Flash News offers the latest information on current tax, accounting, legal and other business issues.
Outsourcing certain business processes is no longer a novelty when it comes to helping companies to secure flexibility while keeping costs predictable. Carefully evaluating our core processes and separating responsibilities can help us assess what the best sourcing mix will be. Companies are already used to the outsourcing of, for example, accounting or information technology (IT) services. But extending the XaaS strategy to other areas is also gaining traction, for example, by analysing all of your company’s present and future competence requirements to help you achieve your goals.
Sole traders were exempt from making advance personal income tax (PIT) payments in 2020, 2021 and 2022 after tax aid measures were adopted under section 6 of the Covid-19 Act. According to the current rules and the information published by the State Revenue Service (SRS), sole traders would have been required to resume advance PIT payments in 2023, with the first payment due on or before 23 March. However, proposals were submitted on 3 March to extend the deadline for another year.
Thanks to the considerable interest in PwC Academy’s introductory lecture in November, which offered an overview of the content of PwC’s Digital Academy (still available as a video recording), in January PwC’s Digital Academy Latvia launched a series of three webinars for managers, accountants, bookkeepers and everyone who works with data, reports and standard processes on a daily basis.
We are happy to share with our MindLink.lv readers the topics we discuss in our webinars.
In our article of 27 September 2022 we explored what Power Query is like and why we should use it, as well as giving a brief overview of what the tool offers. This article explores how we can benefit from using Power Query to compare data, because participants of PwC Digital Academy Latvia’s upcoming webinar on 23 February will have the opportunity to find out how they can set up templates in practice for comparing various types of data.
To continue the fight against money laundering and sanctions breaches, members of the European Parliament sitting on the Committee on Economic and Monetary Affairs and on the Committee on Civil Liberties, Justice and Home Affairs called attention on 28 March to the need for tighter conditions in combating money laundering, terrorism and proliferation financing (“AML”) as well as sanctions breaches. These committees have drawn up a package of documents containing three draft laws, which the European Parliament is to debate in April.
Amendments to the Proof of Identity Act that came into force on 1 September 2022 will also affect entities that are subject to the Anti Money Laundering and Counter Terrorism and Proliferation Financing Act (“AML/CTPFA subjects”). If you want to keep your client relationships then you should evaluate how the amendments will affect them, and you should adopt solutions that will allow you to legally continue those relationships.
As Russia continues the war in Ukraine, the US and the European Union (EU) together with other countries keep increasing the size of sanctions imposed on Russia.
At the EU summit held on 30–31 May 2022, the European Council agreed on the sixth package of sanctions against Russia that will mainly apply to crude oil and petroleum products supplied to EU member states. Yet the Council of Europe has agreed a temporary exception for crude oil supplied through pipelines. Ursula von der Leyen, President of the European Commission, has said that the restrictions included in the package will in fact stop around 90% of EU oil imports from Russia by the end of this year.
As the size of the sanctions grows, confused companies are having more and more questions about how to cope with the increasing sanctions burden, whether a company is supervised by particular regulatory bodies, and whether the current sanctions rules and guidelines provide for setting up an internal control system to manage sanctions risk.
As you may know, Latvian taxable persons can recover VAT paid on purchases in another member state under Council Directive 2008/9/EC, i.e. local VAT is refunded to taxable persons that are not established in the member state but are established in another. As Britain left the EU on 31 January 2020 with a period of transition to 31 December 2020, the single EU VAT refund procedure is no longer available to recover UK VAT after 1 January 2021. The single procedure can still be used to recover any UK VAT paid in 2020, but the filing deadline is almost upon us: 31 March 2021.
