In this article, you will find a summary of the latest developments in the Estonian tax system.

This article completes what we wrote last week about IFRS 15.

Revenue recognition is one of the trickiest challenges, especially in a transaction involving two or more parties. When it comes to recognising revenue in such transactions, companies often have questions. Is the full invoice amount my revenue? Am I an agent? This article explores what legal provisions should be applied in order to answer these questions.

On 9 July 2020, the meeting of state secretaries debated proposals for amending the Cabinet of Ministers’ Rule No. 178, How to claim tax relief under international double tax treaties. The proposals aim to improve the process of tax administration and to ease the administrative burden by promoting electronic exchange of information with the State Revenue Service (“SRS”). This article explores what we see as key changes.

The mass media have recently reported news of the largest fine in Latvia to date (EUR 150,000) being levied on an e-commerce company for breaches involving failure to comply with requirements of the General Data Protection Regulation (“GDPR”). Considering the company’s circumstances, as cited by the National Data Office in its decision, this article explores requirements that must be met by any company processing personal data on its website to steer clear of the fine prescribed by the GDPR.

On 2 July 2020, the Court of Justice of the European Union (“CJEU”) ruled on case C-835/18 (SC Terracult SRL). The dispute was over the tax authority’s refusal to allow a taxable person to adjust invoices after the tax authority had completed a tax audit and assessed an additional tax liability, thus denying the taxable person’s right to a tax refund. The tax authority’s decision was final because the taxable person had accepted it. The taxable person sought to adjust invoices on the basis of new facts which were not known when the tax authority made the decision and which resulted in reverse-charge VAT being applied to the underlying transactions.

The topic continued from MindLink.lv news 24.07.2020. Based on EU and Latvian legislation, in 2019 the Financial Intelligence Unit drew up guidelines, describing methods for identifying politically exposed persons (“PEPs”).

Growing companies tend to see an increase in the amount of documentation and financial accounting data they generate. While the concept of paperless accounting is improved by developers of technology solutions and by digital start-ups, it is implemented by each company individually to make its accounting more straightforward and efficient, allowing its stakeholders to handle its financial accounting data with ease.

Although the Anti Money Laundering and Counter Terrorism and Proliferation Financing (“AML/CTPF”) Act has been in force for more than ten years, some of the entities governed by the Act still find it difficult to identify the status of a “politically exposed person.”

Given the impact of Covid-19 on many companies, on 14 July the Cabinet of Ministers adopted regulations to allocate EUR 19.2 million in aid to companies in the tourism industry and EUR 51 million in aid to exporters whose financial position has significantly deteriorated as a result of Covid-19. The new rules will come into force on the effective date of the European Commission’s decision on the compatibility of business aid with the EU internal market. This aid will be administered by the Latvian Investment and Development Agency, awarding it within the available finance allocation and by reference to the sequence in which aid requests are submitted. The aid will take the form of a grant aimed at helping companies pay wages and salaries.

Although the global economy is undergoing significant transformation as a result of Covid-19, capital keeps moving across borders and investors are still interested in investing. In these uncertain times, investors are particularly keen to maximise the diversification of their investments in order to mitigate the consequences of the financial crisis.

The Cabinet of Ministers’ Regulation No. 210 on the automatic exchange of information on reportable cross-border arrangements came into force on 1 July 2020. The new rules basically require providers of tax, legal and any other type of consulting services who meet the criteria laid down by paragraph 3.5 of the rules, to provide the tax authority with information on any designed, marketed, organised or made available for implementation or manages the implementation a cross-border arrangement between a taxpayer registered in Latvia and a taxpayer registered in another tax jurisdiction known to them. In this article, we explore the hallmarks of cross-border arrangements for transfer pricing purposes and make recommendations that can help taxpayers making cross-border related-party transactions to objectively support their economic substance and avoid concerns about implementing them for aggressive tax planning and profit shifting purposes.

The Corporate Income Tax (“CIT”) Act prescribes a 12-month time limit, within which a prepayment does not become a deemed profit distribution. This article explores whether the landlord’s tax base should include a security deposit that was received when entering into a tenancy agreement and will be refunded at the end of the tenancy.

This article completes what we wrote last week.

This article picks up where we left off last week.