The Cabinet of Ministers’ Rule No. 677 has been amended with effect from 18 February 2021 on ways of applying the profit split method (“PSM”) in analysing transactions between related parties. This article offers a flowchart to help taxpayers evaluate the possibility of using PSM for economic validation of prices applied in their transactions, with a practical example of profit split.
From 1 January 2022 companies investing in a closed alternative investment fund will be allowed to exclude from their tax base any income the fund earns when selling shares in a company it owns, according to amendments to the Corporate Income Tax (“CIT”) Act effective from 20 April 2021. This article explores the rules and how this treatment could affect the fund’s investment disposal strategy.
The Cabinet of Ministers’ Rule No. 321 of 10 May 2005, The Amount, Collection, Refund, Allocation and Payment of the Levy on Blank Storage Media and Devices Usable for Reproduction, has been amended with effect from 14 April 2021. This article explores the goals and implications of the amendments.
On 4 September 2020 the Administrative Division of the Supreme Court ruled on case No. A420190717 SKA-383/2020 concerned with the personal income tax (“PIT”) treatment of a property contribution. The ruling reinforces the understanding of how PIT is deferred for an individual that has contributed capital assets (e.g. real estate or trademarks) to a company’s share capital in exchange for shares.
Although the employment contract is a key basis for each company’s business and its content is quite exhaustively prescribed by section 40 of the Labour Act, in practice we often encounter incorrect, inaccurate and in certain cases even unlawful terms of the employment contract. It is important to review employment contracts regularly, and this article will help you notice some crucial faults in your employment contracts that are often ignored, as well as suggesting improvements.
The national legislation of certain member states, including Latvia, does not give a taxable person established in another member state the right to recover VAT as a taxable person registered in another member state if the person registers for Latvian VAT. This article explores some of the findings made in the Regional Administrative Court’s ruling of 28 January 2021 on case No. A420147918, which has now taken effect.
In last week’s edition of Flash News we outlined the VAT treatment of companies offering free meals to their workers during working hours as well as transport between home and work to ensure business continuity especially during the Covid-19 crisis. This article explores the personal and corporate income tax implications of this practice.
Both before and during the Covid-19 crisis, some companies have been providing their employees with free meals and transport between home and work for the sake of business continuity. This article explores the VAT implications of this practice.
Many multinational enterprises have suffered losses from a drop in demand, a supply chain delay or extraordinary operating costs during the period of Covid-19 restrictions. The allocation of such losses and extraordinary costs between related companies is likely to attract the tax authority’s scrutiny so these issues require special attention. This article explores the allocation of losses and Covid-19 specific costs in the light of the OECD’s Guidance on the transfer pricing implications of the Covid-19 pandemic.
Making a false claim or providing insufficient information can be recognised as an unfair commercial practice. This article explores some common mistakes made by persons selling goods or providing services (“sellers”) that are recognised as unfair commercial practices by the Consumer Rights Protection Centre (the “Regulator”).
To mitigate the adverse effects of the Covid-19 pandemic, amendments to the Covid-19 Act were adopted by Parliament on 18 March and came into force on 20 March 2021. This article explores changes in how individuals file their annual income tax return and how taxes are calculated.
Employee stock option plans are gaining traction as a tool for motivating employees in Latvia. Employees elsewhere in the world have for years been able to become company shareholders, which has boosted their contribution to their company and its growth. The grant of employee shares or stock options is essentially a type of employee compensation linked to the company’s development (profitability).
The principle of penalty individualisation applies in tax law, too. Even if a taxpayer has broken the law the tax authority is permitted by law to treat the taxpayer leniently and charge half a penalty if he meets certain conditions. This article explores what conditions the latest case law says the tax authority should assess to establish that the taxpayer has filed returns and paid taxes on time.
We have spent the last year or so coming to terms with the Covid-19 pandemic, which has changed our daily lives beyond recognition. While we keep thinking mainly about the restrictions and outbreak statistics, it would be useful to figure out whether companies are now subject to a heightened risk of money laundering and terrorism and proliferation financing (“ML/TPF”) and whether the internal control systems set up by persons subject to the Anti Money Laundering and Counter Terrorism and Proliferation Financing Act are still as effective as they were before the pandemic.