make it easier for Indians visiting the Baltic state to get visas and work permits.

It is also expected to provide Indian exporters and visitors with easier access to EU and Russian markets, as Latvia is a gateway to those regions.

While not giving a timeframe for the signing of an FTA between India and the EU, Rinkevics expressed the hope it would be done at the earliest.

Issues such as public procurement and the opening of certain areas of industries were being sorted out, he said.

Latvia will be joining the euro zone in January 2014. That would have no impact on Indian investments in Latvia, the Minister said.

“Even during the worst of the crisis, we did not devalue our currency. Our inflation rate has come down to 2.5 per cent, while public debt is down to 30 per cent. Unemployment, which was 17 per cent at the head of the crisis, is now just above 9 per cent,” he said.

India’s exports to Latvia increased from $59 million in 2007-08 to about $80 million last year, while imports touched $58 million.

There are about 60 Latvian-Indian joint ventures in Latvia in the software and manufacturing sectors.

amitmitra@thehindu.co.in

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