The United Kingdom (“UK”) left the EU at midnight on 31 January 2020. The Brexit agreement provided that EU nationals staying in the UK until the end of the transition period would keep the social rights that go with EU citizen status, i.e. the opportunity to apply for various benefits, pensions and other social entitlements in the UK, similar to living in other member states. The Trade and Cooperation Agreement signed on 30 December 2020 is applied provisionally from 1 January 2021 pending ratification at EU level. The Agreement includes a separate protocol on social security coordination. This article explores some key changes in social security to be considered by employers after Brexit and in the light of the new agreement.
The UK left the EU on 1 January 2021 and now fits the definition of a “third country.” Having joined the European Community on 1 January 1973, the UK is the first country to have formally left the EU after spending 47 years as a member state. Changes brought about by Brexit are affecting not only taxation, immigration and trading but also the operation of the Anti Money Laundering and Counter Terrorism and Proliferation Financing (“AML/CTPF”) Act.
On 20 April 2023 the Court of Justice of the European Union (CJEU) ruled on case C‑282/22 concerning the VAT treatment of services supplied by EV charging stations that offer charging equipment and software in addition to the charging service. This article explores the CJEU’s interpretation.
Our previous article looked at the need for a taxpayer’s transfer pricing (TP) file to support his guarantee transactions, and explored a general approach to assessing whether a guarantee transaction is arm’s length. In this article we are discussing aspects to consider when the substance of guarantee transactions is analysed, and we are taking a closer look at methods used in analysing such transactions.
During the pandemic, Latvian companies faced unprecedented challenges around remote working, when the entire corporate culture came up for overhaul. The biggest challenges arose from the need for flexibility as the traditional eight-hour working day at the office was upgraded with the option to connect remotely at the employee’s convenience. Some companies cancelled the full-time office presence requirement altogether and set up alternative working arrangements with variable hours, places and conditions. Flexibility became a key aspect in keeping employees motivated and loyal. This article explores the rapid development of flexible reward schemes.
On 27 April 2023, Parliament approved amendments to the Corporate Income Tax (CIT) Act in their final reading. The amendments set a higher threshold for luxury executive vehicles – EUR 75,000 instead of EUR 50,000 (excluding VAT). The new threshold will apply to company cars acquired after 1 June 2023.
There is now more talk of how to live green. Companies, too, are trying to take the green path, thinking about their sustainability, more efficient use of resources and ways of cutting costs. Demand for electric vehicles (EVs) has recently grown, as confirmed by the Latvian Road Traffic Safety Office’s data for 1 January 2023 – the number of EVs has risen by 81% since the beginning of 2022. This article explores the corporate income tax (CIT) implications of buying an EV.
On 18 April 2023 the Supreme Court ruled on case No. A420131521 concerning the classification of non-business expenses for corporate income tax (CIT) purposes, application of the concept of labour lease, and additional taxes charged by the State Revenue Service (SRS) in the construction sector, where subcontracted labour was used. By its ruling the Supreme Court refused the company’s request for reversal of the SRS’s decision, which remains unchanged and has taken effect. We feel MindLink subscribers should become familiar with this decision by which the SRS charged CIT and national social insurance (NSI) contributions, as well as a late fee and a penalty. For personal income tax (PIT) purposes, only a penalty was charged.
On 27 April 2023, Parliament approved amendments to the Corporate Income Tax (CIT) Act in their final reading. The amendments set a higher threshold for luxury executive vehicles – EUR 75,000 instead of EUR 50,000 (excluding VAT). The new threshold will apply to company cars acquired after 1 June 2023.
It has been some time since Covid-19 changed our daily lives. The resulting changes to the business environment and especially employment have become a normal part of our daily lives, as the interest in remote and hybrid work grows. This way of working allows employees to choose the place or country where they carry out their job duties. Yet this unlimited mobility may create tax risks to the employer. In this article we explore whether a company may be exposed to permanent establishment (PE) risk under certain conditions if a member of its management team works remotely. We also look at how the tax authorities of other countries have responded, in order to identify the riskiest countries.
