Our customers have been wondering about differences in the corporate income tax (“CIT”) treatment of receivables on the balance sheet at 31 December 2017 and those arising at a later date. This article summarises the CIT treatment of receivables in various situations.

The reporting obligation under DAC6 has been in force since January 2021 and some member states issued guidance on the application of DAC6 provisions as they were preparing to pass the directive in their national law a long time ago. The Latvian State Revenue Service (“SRS”) has now published answers to questions frequently asked by Latvian tax consultants, credit institutions and other intermediaries about evaluating the reporting obligation, as well as other technical matters around DAC6 reporting. This article explores key clarifications and interpretations in the SRS guidance.

In April 2021 the Organisation for Economic Co-operation and Development (“OECD”) published the Third Peer Review Report on Treaty Shopping, which reflects progress in implementing the BEPS Action 6 minimum standard. This standard on preventing the grant of treaty benefits in inappropriate circumstances is one of the four BEPS minimum standards that all members of the OECD/G20 Inclusive Framework have committed to implement (over 125 jurisdictions collaborating on the implementation of the BEPS package). This article explores the main findings of the OECD peer review.

The Cabinet of Ministers’ Rule No. 677  has been amended with effect from 18 February 2021 on ways of applying the profit split method (“PSM”) in analysing transactions between related parties. This article offers a flowchart to help taxpayers evaluate the possibility of using PSM for economic validation of prices applied in their transactions, with a practical example of profit split.

This article explores Microsoft’s data analysis software Power BI as well as its uses and advantages.

From 1 January 2022 companies investing in a closed alternative investment fund will be allowed to exclude from their tax base any income the fund earns when selling shares in a company it owns, according to amendments to the Corporate Income Tax (“CIT”) Act effective from 20 April 2021. This article explores the rules and how this treatment could affect the fund’s investment disposal strategy.

The Cabinet of Ministers’ Rule No. 321 of 10 May 2005, The Amount, Collection, Refund, Allocation and Payment of the Levy on Blank Storage Media and Devices Usable for Reproduction, has been amended with effect from 14 April 2021. This article explores the goals and implications of the amendments.

On 4 September 2020 the Administrative Division of the Supreme Court ruled on case No. A420190717 SKA-383/2020 concerned with the personal income tax (“PIT”) treatment of a property contribution. The ruling reinforces the understanding of how PIT is deferred for an individual that has contributed capital assets (e.g. real estate or trademarks) to a company’s share capital in exchange for shares.

Although the employment contract is a key basis for each company’s business and its content is quite exhaustively prescribed by section 40 of the Labour Act, in practice we often encounter incorrect, inaccurate and in certain cases even unlawful terms of the employment contract. It is important to review employment contracts regularly, and this article will help you notice some crucial faults in your employment contracts that are often ignored, as well as suggesting improvements.

The national legislation of certain member states, including Latvia, does not give a taxable person established in another member state the right to recover VAT as a taxable person registered in another member state if the person registers for Latvian VAT. This article explores some of the findings made in the Regional Administrative Court’s ruling of 28 January 2021 on case No. A420147918, which has now taken effect.

In last week’s edition of Flash News we outlined the VAT treatment of companies offering free meals to their workers during working hours as well as transport between home and work to ensure business continuity especially during the Covid-19 crisis. This article explores the personal and corporate income tax implications of this practice.

Both before and during the Covid-19 crisis, some companies have been providing their employees with free meals and transport between home and work for the sake of business continuity. This article explores the VAT implications of this practice.

Many multinational enterprises have suffered losses from a drop in demand, a supply chain delay or extraordinary operating costs during the period of Covid-19 restrictions. The allocation of such losses and extraordinary costs between related companies is likely to attract the tax authority’s scrutiny so these issues require special attention. This article explores the allocation of losses and Covid-19 specific costs in the light of the OECD’s Guidance on the transfer pricing implications of the Covid-19 pandemic.

Making a false claim or providing insufficient information can be recognised as an unfair commercial practice. This article explores some common mistakes made by persons selling goods or providing services (“sellers”) that are recognised as unfair commercial practices by the Consumer Rights Protection Centre (the “Regulator”).

To mitigate the adverse effects of the Covid-19 pandemic, amendments to the Covid-19 Act were adopted by Parliament on 18 March and came into force on 20 March 2021. This article explores changes in how individuals file their annual income tax return and how taxes are calculated.

Employee stock option plans are gaining traction as a tool for motivating employees in Latvia. Employees elsewhere in the world have for years been able to become company shareholders, which has boosted their contribution to their company and its growth. The grant of employee shares or stock options is essentially a type of employee compensation linked to the company’s development (profitability).

