Nowadays renting out real estate (RE) is a common line of business carried on by individuals. The growing popularity of www.booking.com and www.airbnb.com makes choosing the right tax scheme an important decision. Latvian law offers a number of ways to register a business and pay taxes. This article explores what options are available when it comes to registering a person’s RE letting and whether it is possible to change the form of registration.

Non-fungible tokens (NFTs) have really taken off in recent years. While it might seem this technology has emerged very recently, Kevin MacCoy and Anil Dash created the first known NFT, Quantum, back in 2014. More interest in NFTs didn’t arise until six years later, when the NFT market value reached US$250 million. The market interest in NFTs grew in 2021, when US$41.3 billion was invested in the NFT market over a span of six months. Yet despite such an impressive growth in popularity, we often hear questions like what is NFT, where is it used, and how would it be taxed? This series of articles explores the idea of NFT and the VAT treatment of NFT transactions in the EU.

When external conditions are especially challenging, smooth internal processes and readily available information may prove to be a key aspect of improving your competitive edge. Today’s finance function is challenged by changes in the business environment and economy and by disruptive technology, so a CFO equipped with financial knowledge alone is no longer enough. In its annual CFO survey, PwC finds out what problems are facing companies in areas that CFOs keep on their radar as a top priority in order to grow their company and improve the performance of its finance function. This article summarises findings of the CFO survey conducted by PwC CEE and opportunities we see for supporting CFOs.

On 1 December 2021 the European Parliament published the approved directive on the preparation of a public country-by-country report (“PCbCR Directive”). It states that any multinational group with consolidated revenue exceeding EUR 750 million for each of the last two financial years has to publish certain information (including revenue, headcount, and taxes paid) on their operations in each EU member state and certain third countries. This information has to be posted on the group’s website by December 2026 relating to subjects governed by the Directive if the financial year ends on 31 December 2025.

Amendments to section 9 of the Corporate Income Tax Act came into force on 21 April 2022. The Act’s transition rules now have paragraphs 47 and 48, and there is a different CIT treatment of debts appearing on the balance sheet at 31 December 2017 and ones incurred after this date for which provisions were made before 2022 and later. This article offers an updated summary of the CIT treatment of bad debts in different situations.

The Cabinet of Ministers Rule governing a new aid programme for improving energy efficiency in manufacturers and exporters came into force on 18 June 2022. Businesses can apply for aid to cover their overheads, i.e. for a loan (or a parallel loan) of up to EUR 5 million from the Altum Development Finance Institution. Up to 30% of the loan principal can be cancelled as a capital allowance. The aid can be used on costs associated with improving energy efficiency or introducing renewable energy resources for personal consumption by businesses in non-residential buildings and warehouses. This article explores some aspects of the new aid programme described in the publicly available wording of the Cabinet Rule.

Effective from 4 February 2022, the Whistle Blowing Act introduces new requirements compared to the earlier enactment with the same title, and takes over the provisions of Directive EU 2019/1937. This article explores what a whistle-blowing system (WBS) really means in the light of the new Act and what options companies have for setting up such a system efficiently.

With environmentally friendly practices, such as waste sorting and recycling, becoming the order of the day, the natural resource tax (NRT) treatment is a hot topic too. As you know, packaging is one of the items subject to NRT. The obligation to pay tax or the right to take an exemption lies with the person who is the first to sell goods in packaging in Latvia, including foreign companies supplying their goods to Latvian companies. There are plans to amend the NRT Act on how foreign persons may take an exemption.

In March 2022, PwC conducted the “Global Workforce Hopes and Fears” survey of 52,195 individuals who are in work or active in the labour market. That was one of the largest ever surveys of the global workforce, covering a range of industries, demographic characteristics and working patterns in 44 countries and territories.

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.

This article explores recent amendments to the Taxes and Duties Act that allow qualifying taxpayers to extend the time limit for paying an overdue tax liability for a total of five years.

This article explores key points of “Differentiating the VAT rate on food,” a report the Ministry of Agriculture published on 26 May 2022.

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.

This article completes what we wrote last week.

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).

This article explores the tax treatment of winnings in prize draws run by social networks and of payments to digital content creators.

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.