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.
The Corporate Income Tax (CIT) Act reform effective from 1 January 2018 has brought changes to all aspects of CIT treatment, including thin capitalisation rules. This article explores whether banks and insurance companies should include their excess interest expenses in their CIT base (taxable income).
We have recently written about the OECD Inclusive Framework proposals for taxing the digitalised economy that will help OECD members find a common basis for agreeing on taxation of global enterprises that is acceptable to all OECD members and jurisdictions. Despite the large number of participating members (139 members and jurisdictions pursuing different interests and representing various sizes of economy), all stakeholders understand the significance of this reform and are interested in agreeing on the urgent issues and implementing the common taxation of the digitalised economy as soon as possible. This article explores the ambitious goals of this agreement and the deadlines for concluding and implementing it, which are even more ambitious.
On 10 May 2021 the State Revenue Service (“SRS”) posted on their website an update to “Bad Debts” offering guidance on how VAT and corporate income tax should be applied. This article explores the VAT treatment of debt assignment.
We have written earlier about the corporate income tax (“CIT”) treatment of payments made to a non-resident company on which tax must be withheld under section 5 of the CIT Act. This article explores the legal framework, examples and supporting documents for the most common type of payment: management and consulting fees.
To pick up where we left off in our earlier article Ways of reducing tax on profit distribution, which discusses how to minimise your corporate income tax (“CIT”) liability when distributing “new” profits, this article explores some personal income tax (“PIT”) relief an individual can take even if the company has already claimed one of the available CIT reliefs according to the current practice.
Having the status of a public benefit organisation (“PBO”) not only demonstrates that the organisation is working for the public good but also motivates the PBO to raise donations and receive various tax and other advantages. Donations are a key source of various PBO public benefit projects, while donors can claim tax advantages. The Ministry of Finance (“MOF”) has issued an informative report on the activities and development of PBOs. This article offers a brief summary and looks at what companies think about this relief and whether it has promoted PBO operations.
The G7 finance ministers announced an agreement on 5 June in which the participating countries committed to new taxing rights allowing countries to reallocate some portion of large multinational companies’ profits to markets (i.e. where sales arise – “Pillar One”) as well as enacting a global minimum tax rate of at least 15% (“Pillar Two”). The meeting marked an early test of whether the US position on the OECD Inclusive Framework’s “Taxation of the Digitalising Economy” project would provide momentum to finding a common base for agreement.
Latvian companies often approach foreign organisations or individuals to draw on their expertise and receive advice on matters that are crucial for the Latvian company’s growth. This assistance is best received from a group company in the form of management services or consulting services but the Latvian company may have to hire an unrelated foreign company or personal consultant. This article explores Latvian tax implications (including for the Latvian company) and how to tell whether it is personal income tax (“PIT”) or corporate income tax (“CIT”) that is chargeable primarily.