The principle of penalty individualisation applies in tax law, too. Even if a taxpayer has broken the law the tax authority is permitted by law to treat the taxpayer leniently and charge half a penalty if he meets certain conditions. This article explores what conditions the latest case law says the tax authority should assess to establish that the taxpayer has filed returns and paid taxes on time.

We have spent the last year or so coming to terms with the Covid-19 pandemic, which has changed our daily lives beyond recognition. While we keep thinking mainly about the restrictions and outbreak statistics, it would be useful to figure out whether companies are now subject to a heightened risk of money laundering and terrorism and proliferation financing (“ML/TPF”) and whether the internal control systems set up by persons subject to the Anti Money Laundering and Counter Terrorism and Proliferation Financing Act are still as effective as they were before the pandemic.

The Covid-19 pandemic has undeniably caused an economic downturn that has dealt a nasty blow not only to the European and global economy but to each company and its employees. So it makes sense that the new EU funding period, launched amid a global pandemic, aims to help minimise the adverse effects of Covid-19 in the distant future as well. Most of the funding (e.g. Cohesion Policy programmes) available to the member states during the new planning period are familiar but there are also some new programmes. Each programme focuses on achieving the goals of a greener and smarter Europe.

A non-resident company that allocates various expenses to its permanent establishment (“PE”) in Latvia might wonder whether the PE can fully deduct all those expenses for corporate income tax (“CIT”) purposes. This article explores the non-resident’s staff cost allocations to the PE.

This article summarises changes to the microbusiness tax (“MBT”) rules effective from 1 January 2021 and outlines amendments coming into force gradually during 2021.

Acting on requests from customers and readers to identify and interpret persons that are subject to the Anti Money Laundering and Counter Terrorism and Proliferation Financing Act, we approached the State Revenue Service for some practical insights into non-standard and complex corporate structures and their business activities in order to gain a broader understanding of how the Act should be applied. We have now summarised the information and reached conclusions, so here are the answers!

While some taxpayers may face challenges in applying their advance pricing agreements (“APAs”) with the tax authorities under the economic conditions resulting from the pandemic, all existing APAs and their terms should be respected unless a critical assumption is breached. This article provides an overview of how COVID-19 affects APAs in the light of the OECD’s “Guidance on the transfer pricing implications of the COVID-19 pandemic.”

As you may know, Latvian taxable persons can recover VAT paid on purchases in another member state under Council Directive 2008/9/EC, i.e. local VAT is refunded to taxable persons that are not established in the member state but are established in another. As Britain left the EU on 31 January 2020 with a period of transition to 31 December 2020, the single EU VAT refund procedure is no longer available to recover UK VAT after 1 January 2021. The single procedure can still be used to recover any UK VAT paid in 2020, but the filing deadline is almost upon us: 31 March 2021.

As we have entered the filing season, this article explores the filing obligation and the deadlines for filing and paying personal income tax (“PIT”).

Directive (EU) 2019/2161 adopted in late 2019 (the “Omnibus Directive”) requires member states to transpose it by 28 November 2021, and their amended national rules must come into force by 28 May 2022. This article explores key changes and requirements for traders under the new directive.

When it comes to approving an action plan for a debtor’s legal protection proceedings, it is important to know which of its creditors can vote and to properly interpret the rules that place voting restrictions on certain persons. The insights outlined in this article can help companies in financial distress, creditor representatives and supervisors of legal protection proceedings find out whether only voting creditors have approved an action plan or whether the vote includes any person ineligible to vote.

As we carry on exploring the OECD’s Guidance on the transfer pricing implications of the Covid-19 pandemic (the “Guidance”) this article offers an overview of how government assistance programmes affect transfer pricing analysis.

Favourable rules effective from 2021 have cancelled certain fees that businesses had to pay when making various entries on the commercial register maintained by the Enterprise Registry (“ER”). In other words, when registering traders or any changes to particulars already entered on the commercial register, ER customers are no longer charged for an official announcement in Latvijas Vestnesis, the government gazette.

The United Kingdom (“UK”) left the EU at midnight on 31 January 2020. The Brexit agreement provided that EU nationals staying in the UK until the end of the transition period would keep the social rights that go with EU citizen status, i.e. the opportunity to apply for various benefits, pensions and other social entitlements in the UK, similar to living in other member states. The Trade and Cooperation Agreement signed on 30 December 2020 is applied provisionally from 1 January 2021 pending ratification at EU level. The Agreement includes a separate protocol on social security coordination. This article explores some key changes in social security to be considered by employers after Brexit and in the light of the new agreement.