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Flash News offers the latest information on current tax, accounting, legal and other business issues.

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14.06.2019

European Single Electronic Format will change life of entities listed on regulated markets (1) (3/24/19)
Tax
We have recently heard a lot about the regulators’ and investors’ growing interest in processing financial data in a faster and better way, about financial statements in PDF being lengthy and unusable, nobody reading them, etc. The European Commission is holding up the European Single Electronic Format (ESEF) as a solution to these problems. From the financial year 2020 onwards, all entities listed on a stock exchange will be required to file their consolidated statements in a specified format using defined tags.
14.06.2019

Unexpected overpayment of income tax in Electronic Declaration System (2/24/19)
Tax PIT
Individuals preparing their annual income tax return this spring had to consider the changes made by the tax reform of 2018. Quite a few people preparing the tax return electronically were in for a surprise.
14.06.2019

VAT aspects of sharing economy (1/24/19)
Accounting Tax VAT
The role of the sharing economy is growing across Europe. Perhaps only a few of us had faced it earlier when booking an apartment with Airbnb, but now we can choose from a variety of services using the principles of the sharing economy. This article explores some of its VAT aspects.
07.06.2019

Easy tax treatment of rental income (3/23/19)
Tax PIT
We have had questions about reporting rental income from property and applying easy terms of personal income tax (PIT) where the statutory notification of a tenancy agreement is overdue. This article explores the statutory obligation and case law allowing an individual to charge a 10% PIT on rental income without registering as a trader.
07.06.2019

EU countries competing for wealthy individuals (2/23/19)
Tax PIT
Over 160,000 people in almost 20 EEA countries are avoiding their fair share of local income tax by enjoying special tax schemes for individuals willing to change their tax residence. In the fight for tax revenues, more and more member states are introducing special exemptions to attract the rich and mobile. This article summarises the main takeaways from a recent study.
07.06.2019

Taxpayer’s explanations during audit (1/23/19)
Legal Tax
Explanations given by a taxpayer facing a tax audit become an important source of information. We have seen some typical mistakes a person makes in giving explanations to the tax authority. Mistakes are often made through lack of understanding or knowledge of the procedures. This article explores some of the aspects to consider in communicating with the tax authority during an audit.
04.06.2019

31.05.2019

Seeing doctor during working hours (3/22/19)
Tax Employees
Employees often have to make an appointment to see a doctor during their working day, so they are absent from work or leave their workplace in the middle of the day. Is the employee entitled to such temporary absence? How do we handle this properly?
31.05.2019

VAT: margin scheme for sales of second-hand vehicles (2/22/19)
Tax VAT

Section 138 of the VAT Act prescribes a special arrangement that allows a taxable dealer supplying second-hand goods to charge VAT on the difference between the selling price and the purchase price. This article explores how the State Revenue Service (SRS) makes this margin scheme for second-hand goods applicable to sales of second-hand means of transport.
23.05.2019

Annual leave (3/21/19)
Accounting Tax Employees
A company does not want to accrue any unused vacation and orders its employees to use it. What do you do if an employee keeps coming to work during their vacation and refuses to use it? Is the employer required to cancel the vacation order and pay wages if the employee is working?
23.05.2019

Working capital and its cycle (2) (2/21/19)
Accounting Business Tax
This article completes what we wrote last week.
23.05.2019

Fuel card transactions: supply of goods or financial service? (1/21/19)
Tax VAT
On 15 May 2019, the Court of Justice of the European Union (CJEU) ruled on case C-235/18 Vega International regarding the VAT treatment of a transaction in which a company makes its fuel cards available to another company (business partner). This article explores the CJEU findings and their practical application.
17.05.2019

Benefit test in transfer pricing analysis (3/20/19)
Tax Transfer pricing
The benefit test is one of the key areas the State Revenue Service (SRS) will examine when reviewing intragroup services and assessing whether the costs of receiving such services are related to the taxpayer’s business. To prove that a benefit has been received from the service, it is important to take precautions for mitigating transfer pricing (TP) risks. The benefit test depends on facts and circumstances, so it is not possible to define intragroup services that are clearly treated as low or high value adding services. This article explores the benefit test and ways of checking whether a service has provided its recipient with any economic or commercial benefit.
17.05.2019

Working capital and its life cycle (1) (2/20/19)
Business Tax
Every company should be able to keep up its daily cash flows and have sufficient finances to cover its labour costs, taxes and trade payables as they fall due. Optimum working capital (WC) levels should be maintained in both the short and the long term. This article explores the concept and related matters.
17.05.2019

CJEU on deducting input VAT where reverse charge should have been applied (1/20/19)
Tax VAT
On 11 April 2019, the Court of Justice of the European Union (CJEU) ruled on case C‑691/17 PORR Epitesi Kft. The CJEU examined whether the Hungarian tax authority had acted contrary to the VAT directive and VAT principles in preventing a customer from deducting input tax on an invoice issued under the general VAT scheme for a supply attracting domestic reverse-charge VAT. This article explores the CJEU ruling.
10.05.2019

Cash ban in property deals (3/19/19)
Tax Real estate
Parliament adopted amendments to the Taxes and Duties Act in their final reading on 3 April 2019 making it illegal to use cash in real estate (RE) transactions from 1 May 2019. This article explores some of the proposals debated as part of the bill.
10.05.2019

