In September 2024 the Court of Justice of the European Union (CJEU) definitively ruled on the case involving the European Commission (EC) against Ireland and Apple. The CJEU confirmed that Ireland’s two tax measures allowed Apple to use transfer prices in its intragroup transactions that were not arm’s length, constituting illegal state aid under Article 107(1) of the Treaty on the Functioning of the European Union (TFEU). Apple enjoyed tax advantages over the period from 1991 to 2014 and must now repay EUR 13 billion in unpaid taxes to the Irish state. This is the largest amount of illegal aid in history to date.

We have read conflicting opinions from the State Revenue Service (SRS) on how financing from the State or EU funds affects value added tax (VAT). Persons receiving such funding should consider this issue carefully and may have to seek SRS approval for VAT treatment. To help you navigate this complexity, we will offer some guidelines based on the assessment made by the Court of Justice of the European Union (CJEU) in its ruling C‑87/23 of 4 July 2024. The case involves a dispute between the Latvian Information and Communications Technology Association (LICTA) and the SRS.

Today’s business often spreads across several countries, making it difficult to tax business income properly. A key challenge for companies is to determine whether they have a permanent establishment (PE) abroad. The situation is complicated further by countries possibly applying different PE criteria and interpreting PE rules in their double tax treaties differently.

The market economy operator principle (also known as the ‘private investor test’) is an analytical tool the European Commission uses to prevent companies from obtaining advantages through the State intervening in a particular market. This requires a complex economic analysis and legal justification to assess whether a hypothetical private investor would make a comparable intervention in the particular market on the same conditions as the State. If the answer is yes and the transaction is consistent with the market, this is unlikely to be considered state aid because the other party (company) has not obtained an economic benefit it would not have obtained under normal market conditions.

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.

A claim for damages and litigation expenses totalling EUR 212,040.63 was fully satisfied in a civil case where a PwC Legal client was seeking damages, including lost profits, from a certain private company. The plaintiff’s interests were represented by Natalja Purina, an attorney-at-law with PwC Legal.

In this article, we will explore how the courts ruled on a tax audit where the State Revenue Service (SRS) claimed the company under audit had wrongly deducted input VAT and misapplied a ratio. Although the SRS did not approve the company’s adjustments to its VAT returns and did not refund the VAT it had overpaid, the courts found the penalty and interest charged by the SRS to be justified. This case highlights important lessons for companies to avoid similar problems in the future.

This article kicks off a new series on state aid, a tool that municipalities and other public persons use to drive economic growth and support business across the country. This article explores the main principles of state aid, which every company needs to know because under the European Court of Justice’s case law every company must act as a good steward and be able to establish whether the state aid received is legitimate. Did you know that state aid is in fact forbidden and only permitted in exceptional cases?

The Constitutional Court (CC) ruled on 13 June 2024 that provisions of the Personal Income Tax (PIT) Act are consistent with section 105 of the Constitution, which guarantees the right to property. The ruling was passed after the Administrative Regional Court and Riga City Court disputed the PIT Act’s provisions requiring payment of PIT on gambling and lottery winnings regardless of what the gambler has paid to play the game.

This article explores a court ruling that was issued after a review by the State Revenue Service (SRS) found that invoices a company had expensed in its books did not meet requirements of the Accounting Act. A tax audit found the invoices do not qualify as supporting documents because no services were provided in exchange and the invoices were prepared incorrectly. The company faced an additional corporate income tax (CIT) liability of more than EUR 5 million.