Flash News offers the latest information on current tax, accounting, legal and other business issues.
Some time ago the Latvian personal identification number was available mainly to persons holding a residence permit or an EU national’s registration certificate. Yet we are aware of cases where a foreigner without any special status had legal ties with Latvia but it was still difficult to prove their identity in person or electronically. This article explores the new tool for electronic identification: a foreigner’s eID.
Many workers take a vacation in the summer but accountants usually pick a time with a relatively lower workload. Taking a full vacation tends to be difficult when you are supposed to be filing tax reports, calculating and paying out wages, or closing the month. This article explores replacement possibilities and an appropriate evaluation of accounting risks during accountants’ absence.
With employee stock options becoming increasingly popular, Latvian companies too are offering this incentive not only to their own employees but to those of their subsidiaries. This article explores the corporate income tax (CIT), personal income tax (PIT) and national social insurance (NSI) implications of a Latvian company awarding stock options to its own and subsidiary employees.
We have written before about a taxpayer’s duty to file with the State Revenue Service (SRS) a multinational enterprise group’s country-by-country (CbC) report under section 15(9) of the Taxes and Duties Act or a statement of the reporting company and its tax residence. This article explores how to correctly disclose information in the statement in the case of a non-standard fiscal period.
The Covid-19 pandemic had a significant impact on people’s habits, with restrictions affecting many events, including contests. More and more public events are taking place as we return to normal life. Various contests are being held, and individuals taking part win prizes. What taxes apply on such cash and non-cash prizes? Who is responsible for reporting this income and paying taxes? Is it the individual or the company that holds the contest and pays the benefit?
As Russia continues the war in Ukraine, the US and the European Union (EU) together with other countries keep increasing the size of sanctions imposed on Russia.
At the EU summit held on 30–31 May 2022, the European Council agreed on the sixth package of sanctions against Russia that will mainly apply to crude oil and petroleum products supplied to EU member states. Yet the Council of Europe has agreed a temporary exception for crude oil supplied through pipelines. Ursula von der Leyen, President of the European Commission, has said that the restrictions included in the package will in fact stop around 90% of EU oil imports from Russia by the end of this year.
As the size of the sanctions grows, confused companies are having more and more questions about how to cope with the increasing sanctions burden, whether a company is supervised by particular regulatory bodies, and whether the current sanctions rules and guidelines provide for setting up an internal control system to manage sanctions risk.
Productivity has always been high on the agenda in organisations. Remote and hybrid working during the pandemic has brought some new advantages as well as complex challenges. When trying to put our processes back on track, we often focus on the process itself and how to streamline it, yet people play a big role in the productivity puzzle.
With Covid-19 restrictions being lifted in Latvia and across Europe, companies are returning to their normal working arrangements, including staff education and team building events. Event organisers, too, are resuming their business activities. The VAT treatment is clear as long as the customer is a Latvian company and the event is held in Latvia. But what happens if the event is held or the customer established in another EU member state? This article explores key aspects of event organisation services.
Employers commonly use GPS geolocation devices to monitor their vehicles or equipment and to analyse fuel consumption, mileage, driving time, idle time, parking time, usage statistics etc. European case law has introduced tighter rules and requirements for personal data processing associated with GPS tracking. There are certain restrictions that companies using these devices for business purposes should be aware of.
With the summer holidays approaching, student employment is an option. This article explores tax aspects to be considered if a student wants to do paid work during the summer holiday, how such income is treated, and what tax relief is available to parents.
Our experience suggests that taxpayers carrying out the obligation to submit transfer pricing (TP) documentation to the State Revenue Service (SRS) may suddenly find themselves in an awkward situation, as the functionality of the Electronic Declaration System (EDS) prevents them from uploading a screenshot file that supports their benchmarking study because of its size. So the document fails to reach the SRS and puts the taxpayer at risk of defaulting on statutory requirements for information to be included in TP documentation. This article offers a solution to this problem.
As the cost of living is rising day by day, people are struggling to embrace the need to cut carbon emissions as a priority. Tax policy is one of the tools capable of affecting our decisions. So it is very important to devise a long-term tax strategy that would encourage us to change our daily habits and switch over to green energy.
The member states may even introduce a specially reduced rate of VAT (down to 0%, without restricting the supplier’s right to deduct input tax) on supplies of solar panels to private homes and public buildings. A reduced rate may also be applied on supplies of electricity, district heating and cooling, and certain biogas, as well as on the supply and installation of certain very efficient low-emission heating systems. Latvia will have to stop applying a reduced rate on supplies of wood used as fuel by 1 January 2030.
This article explores some of the tax implications for people installing solar panels at their homes.
A company that suffers inventory loss has to forecast a shrinkage rate for the financial year. This may have corporate income tax (CIT) implications. Since the company is allowed to adjust its CIT return for the last month of the financial year without incurring late fees before it files its annual accounts, this article explores the CIT treatment of inventory loss.
By decision of Parliament Speaker I. Murniece, the double tax treaty (DTT) and its protocol have been suspended indefinitely from 16 May. The decision makes unavailable from this date the DTT and national reliefs that provided for an exemption on the basis that Russia had a DTT with Latvia. In this article we explore how this decision affects paying taxes. And we note that the Latvia-Russia social security agreement is still in force.
