Flash News offers the latest information on current tax, accounting, legal and other business issues.
The Corporate Income Tax (CIT) Act reform effective from 1 January 2018 has brought changes to all aspects of CIT treatment, including thin capitalisation rules. This article explores whether banks and insurance companies should include their excess interest expenses in their CIT base (taxable income).
Proposals for amending the Company and Consolidated Accounts Act (the “CCAA”) were announced at the meeting of state secretaries on 12 August 2021. Although the proposals are still to be debated by the Cabinet of Ministers and need parliamentary approval, certain amendments would apply when preparing financial statements for 2021.
To begin the new training season, PwC’s Academy offers everyone interested, whether you are in Latvia or abroad, an opportunity to gain valuable knowledge of taxes and other relevant business topics online.
The year 2021 and the current macroeconomic cycle have brought a number of adjustments and uncertainty about the future to households (private consumers), businesses of various sizes, and policymakers. Covid-19 and related paradigm changes, the risk of recurrent pandemic, disrupted logistics and supply chains, and other factors create substantial risks affecting companies’ ability to stay in business and grow. This article explores common causes of financial distress and debt restructuring tools, including how companies can reach an agreement with the State Revenue Service on paying taxes.
On 21 May 2019 we informed MindLink.lv readers about Ruling C-235/18 Vega International issued by the Court of Justice of the European Union (CJEU) on VAT treatment where a company provides its subsidiaries registered for VAT in various EU member states with fuel cards for various fuel suppliers and arranges payments between those subsidiaries (the actual consumers of fuel) and the actual suppliers. Based on this CJEU ruling, the Latvian State Revenue Service (SRS) has issued guidance on the VAT and excise treatment of fuel card transactions. This article explores their opinion on applying tax rules to fuel card transactions.
We have written earlier about amendments to the Anti Money Laundering and Counter Terrorism and Proliferation Financing Act (the “Act”), which, among other things, will make it easier for persons that are subject to the Act (“Subjects”) to report suspicious transactions and will set up a common customer due diligence tool. This article explores changes to the requirements affecting the ultimate beneficial owner (“UBO”) of a Subject.
We have written earlier about the VAT treatment of distance sales and the new VAT simplification schemes such as the One Stop Shop (“OSS”) and the Import One Stop Shop (“IOSS”) allowing sellers to register for VAT in one member state and pay VAT on distance sales to consumers in all member states. This article explores what other tax or administrative obligations may arise from cross-border e-commerce in another member state.
The Covid-19 pandemic has also affected risk assessment and decision-making processes in organisations. As the pandemic and restrictions ease off, organisations should revise these processes and make any necessary changes.
We have recently written about the OECD Inclusive Framework proposals for taxing the digitalised economy that will help OECD members find a common basis for agreeing on taxation of global enterprises that is acceptable to all OECD members and jurisdictions. Despite the large number of participating members (139 members and jurisdictions pursuing different interests and representing various sizes of economy), all stakeholders understand the significance of this reform and are interested in agreeing on the urgent issues and implementing the common taxation of the digitalised economy as soon as possible. This article explores the ambitious goals of this agreement and the deadlines for concluding and implementing it, which are even more ambitious.
The Competition Council’s decisions on a number of recently completed controversial investigations have raised the question of recovering damages caused by an infringement of competition law. What circumstances should the injured party and the offender take into account if anyone harmed by a competition offence has the right to claim compensation for that harm?
CEOs and workers are increasingly embracing remote work. CEOs plan to invest more in order to support adoption of the hybrid work model. Workers are not so eager to return to the office as their managers. CEOs face difficult decisions about using office space. These are just a few of the issues and findings from a recent PwC survey.
The rapid evolution of digital financial services has led to virtual currency (“VC”) being increasingly used in everyday payments. In July 2021 the State Revenue Service issued guidance on the tax and accounting treatment of virtual currency transactions, offering insights into the practical application of laws and regulations to income people earn from VC dealings. This article explores the personal income tax (“PIT”) treatment where an individual buys and sells VC.
This article explores changes to the royalties scheme effective from 1 July 2021 and applicable throughout 2021, as well as other ways in which authors can receive royalties. This article summarises the practicalities and administrative obligations facing the payer of income and the Latvian tax-resident payee.
On 6 July 2021 Parliament amended the Taxes and Duties Act to give the State Revenue Service (“SRS”) the right to publish information on SRS decisions of public importance from 5 August 2021. This article explores the goals of the amendments and the nature of information the SRS will be allowed to publish.