Sole traders were exempt from making advance personal income tax (PIT) payments in 2020, 2021 and 2022 after tax aid measures were adopted under section 6 of the Covid-19 Act. According to the current rules and the information published by the State Revenue Service (SRS), sole traders would have been required to resume advance PIT payments in 2023, with the first payment due on or before 23 March. However, proposals were submitted on 3 March to extend the deadline for another year.
Does the land owner – a taxable person registered for Latvian VAT – have a right to demand payment of VAT in a forced lease of land? And should the amount of VAT be included in or paid on top of the rent? In this article we are looking for answers.
On 28 September the European Commission announced a new action plan for the Customs Union aimed at making EU Customs smarter, more innovative and more efficient over the next four years. This article explores how these measures are to strengthen the significant role the Customs Union has to play.
During the pandemic, Latvian companies faced unprecedented challenges around remote working, when the entire corporate culture came up for overhaul. The biggest challenges arose from the need for flexibility as the traditional eight-hour working day at the office was upgraded with the option to connect remotely at the employee’s convenience. Some companies cancelled the full-time office presence requirement altogether and set up alternative working arrangements with variable hours, places and conditions. Flexibility became a key aspect in keeping employees motivated and loyal. This article explores the rapid development of flexible reward schemes.
PwC US has carried out HR Tech Survey 2022. We believe that MindLink.lv subscribers, too, might be interested in its findings, as they relate to one of the traditional corporate processes – human resources (HR), or more precisely, investing in HR technologies. HR technologies in this article mean IT systems that enable the recording of HR processes, such as vacations, time sheets, training courses, hiring and firing. The survey interviewed 688 HR leaders, who answered questions about their technology challenges and achievements. The full survey is unfortunately restricted to the US market, but a summary offering many valuable insights is available here. This article explores what we see as key findings.
There are various programmes out there aimed at increasing a company’s sales by raising the productivity of its employees joining the programme, by increasing customer loyalty etc. Cross-border programmes are also implemented in Latvia, and their tax issues are very topical as well as complicated. This article explores employee incentive programmes in the light of a recent VAT ruling from the Court of Justice of the European Union (CJEU).
One EU individual on average discards 11 kg of textiles a year. Globally, a consignment of textiles is buried or incinerated every second. The global production of textiles almost doubled over the period from 2000 to 2015. Clothing and footwear consumption is expected to grow by 63% by 2030. In this article we’ll be looking at some of the EU’s proposed measures to address the problem of textile waste, as well as discussing what’s being done in Latvia and what we can expect in taxation.
The Excise Act was amended on 13 October 2022 with effect from 13 February 2023. The amendments are primarily made to transpose Council Directive (EU) 2020/262 of 19 December 2019 laying down the general arrangements for excise duty (recast) (the “new directive”), which will replace Council Directive 2008/118/EC of 16 December 2008 concerning the general arrangements for excise duty and repealing Directive 92/12/EEC (the “old directive”). More amendments stem from the CJEU’s ruling of 13 January 2022 concerning Mono SIA vs the State Revenue Service (SRS). The court disallows a situation where the ability of diplomatic and consular offices to claim an excise exemption is subject to the condition that payment for goods be made by bank transfer. This article summarises some of the key amendments to the Excise Act.
Artificial intelligence (AI) has recently aroused interest in most people. Some are depicting end-of-the-world scenes with AI taking over people’s jobs and later ruling the whole world. Others believe there is no reason to fear AI tools. As always, the truth lies somewhere in between. One of the most popular AI tools today is ChatGPT, which everyone can try out and see what it’s capable of, as we wrote in our recent Flash News. But why are the data protection authorities of European countries beginning to raise the alarm?
On 20 April 2023 the Court of Justice of the European Union (CJEU) ruled on case C‑282/22 concerning the VAT treatment of services supplied by EV charging stations that offer charging equipment and software in addition to the charging service. This article explores the CJEU’s interpretation.