On 20 April 2022 the Regional Administrative Court again ruled on a dispute between a Latvian company and the State Revenue Service (SRS) about refunding overpaid personal income tax in a situation of double taxation. This court ruling follows the Supreme Court Administrative Division’s ruling No. A420282416 of 9 July 2020 (SKA-150/2020). The Regional Administrative Court’s anonymised ruling is available under case No. A420282416 (archive No. AA43-0096-22/15).
We have written before about significant differences in measuring total transactions made with related parties during the financial year, to be reported on line 6.5.1 of the corporate income tax (CIT) return, and controlled transactions that determine whether the taxpayer becomes liable to prepare and file transfer pricing (TP) documentation with the State Revenue Service (SRS).
Today’s reality shows that environmental, social and governance (ESG) matters are becoming central to new corporate strategies, increasing the importance of the role ESG leaders and experts play in organisations and their governance structure. A modern ESG leader not only has to understand the interaction between the various ESG matters and their impact on the company’s lines of business but must also be able to integrate ESG in the company’s operations, inspiring the other staff to action. PwC’s latest survey “Empowered Chief Sustainability Officers” offers insights into how the role of an ESG leader has evolved over time and how ESG leaders can make a tangible difference in their companies by combining the various ESG aspects with the company’s operations, thereby helping the company transform and undertake more sustainable operations. A key finding of the survey is that organisations whose governance structure has a clearly defined role of the ESG leader are able to achieve higher indicators in sustainability areas.
The term “deposit system” is fast becoming a household name. A mandatory deposit system for single-use and reusable drinks packaging became operational on 1 February 2022 in an attempt to prevent environmental pollution. The new deposit system applies to all beverage retailers and their outlets, filling stations, public catering companies selling bottled drinks etc. This article explores the accounting treatment for a retailer who is required to install a deposit system collection point close to his outlet.
We are inviting you to listen to a PwC tax podcast about the accounting control system, about the plans of the State Revenue Service to introduce penalties for delays in submitting mandatory declarations and reports, as well as about current issues related to the company's transfer.
Four years of work have been crowned with amendments passed to the VAT directive concerning a reduced rate of VAT on 5 April 2022. The new provisions will give the governments of the EU member states greater flexibility in applying the rates and will ensure transnational equality. The reduced rates clearly point to EU shared priorities, such as protection of public health, fight against climate change, and support for the European Green Deal, while preparing to phase out the current preferential regime for environmentally damaging supplies.
For many years, challenging the receipt of intragroup services and commercial benefits has been among the most popular grounds for corporate income tax (CIT) assessments made by the State Revenue Service (SRS). Our analysis of one of the latest publicly available transfer pricing court cases leads to the conclusion that such a taxpayer dispute with the SRS has not lost its relevance. This article looks at an example from the Latvian court case – the taxpayer’s dispute with the SRS over missing evidence that the taxpayer has actually received management services from a related foreign company.
Council Directive 2020/284 of 18 February 2020 amending Directive 2006/112/EC as regards introducing certain requirements for payment service providers (the “Directive”) states that these providers (credit institutions, payment institutions, electronic money institutions, and post office giro payment institutions) operating in the EU will have to keep electronic records of cross-border payment data and exchange those records with a newly formed Central Electronic System of Payment information (CESOP) database as from 1 January 2024.
The Covid-19 pandemic has thrown the global economy into recession. However, the warning issued by the industry experts and backed by the authors of a World Bank study that the economy will experience a rapid increase in the number of insolvency proceedings and legal protection proceedings (LPP) at the end of Covid-19, has not come true as yet. This is because the financial difficulties brought on by the pandemic were countered with an unprecedented government intervention in the market and a huge package of financial aid, including working capital grants and idleness benefits. The economic downturn is now being aggravated by Russia’s invasion of Ukraine, as the consequences of the war are pushing up energy prices and fuelling price rises in general, inevitably leading to debt crises. Latvia seems likely to face an inevitable wave of insolvencies and LPP, so this article aims to introduce companies to Latvian LPP and out-of-court workouts in simple terms in order to highlight the characteristics of these debt restructuring tools, as well as the role of the debtor, the creditors and the supervisor within these proceedings.
The European Commission has published proposals for a directive on rules to prevent shell companies from being used for tax evasion and to amend Directive 2011/16/EU on administrative cooperation. ATAD3 is the short title of the proposed directive. It mandates minimum business indicators for companies established in member states and rules on the tax regime for companies falling short of those indicators. The proposed directive would apply to all companies that are considered tax residents, including partnerships, trusts, and other legal arrangements. If adopted, the directive will come into force on 1 January 2024.
On 9 December 2021 the Commission on Public Administration and Local Government urged Parliament to amend the Personal Income Tax (PIT) Act so that the exempt income types would include proceeds from a piece of land that is sold under the Termination of Forced Shared Ownership in Privatised Apartment Blocks Act after being held for more than 60 months. The proposed amendments were backed in their first reading on 20 January. More proposals for amending other sections of the PIT Act have been submitted for the second reading, including ones that seek to promote the development of the Latvian capital market. This article summarises what we see as key proposals.