The first article in our corporate income tax (CIT) series mentioned the concept of deemed distribution of profit introduced by the new CIT Act. Deemed distributions will be considered to take place if a company incurs non-business expenses, lends to related parties, shares out surplus assets on winding-up, pays excessive interest, etc. This article explores the CIT treatment of one type of deemed distribution: non-business expenses.
On 28 July 2017 Parliament adopted amendments to the Corporate Income Tax (CIT) Act in their final reading, significantly changing the principles of CIT treatment. The new CIT model largely resembles the one Estonia adopted 17 years ago (see our Flash News edition of 18 May 2017) which provides for paying tax at the time any profit is distributed (including deemed profit distributions). This article explores some of the new principles for calculating CIT.
The OECD’s Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (the “Convention”) was approved on 24 November 2016. As many as 69 countries (including Latvia and Lithuania) signed it on 7 June 2017, with eight countries (including Estonia) having expressed their intention to sign it. Under the Convention, Latvia has opted to apply only provisions for implementing the minimum standard of the action plan on BEPS and to ensure as far as possible that the new provisions complement the existing provisions of the covered tax treaties, or that new provisions not amending the provisions of the covered tax treaties are applied.