This statement does not seem to make sense and is contrary to what the law says about capital gains tax being payable only on income that results from a disposal of real estate (RE). However, a certain taxpayer had to fight in court for his right to be exempt from a tax liability on an RE disposal.
Artificial intelligence (AI) has recently aroused interest in most people. Some are depicting end-of-the-world scenes with AI taking over people’s jobs and later ruling the whole world. Others believe there is no reason to fear AI tools. As always, the truth lies somewhere in between. One of the most popular AI tools today is ChatGPT, which everyone can try out and see what it’s capable of, as we wrote in our recent Flash News. But why are the data protection authorities of European countries beginning to raise the alarm?
Russia’s military aggression has significantly affected some of the businesses importing metal products from Russia and Belarus, as well as industries such as metalworking, defence, construction, mechanical engineering, and information & communication technologies. To promote market stability, the Ministry of Economics intends to implement aid measures as an immediate solution in the form of financial instruments to ensure traders’ future business.
One EU individual on average discards 11 kg of textiles a year. Globally, a consignment of textiles is buried or incinerated every second. The global production of textiles almost doubled over the period from 2000 to 2015. Clothing and footwear consumption is expected to grow by 63% by 2030. In this article we’ll be looking at some of the EU’s proposed measures to address the problem of textile waste, as well as discussing what’s being done in Latvia and what we can expect in taxation.
As Europe is pressing ahead with its Green Deal, the relevance of environmental taxation is growing rapidly in Latvia and across the EU. Our experience suggests that Latvian companies are much better informed about the natural resource tax (NRT) treatment than foreign persons doing business in Latvia. This article serves as a reminder of the NRT treatment for foreign persons. This information may also help Latvian companies identify cases where a foreign supplier has Latvian NRT obligations, which are either not discharged or wrongly shifted onto the Latvian company.
With environmentally friendly practices, such as waste sorting and recycling, becoming the order of the day, the natural resource tax (NRT) treatment is a hot topic too. As you know, packaging is one of the items subject to NRT. The obligation to pay tax or the right to take an exemption lies with the person who is the first to sell goods in packaging in Latvia, including foreign companies supplying their goods to Latvian companies. There are plans to amend the NRT Act on how foreign persons may take an exemption.
On 18 April 2023 the Supreme Court ruled on case No. A420131521 concerning the classification of non-business expenses for corporate income tax (CIT) purposes, application of the concept of labour lease, and additional taxes charged by the State Revenue Service (SRS) in the construction sector, where subcontracted labour was used. By its ruling the Supreme Court refused the company’s request for reversal of the SRS’s decision, which remains unchanged and has taken effect. We feel MindLink subscribers should become familiar with this decision by which the SRS charged CIT and national social insurance (NSI) contributions, as well as a late fee and a penalty. For personal income tax (PIT) purposes, only a penalty was charged.
This statement does not seem to make sense and is contrary to what the law says about capital gains tax being payable only on income that results from a disposal of real estate (RE). However, a certain taxpayer had to fight in court for his right to be exempt from a tax liability on an RE disposal.
During the pandemic, Latvian companies faced unprecedented challenges around remote working, when the entire corporate culture came up for overhaul. The biggest challenges arose from the need for flexibility as the traditional eight-hour working day at the office was upgraded with the option to connect remotely at the employee’s convenience. Some companies cancelled the full-time office presence requirement altogether and set up alternative working arrangements with variable hours, places and conditions. Flexibility became a key aspect in keeping employees motivated and loyal. This article explores the rapid development of flexible reward schemes.
Latvian tax residents are also taking the opportunity to work abroad. A Latvian tax resident meeting certain criteria may become a tax resident in the foreign country where he is employed. Selling real estate (RE) located in Latvia or other assets may raise the question of which country’s personal income tax (PIT) is payable on the profit you make on the transaction.
On 8 October 2021 the Supreme Court announced a ruling on case SKA-301/2021 regarding expenses a person incurs in repaying a mortgage on an inherited real estate (RE), which may be treated as an investment in a functionally similar RE.
