Estonia has drawn up new taxation plans that will considerably change the financial landscape for businesses and people from 2025. This article looks at the proposed defence tax and motor vehicle tax, as well as other significant tax increases affecting various sectors.
Much of the acquisition cost in a share deal tends to be financed externally, i.e. by borrowing. Repayment of a shareholder’s loan is typically exempt from corporate income tax (CIT) under Latvian law (more details in our article CIT reform: lending to related parties). Also, if interest paid on the shareholder’s loan complies with Latvian thin capitalisation rules and transfer pricing rules and is used for business purposes, i.e. it qualifies as a business expense, the interest charges are exempt from Latvian CIT.
The end of the summer saw the Supreme Court rule on cases concerning the tax treatment of income from various entertainment services. Just like income from live streaming of video games, winnings from participation in games of chance are high on the agenda when it comes to interpreting the relevant tax rules, which is causing disputes with the tax authority. One of these disputes involved the State Revenue Service (SRS) deciding to charge personal income tax (PIT) and late fees on an individual’s unreported winnings from a company organising games of chance. The taxpayer sued the tax authority, and his appeal eventually landed in the Supreme Court. This article continues our MindLink series on Supreme Court rulings concerning the tax treatment of income from recreational activities and looks at a recent Supreme Court ruling.
Since the current Latvian transfer pricing (TP) rules came into force back in 2018, companies are used to preparing and submitting a TP file in the second half of the current year. For most taxpayers, the financial year is the calendar year, which in conjunction with the TP rules means a TP file for the previous financial year must be submitted by 31 December of the current year.
Last week we wrote about proposals for amending the Taxes and Duties Act and looked at the proposed changes in taxation and administration. This article continues exploring changes expected to tidy up administrative and data sharing processes.
In many companies summer is the time when staff performance is being appraised, potentially leading to promotions and bonus payments. Yet the employer has discretion in paying bonuses – it’s not an obligation but a choice. There are several preconditions to consider when it comes to setting up and running a bonus system. The case law says a bonus shows appreciation for an employee’s good work, so it’s up to the employer to determine the amount of a bonus. However, this decision-making power should not be interpreted as the employer’s unilateral opportunity to pay bonuses inconsistently and with no legal justification.
The State Revenue Service (SRS) has drawn up a plan for dealing with situations where individuals have not reported their income in full. This year the SRS has identified about 70,000 individuals with a difference of at least EUR 20,000 between their bank account turnover and reported income. In September the SRS plans to send out notices asking those individuals to revise their income and report it in full. Sending such letters is not a new practice – the SRS has used them for several years to check that a person reports all taxable and non-taxable transactions. A letter arrives through the SRS’s electronic reporting system. The SRS has 30 days to wait for a response from the person giving reasons for the discrepancy or adjusting their annual tax return if they find the discrepancies between the bank account turnover and the tax return arise from unreported income.
If we are to successfully integrate artificial intelligence (AI) in society, first of all we need to cross our moral threshold. We can see a common attitude that “the technology is not ready, it’s not capable of doing what I need”. However, we often expect AI to act independently like a human. The technology can do a lot of things, yet we need to find out if we are able to see its added value. The computer does what we tell it to do, rather than what we want it to do.
In early June, the Finance Ministry proposed amending the Taxes and Duties Act to improve the general tax administration rules and held a public consultation on the proposed changes. The proposals have been approved by the Cabinet of Ministers and are being prepared for submission to Parliament. This article explores what we see as key changes.
This series of articles offers information on the nature of state aid, and this time we will look at a set of state aid rules that is used very widely: de minimis aid. This aid is particularly attractive because its conditions are simplified and it is more accessible than other types of aid. This article explores key changes to these rules, where you can sign up for this aid and what conditions apply.
The live streaming of video games has become a popular form of entertainment attracting millions of global viewers on streaming platforms. The creators of video game livestreaming often encourage viewers to make voluntary payments supporting the gamer, which in certain cases may be his only source of income. This income has attracted the attention of the State Revenue Service (SRS). Having examined a person’s activities of creating video game streams and receiving money from viewers, the SRS found an unregistered economic activity and charged personal income tax (PIT). The person challenged this decision, and the case ended up in the Latvian Supreme Court. This article explores the background to the case and the Supreme Court’s opinion on the PIT treatment of income received from viewers during the live streaming of video games.
Latvian law lays down different principles for including employment periods and periods equivalent to employment in the insurance period for Latvian nationals and foreign nationals, including EU nationals receiving an old-age pension. This has caused disputes between pension recipients and the National Social Insurance Agency (NSIA), as well as building the case law based on interpretations of the Latvian Constitution, EU law and international agreements.
Today’s rapid technological advances have considerably changed the way business processes are organised. Integrating electronic invoices (e-invoices) with enterprise resource planning (ERP) systems has become a key strategy in companies looking to improve their operational efficiency and to simplify their financial processes. This integration not only accelerates invoice processing but also significantly improves data accuracy and governance capabilities, marking significant changes in financial transactions.
In a previous article, we used a tax gap example to explain why taxation is a key pillar of ESG. Tax transparency and tax governance in the context of ESG are relevant topics in the PwC network – last year PwC published a study ‘Tax transparency and sustainability reporting in 2023’. The study looks at the sustainability reports of 269 listed companies (Australia, Brazil, Germany, Ireland, South Africa, Spain, Switzerland and the UK), i.e. whether their reports address tax aspects and how. The study examined what sustainability frameworks (i.e. documents and guidelines) companies use the most often to disclose tax aspects in their sustainability reports. In this article we have summarised information from the study to explain what tax details should be included in a sustainability report.
Communicating with the State Revenue Service (SRS) is certainly the safest way to make sure the interpretation of law we use daily complies with how it was originally intended. Most of the guidelines published by the SRS explain clearly how statutory requirements should be applied. Yet the 2019 guidelines on transfer pricing (TP) documentation offer a formula for computing the amount of a controlled credit-line or cash-pool transaction made in the financial year that gives the taxpayer much more room for interpretation. This alternative formula became the subject of debate again in recent communication between TP professionals and the SRS.