Retailers and consumers have been recently forced to change their product distribution and shopping habits. The online marketplace is evolving and gaining unprecedented momentum. PwC’s June 2021 Global Consumer Insights Pulse Survey shows that the Covid-19 pandemic has created new consumer groups. Their creation is driven by consumer attitudes and behaviours, which have a great potential to significantly impact how consumers choose their shopping channels, goods, and brands.
On 10 May 2021 the State Revenue Service (“SRS”) posted on their website an update to “Bad Debts” offering guidance on how VAT and corporate income tax should be applied. This article explores the VAT treatment of debt assignment.
On 15 June 2021, Parliament adopted amendments to the Anti Money Laundering and Counter Terrorism and Proliferation Financing (“AML/CTPF”) Act, which, among other things, makes it easier for persons that are subject to the Act to report suspicious transactions taxwise and creates a common customer due diligence tool. The amendments relating to reporting procedures are coming into force on 1 October 2021, and the tool is to be used from 1 January 2022.
Every company must have an accounting policy in place that specifies its accounting principles, as well as laying down rules for how its financial statements should be prepared and how its internal documents should move around. The accounting policy must fit the nature of the company’s business.
If an individual is considered to be tax resident simultaneously in two treaty countries (e.g. Latvia and Lithuania) according to their national law, the dispute over the person’s tax resident status will be resolved by treaty article 4(4), which provides for consecutively assessing the following criteria:
We have written earlier about the corporate income tax (“CIT”) treatment of payments made to a non-resident company on which tax must be withheld under section 5 of the CIT Act. This article explores the legal framework, examples and supporting documents for the most common type of payment: management and consulting fees.
To pick up where we left off in our earlier article Ways of reducing tax on profit distribution, which discusses how to minimise your corporate income tax (“CIT”) liability when distributing “new” profits, this article explores some personal income tax (“PIT”) relief an individual can take even if the company has already claimed one of the available CIT reliefs according to the current practice.
To deal with the Covid-19 crisis in 2020 and 2021, the governments have imposed tight restrictions, including travel restrictions, to contain the pandemic. Various exit and entry restrictions forced many people to stay in Latvia or another country. If you are performing your job duties in Latvia then you may need to consider tax treatment aspects. This article explores how Covid-19 affects the way tax residence is determined under Latvian law.
As the tax system evolves, the regulatory authorities have been rearranging their priorities around transfer pricing risks and focusing on increasingly complex cases in recent years. The transfer pricing aspects of intangible assets are climbing up the agenda, so we will be posting a few articles to explain the significance of related-party transactions involving the use of intangibles, as well as looking at transfer pricing trends, common risks, and relevant case law.
Having the status of a public benefit organisation (“PBO”) not only demonstrates that the organisation is working for the public good but also motivates the PBO to raise donations and receive various tax and other advantages. Donations are a key source of various PBO public benefit projects, while donors can claim tax advantages. The Ministry of Finance (“MOF”) has issued an informative report on the activities and development of PBOs. This article offers a brief summary and looks at what companies think about this relief and whether it has promoted PBO operations.
On 22 March 2021 the EU Council adopted Directive (EU) 2021/514 (“DAC7”) amending Directive 2011/16/EU on administrative cooperation in the field of taxation, to extend the EU tax transparency rules and reporting obligations to digital platforms and platform operators. Digital platforms and platform operators are required to provide information on the income of sellers using digital platforms from 2023. These rules impose a reporting obligation on digital platforms operating within and outside the EU.
Latvia has adopted minimum mandatory national social insurance contributions (“NSIC”) from 1 July 2021. The parliamentary opposition as well as several business organisations and industry associations asked the MPs in an open letter to postpone adoption of the minimum NSIC scheme until the economy recovers from the Covid-19 restrictions. Despite public criticisms, the new regime came into force on 1 July. This article explores cases where a self-employed person is permitted not to apply minimum NSIC to their income after filing a written request with the State Revenue Service (“SRS”).
The legal form, meaning the contract between related parties and its provisions, has always been among the factors that come into play when assessing whether prices applied in controlled transactions are arm’s length. This article discusses why the legal form of a transaction is important, looks at a common approach to preparing intragroup contracts, and explores some rules that should be followed when drafting those contracts to mitigate transfer pricing risks.