A foreign company planning to do business in Latvia can choose between registering a subsidiary or operating through a branch. This choice is commonly dictated by the group’s governance strategy and long-term plans in Latvia. A foreign company going for a simplified arrangement can register either a branch with the Enterprise Registry or a permanent establishment (PE) with the State Revenue Service (SRS) only for paying Latvian corporate income tax (CIT). This article outlines some CIT and accounting issues relevant to PE activities in Latvia.
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.
As the war in Ukraine goes on, many companies have unselfishly donated to Ukrainian residents and to Ukrainian refugees having crossed the EU border. Does the current tax regime encourage donations? And how has the Latvian government responded to the present situation?
When it comes to applying the corporate income tax (CIT) provisions for penalties and donations in practice, we have to deal with the terms “state institution,” “government-funded establishment” and “state-owned company,” which are not defined in the CIT Act or in the rules explaining its application. In this article we explain these terms for CIT purposes.
A company’s shareholders in a general meeting may decide to pay a dividend once the annual accounts showing a profit have been approved. If the company’s articles of association provide for this, the Commerce Act permits an interim dividend to be declared and paid halfway through the financial year. This article explores the legislation and corporate income tax (CIT) treatment of dividends a Latvian branch pays to its foreign head office.
The Corporate Income Tax (CIT) Act has been amended only slightly during 2021, as we wrote in our Flash News edition of 20 April 2021. This article explores the latest changes to the CIT Act as well as amendments being proposed for the near future, including the long-awaited rules for bad debt provisions under IFRS 9 Financial Instruments.
We have already commented on the corporate income tax (CIT) treatment of flow-through dividends and looked at personal income tax (PIT) relief available to an individual receiving a dividend. This article explores potential pitfalls in the tax treatment of flow-through dividends if a change of shareholder takes place shortly before the company decides to distribute a profit.
This article explores the corporate income tax (CIT) and personal income tax (PIT) treatment of financial transactions between a Latvian company and its owner (an individual) in two examples:
Companies have access to several reliefs that help reduce their corporate income tax (CIT) charge on dividends. This article answers the question of whether the legislation prescribes any order in which those reliefs may be taken or whether the taxpayer has a right to determine that order.
If a company’s debtor has been removed from the Commerce Register, can the company write off an account receivable from that debtor with no corporate income tax (CIT) consequences? This article explores things to consider when it comes to writing off a debt like this, and what documents the company must hold.
The Public Benefit Organisations (PBO) Act defines a donation but the concept of sponsoring remains undefined. In practice, companies that sponsor events organised by PBOs might wonder whether sponsoring has the same tax treatment as a donation. This article explores the tax implications of sponsoring PBOs.
A Latvian company in a vertically structured group often receives dividends from subsidiaries and pays them on to its owners. Such flow-through dividends qualify for a special relief under the Corporate Income Tax (CIT) Act: if certain conditions are met those dividends are taxed only once even if tax has been paid abroad. In practice various situations may arise, for instance, a dividend is received and paid in different periods, the profit may not have been taxed in the payer’s country, the Latvian company receives the dividend net, i.e. after tax has been withheld in the payer’s country. This article explores some relevant examples.