Today’s business environment sees many companies entering into contracts with foreign partners that often involve the agreed work being carried out abroad. PwC Latvia tax director Vita Sakne and senior associate Elizabete Lizete Lapsina explain the circumstances and issues arising when a company doing a long-term construction or installation project across several jurisdictions may be liable to register a permanent establishment.

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.

Many taxpayers that have wrongly paid some taxes into the single tax account, made an overpayment or adjusted their liabilities will see an amount under ‘Unallocated Payments’ in the Electronic Declaration System. We asked the State Revenue Service (SRS) when such unallocated amounts expire.

Whistleblowing is not a novel concept in the European Union (EU) so it’s not related to sustainability alone. However, the latest sustainability legislation enhances the significance of whistleblowing and the need to protect whistleblowers. This article explores how a whistleblowing system can drive sustainable growth in organisations.

Every five years or so, each information technology (IT) officer looks back at performance and builds a new corporate IT strategy. A benchmarking study that involves comparing your current IT governance parameters with similar companies is an integral part of strategic planning. Comparable parameters (e.g. IT costs per user or per euro earned, the percentage of technology maintenance costs in total technology costs, or the number of computer hardware units to be serviced per specialist full-time equivalent) depend on the database you’re using, they’re easy to understand, and selecting them raises no questions.

Whether a taxable person transfers a business or makes a contribution in kind in exchange for shares, this is typically treated as a transaction outside the scope of VAT. However, the Latvian VAT Act does not resolve this issue conclusively, and this assumption comes from a logical assessment of the rules that require adjustment to input VAT deduction. The latest case law of the Court of Justice of the European Union (CJEU) has weakened the impression that a contribution to share capital is always a supply outside the scope of VAT. This article explores a recent CJEU ruling.

One day I tried out Copilot for Microsoft 365 and realised this GenAI tool isn’t going to replace me at PwC but it will certainly change my daily life. PwC Latvia has been a Microsoft partner since last Christmas, and I’ve been encouraging Latvian companies to test Copilot’s capabilities. Each company can come up with its own scenario and see how it can benefit from using GenAI. It’s important that your company has its own task where it expects added value from GenAI. It wouldn’t be right to use the technology ‘unattended’ and laugh about images it generates with two-headed persons or about Neil Armstrong being hailed as the first astronaut. Below I offer my scenario and findings.

We have written earlier about the State Revenue Service (SRS) pointing out significant errors in transfer pricing (TP) files and focusing on the lack of financial data segmentation, the tested party or its financial data, and the benefit test (i.e. evidence of services). This article explores some other common breaches.

The Ministry of Finance has drafted proposals for amending the Cabinet of Ministers’ Rule No. 336 of 31 July 2001, ‘Allowable Expenses on Education and Medical Services’. The proposals mainly deal with the need to clearly define expenses that taxpayers may claim as allowable expenses.

Generative artificial intelligence (GenAI) has become an essential business tool that helps companies optimise their processes, improve efficiencies and cut costs. However, to better understand GenAI’s impact on finances, it’s important to consider the cost of this tool from different aspects.

A civil lawsuit involving a PwC Legal client’s dispute with an insurer over who owns a cash deposit has ended in payment of the full claim, with recovery of cash and interest on arrears and reimbursement of litigation costs, totalling EUR 115,029.32. The claimant’s interests were represented by Nataļja Puriņa, an attorney-at-law with ZAB PricewaterhouseCoopers Legal SIA.

Cross-border work done remotely has become very popular among digital nomads after the Covid-19 pandemic. However, an employer accepting or offering this option may face administrative obstacles and tax risks, one of which is the risk of having a permanent establishment (PE). This article explores the reasons for the growing popularity of remote work and the inherent PE risks.

Electrical vehicles (EVs) are gaining traction. According to the Auto Association, Latvia set a record in new EV registrations in 2023: 8.8% of total registered new passenger vehicles were electrical. Episode 41 of our podcast features Viktorija Lavrova, a PwC tax manager, and Aleksandrs Afanasjevs, a tax consultant, explaining what tax aspects should be considered if a company buys an EV, and whether the employer can reimburse EV charging costs if it’s being used for private as well as business purposes.

In this article we explore Ruling C-606/22 from the Court of Justice of the European Union (CJEU) on the entitlement to a refund of value added tax (VAT) where the taxable person has applied a higher rate of VAT than what the law prescribes. This ruling is important because it explains how the VAT directive’s principles should be applied in practice where a cash-register receipt has been issued to the customer, which is practically impossible to amend in order to show the correct rate of VAT and to refund the overpaid tax to the customer.

It’s been a while since the Organisation for Economic Co-operation and Development (OECD) drafted its Pillar I report dealing with various issues around the growing economic globalisation and digitalisation. It’s also increasingly difficult to determine countries’ rights to charge corporate income tax on the profits of multinational enterprise groups. While the project is basically geared towards digital business, one of the solutions the OECD offers may simplify transfer pricing (TP) for a particular group of transactions: baseline marketing and distribution activities.