On 18 April 2023 the Supreme Court ruled on case No. A420131521 concerning the classification of non-business expenses for corporate income tax (CIT) purposes, application of the concept of labour lease, and additional taxes charged by the State Revenue Service (SRS) in the construction sector, where subcontracted labour was used. By its ruling the Supreme Court refused the company’s request for reversal of the SRS’s decision, which remains unchanged and has taken effect. We feel MindLink subscribers should become familiar with this decision by which the SRS charged CIT and national social insurance (NSI) contributions, as well as a late fee and a penalty. For personal income tax (PIT) purposes, only a penalty was charged.
A new year, a new beginning! As usual, this article summarises the provisions of tax laws and other legislation affecting the calculation of national social insurance (NSI) contributions, solidarity tax (ST) and personal income tax (PIT) on wages and salaries in 2023.
The last decade has seen a considerable increase in regulatory requirements in the governance and non-financial reporting space. At the same time, various stakeholders (shareholders, employees, customers etc) are expecting reliable, high-quality and standardised information from companies on their governance practices and non-financial performance. Both of these factors affect companies in Latvia as well.
Several sections of the Taxes and Duties Act define a taxpayer’s obligations. Section 15.2 requires the taxpayer to prepare a local transfer pricing (TP) file within 12 months after the end of the financial period and, depending on the circumstances, to submit it to the State Revenue Service (SRS) for the financial period:
Situation 1 – within 12 months after the end of the financial period; or
Situation 2 – within one month after receiving a request from the SRS.
This article is meant just for you if you are interested in learning more about a crucial relief in Situation 2. The taxpayer has the right to revise his local TP file every three years if he satisfies a certain condition and meets one annual requirement.
Amendments to the Taxes and Duties Act that require taxpayers to prepare and file a specified form of transfer pricing (TP) documentation with the State Revenue Service (SRS) took effect back in 2018, yet we had not seen any active enforcement steps from the SRS until the end of this summer, when several Latvian companies received an informational report on the submission of TP documentation via the SRS’s e-filing system (“EDS”). These reports imply that the SRS is checking the companies’ obligation to file TP documentation for 2020 and urging them to do so by the deadline stated in the report or to explain why they should not file TP documentation. This article reminds you of the TP documentation preparation and filing requirements and of the SRS’s activities in enforcing them, and we also suggest steps your company might take after receiving such a report.
On 18 April 2023 the Supreme Court ruled on case No. A420131521 concerning the classification of non-business expenses for corporate income tax (CIT) purposes, application of the concept of labour lease, and additional taxes charged by the State Revenue Service (SRS) in the construction sector, where subcontracted labour was used. By its ruling the Supreme Court refused the company’s request for reversal of the SRS’s decision, which remains unchanged and has taken effect. We feel MindLink subscribers should become familiar with this decision by which the SRS charged CIT and national social insurance (NSI) contributions, as well as a late fee and a penalty. For personal income tax (PIT) purposes, only a penalty was charged.
On 20 April 2023 the Court of Justice of the European Union (CJEU) ruled on case C‑282/22 concerning the VAT treatment of services supplied by EV charging stations that offer charging equipment and software in addition to the charging service. This article explores the CJEU’s interpretation.
One EU individual on average discards 11 kg of textiles a year. Globally, a consignment of textiles is buried or incinerated every second. The global production of textiles almost doubled over the period from 2000 to 2015. Clothing and footwear consumption is expected to grow by 63% by 2030. In this article we’ll be looking at some of the EU’s proposed measures to address the problem of textile waste, as well as discussing what’s being done in Latvia and what we can expect in taxation.
Artificial intelligence (AI) has recently aroused interest in most people. Some are depicting end-of-the-world scenes with AI taking over people’s jobs and later ruling the whole world. Others believe there is no reason to fear AI tools. As always, the truth lies somewhere in between. One of the most popular AI tools today is ChatGPT, which everyone can try out and see what it’s capable of, as we wrote in our recent Flash News. But why are the data protection authorities of European countries beginning to raise the alarm?
