To pick up where we left off last week, this article explores the ESG concept and its components – environmental, social and governance.

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.

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.

Today’s understanding of sustainable growth is based on the idea expressed in “Our Common Future”, a 1987 report from the UN World Commission on Environment and Development: Sustainable development meets the needs of the present without compromising the ability of future generations to meet their own needs. This means that countries globally must plan their development in a way that not only boosts their economic development rates but also maintains the quality of life and prevents environmental degradation and overexploitation of natural resources.

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).

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.

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.

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.

On 15 December 2022, the Administrative Division of the Supreme Court passed ruling No. SKA-68/2022, which formulates a finding that’s apparently logical yet relatively rarely heard: “A drop in monetary value caused by inflation is treated as a type of financial loss, and the person is entitled to claim compensation for that loss.” While such an understanding can be found in earlier court decisions, a repeat confirmation in the Supreme Court ruling may turn out to be especially significant and become relevant not only in private persons’ disputes with government agencies but also in disputes between individuals and entities over issues typical of debt recovery cases, because in February 2023, for example, the annual inflation rate was 20.3%, as opposed to the statutory interest rate of 6% per annum.

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.

This article rounds off what we wrote last week.

Two or more individuals or entities may combine forces or funds under a partnership agreement to achieve a common goal. Each partner should make a contribution (cash, property or work) to the partnership and any assets acquired through the joint business of the partners are their joint property. The partners share in profits that are essentially due to them.

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.

On 14 February 2023 the EU Council decided to add four jurisdictions to the EU blacklist, bringing the total to 16. This blacklist is coming up for review in October. The Latvian blacklist of 12 jurisdictions in the Cabinet of Ministers’ Rule No. 819 is based on the EU blacklist as updated by the EU Council on 4 October 2022. While no amendments are being proposed, companies should prepare themselves for any resulting changes in advance and estimate their business impact.

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.