Changes in calculating duration of tax audit (2/19/19)
Business Tax
Recent amendments to the Taxes and Duties Act have changed the tax audit time limit rules. A tax audit that includes a transfer pricing review no longer has a time limit. There are also new rules for obtaining information during any period that is excluded from a tax audit, and a rule stating that the audit time frame excludes any period during which the taxpayer is preparing an opinion on the audit findings.
10.05.2019

SRS interprets PIT treatment of non-resident’s disposal of RE company (1/19/19)
Tax PIT
In response to an advance tax ruling (ATR) request from a non-Latvian tax resident individual, the State Revenue Service (SRS) has explained the personal income tax (PIT) treatment of a non-resident’s disposal of shares in a Latvian company with real estate in Latvia representing more than 50% of its assets (the “Latvian RE Company”). The ATR has been issued to a particular taxpayer and is not public, so it cannot be applied directly. This article explores the SRS conclusions about the PIT treatment in similar situations.
03.05.2019

Taxation of dividends in Estonia (3/18/19)
Tax CIT
This article looks at changes in the Estonian taxation of dividends effective from 2019.
03.05.2019

Advance tax ruling from State Revenue Service (2/18/19)
Legal Tax
When a taxpayer is unsure how to apply a tax law, there are various ways of obtaining an opinion from the State Revenue Service (SRS) by telephone or in writing. The written ways include seeking an information letter or an advance tax ruling (also known as a private letter ruling). This article explores the substance of an advance tax ruling, the procedures for requesting one, and the legal implications.
03.05.2019

Tax information request outside control measure (1/18/19)
Tax
A company receives an information request from the State Revenue Service (SRS), although no tax audit or other control measure has been started against the company. Taxpayers are often unsure what that means and how to respond correctly. This article explores the reason for such an information request and the taxpayer’s options.
26.04.2019

Transparency of beneficial ownership registers (3/17/19)
Legal Tax AML

This article explores how far we can rely on the information placed in the registers of beneficial owners.
26.04.2019

Deducting input VAT on preparations for making taxable supplies (2) (2/17/19)
Tax VAT
In an earlier article we explained some of the aspects a taxable person should consider when deducting input tax on preparations for making taxable transactions. This article explores a few examples from case law.
26.04.2019

Tax authority’s comment on filing annual income tax returns (1/17/19)
Tax PIT
When helping our clients prepare their annual income tax returns, we face various questions about applying the Personal Income Tax (PIT) Act that we regularly check with the State Revenue Service (SRS). We have now received SRS comment on the requirement for filing the annual income tax return in various situations, including PIT underpayment and filing exemptions.
18.04.2019

Adult education: opportunity not to be missed! (3/16/19)
Accounting Tax Employees
In childhood, each of us dreamed of acquiring a profession. One imagined baking cakes, another felt like repairing a car in the garage, and another one fantasised about building a house every day. Most of our childhood dreams have not come true because our work is very different from our dream profession, but we might indulge in daydreams sometimes. Everything is now possible! But how? There is an excellent opportunity to see our dream come true by acquiring new competences and skills. This article explores the importance of lifelong education and the scope for using it.
18.04.2019

Adjusting input VAT on real estate (2/16/19)
Tax VAT
Traders that acquire various financial services for improving liquidity and obtaining more current assets might use the Court of Justice of the European Union (CJEU) findings of 27 March 2019 in Case C‑201/18 Mydibel SA. The CJEU heard a dispute over the requirement for adjusting input VAT deducted towards the construction, reconstruction or renovation of real estate (RE) that is later subject to a sale and leaseback agreement.
18.04.2019

Income paid to non-residents: tax authority’s explanation of CIT treatment (1/16/19)
Tax CIT
When preparing corporate income tax (CIT) returns, we have faced some conflicting interpretations of certain practical questions, such as the deadline for filing a residence certificate and the CIT report on income gained by the non-resident. To verify those deadlines and certain taxpayer obligations, we sought the opinion of the State Revenue Service (SRS). This article explores their answers.
12.04.2019

Transfer pricing trends: arm’s length level of debt (3/15/19)
Tax Transfer pricing
Following our series of articles on the OECD’s BEPS public discussion draft on financial transactions (the “Green Paper”) this article explores an arm’s length level of debt for transfer pricing (TP) purposes. Taxpayers are invited to evaluate whether interest charges on a loan made to a related party and the debt itself meet the arm’s length standard.
12.04.2019

Deducting input VAT on preparations for making taxable supplies (2/15/19)
Tax VAT
One of the conditions for deducting input VAT on goods or services is that they must be acquired for making taxable supplies, but there is no requirement for such taxable supplies to have been made; the intention to make them will suffice. This article explores a few aspects to consider when it comes to deducting input VAT on activities carried out in preparation for taxable supplies.
05.04.2019

Corporate tax relief on donations after adjusting other tax returns and incurring tax debt (3/14/19)
Tax CIT
Section 12 of the Corporate Income Tax (CIT) Act allows taxpayers to take one of three donation reliefs, but none is available if at least one of the prohibitory circumstances is present, including a tax debt. This article explores cases of adjusting the CIT return where an additional tax assessment is or is not considered a debt.
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