Technologies, especially artificial intelligence (AI), seem to be evolving faster than people are able to perceive their significance. This is still a hot topic not only in Hollywood but also in everyday life. AI tools are now being widely used by students and entrepreneurs who recognise potential uses of this technology. This growing interest has led to the creation of many tools of this kind, such as ChatGPT, Bing ChatGPT, Jasper, and Google Bard. This article explores the most popular and capable AI tool, ChatGPT, and its newest version, GPT-4, as well as looking at what it’s capable of doing and what its limitations are.
PwC US has carried out HR Tech Survey 2022. We believe that MindLink.lv subscribers, too, might be interested in its findings, as they relate to one of the traditional corporate processes – human resources (HR), or more precisely, investing in HR technologies. HR technologies in this article mean IT systems that enable the recording of HR processes, such as vacations, time sheets, training courses, hiring and firing. The survey interviewed 688 HR leaders, who answered questions about their technology challenges and achievements. The full survey is unfortunately restricted to the US market, but a summary offering many valuable insights is available here. This article explores what we see as key findings.
Our previous article looked at the need for a taxpayer’s transfer pricing (TP) file to support his guarantee transactions, and explored a general approach to assessing whether a guarantee transaction is arm’s length. In this article we are discussing aspects to consider when the substance of guarantee transactions is analysed, and we are taking a closer look at methods used in analysing such transactions.
On 5 July 2022 the Regional Court passed ruling No. A420275316 on whether interest rates charged on loans between related parties are arm’s length. The ruling emphasises the significance of the economic substance approach and strengthens the understanding of whether the Bank of Latvia (BOL) statistics are suitable for analysing transfer prices (interest rates).
When it comes to performing a transfer pricing (TP) analysis of financial transactions, attention is usually paid to loans and cash pool transactions. Yet there are some other financial transactions between related parties that often fail to receive a proper assessment in the TP documentation: financial guarantees. The current market environment has more creditors such as banks asking for a guarantee before they lend to customers. In this series of articles we explore TP aspects of guarantees, compare different approaches to determining an arm’s length price of a guarantee, and analyse relevant case law.
Neither the Corporate Income Tax (CIT) Act nor the Ukrainian Civilians Support Act (“Ukraine Act”) laid down any special procedures or easy terms for the CIT treatment of donations intended to help victims in Ukraine until the Ukraine Act was amended with effect from 7 April to add a new section, 11.4: Corporate Income Tax Relief for Donors. This article explores the special rule and how it’s supposed to be applied.
Since war broke out in Ukraine, many people have been eager to help Ukrainian people with various donations. Last week we wrote about the Latvian VAT treatment of donations and how the tax rules should be changed to cover various cases. This article explores the corporate income tax (CIT) treatment of donations.
On 20 April 2023 the Court of Justice of the European Union (CJEU) ruled on case C‑282/22 concerning the VAT treatment of services supplied by EV charging stations that offer charging equipment and software in addition to the charging service. This article explores the CJEU’s interpretation.
On 27 April 2023, Parliament approved amendments to the Corporate Income Tax (CIT) Act in their final reading. The amendments set a higher threshold for luxury executive vehicles – EUR 75,000 instead of EUR 50,000 (excluding VAT). The new threshold will apply to company cars acquired after 1 June 2023.
The VAT Act has imposed reverse-charge VAT on construction services since 2018. But is it clear in what cases a service, especially one that doesn’t involve technical construction works, is governed by the VAT rules on construction services? Practice shows it’s not clear.
This article explores changes to the royalties scheme effective from 1 July 2021 and applicable throughout 2021, as well as other ways in which authors can receive royalties. This article summarises the practicalities and administrative obligations facing the payer of income and the Latvian tax-resident payee.
