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

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05.04.2019

SRS denies corporate tax relief on provision for impairment loss (2/14/19)
Tax CIT
In March 2019 the State Revenue Service ("SRS") published an anonymised advance tax ruling on the corporate income tax ("CIT") treatment of provisions made before 2018. This article explores the SRS conclusions about the CIT treatment where a company reported a balance of provision for slow-moving inventory at 31 December 2017.
29.03.2019

Tax loss transfer on reorganisation (1/13/19)
Tax CIT
The Corporate Income Tax (CIT) Act lays down rules for how any unused tax losses at 31 December 2017 may be used in later tax periods. Yet practice raises the question of whether the acquiring company may claim any unused tax losses of the merging companies in a reorganisation carried out after 2017.
29.03.2019

VAT treatment of education services (2/13/19)
Tax VAT
On 13 March 2019, the Court of Justice of the European Union (the CJEU) ruled on Case C‑647/17 Skatteverket, which analyses the interpretation of article 53 of the VAT directive and how to determine the place of supply of training services. This article explores the CJEU view.
29.03.2019

Student summer work: do I file annual income tax return? (3/13/19)
Accounting Tax Employees PIT
With the 2018 annual income tax filing season in, some people begin wondering about the personal income tax (PIT) treatment of a dependent student employed in the summer. There are quite a few questions about this, but the aggregated answers are nowhere to be found. In this article, we will answer a few topical questions, for example: • How does a student’s work affect the parent’s PIT liability? • Can a student recover any overpaid PIT and to what extent? • Has such work created an underpayment or overpayment of tax?
21.03.2019

Construction loan: enough to support investment for tax purposes? (2/12/19)
Tax PIT
The Administrative Division of the Supreme Court analysed whether the amount an individual borrowed to build a house (in conjunction with other evidence) is a sufficient basis for amounts invested in real estate (RE) and allows a personal income tax (PIT) deduction on the capital gain. This article explores the findings made by the court.
21.03.2019

Societies’ obligation to pay corporate tax (3/12/19)
Tax CIT
Each corporate trader is liable to pay corporate income tax (CIT), except for cases prescribed by the CIT Act, but societies are covered by exceptions. In statutory cases, the State Revenue Service (SRS) may examine a society’s economic activity, find it unlawful, and charge CIT.
18.03.2019

New grounds for VAT deregistration (1/11/19)
Tax VAT
The Cabinet of Ministers is to debate proposals for amending the VAT Act to give the State Revenue Service (SRS) more powers to deregister traders for VAT purposes. The proposals also lay down tighter conditions for obtaining a permit to apply a special VAT scheme on imports, as well as prescribing a taxable person’s liability for failure to provide the SRS with information about the conduct of a transaction. Traders that change their board improperly or fail to conduct any economic activity will face VAT deregistration.
18.03.2019

Personal Income Tax Act to be amended (3/11/19)
Tax PIT
Proposals for amending the Personal Income Tax (PIT) Act, which the Cabinet of Ministers debated on 26 February 2019, are to be decided by Parliament soon. This article explores proposals for extending the time limits by which certain taxpayer categories are allowed to pay their overdue taxes and for exempting PIT on income that residents will gain from Latvia’s receipt lottery.
18.03.2019

Brexit: corporate tax implications (2/11/19)
Tax CIT
There are about ten days left until the UK presumably leaves the EU. An event of such a magnitude is bound to have tax implications. Clearly, VAT and customs are the most affected taxes, yet the corporate income tax (CIT) treatment will also change. This article explores how Brexit will affect a few situations we have picked for review.
11.03.2019

Bidder’s right to challenge decision on winner of customer-funded procurement (3/10/19)
Legal Tax
In an earlier article, we explained why the customer in a public procurement procedure has no appeal against the Procurement Regulator’s decision, and we said only a bidder has this right. Yet there is an exception to this rule because in certain cases a bidder cannot go to the administrative courts and challenge the procurement commission’s decision on the procurement winner.
11.03.2019

Reporting non-business expenses in appropriate tax period (2/10/19)
Tax CIT
Under the Corporate Income Tax (CIT) Act, non-business expenses should be included in the tax base for each tax period. Since the tax period is one month, it might sometimes be unclear which period such expenses should be reported in. This article explores three different situations.
11.03.2019

Brexit
04.03.2019

VAT treatment of event organisation services (3/9/19)
Tax VAT
On 22 January 2019, the Senate of the Latvian Supreme Court issued judgment SKA-76/2019 on case A420538012 concerning the VAT treatment of conference organisation services supplied by an Estonian company. The Supreme Court’s findings about the principles for charging VAT on event organisation services is contrary to a ruling the State Revenue Service (SRS) posted on their website on 13 July 2018. This article compares the judgment and the ruling in terms of arguments for measuring the taxable amount of a supply in substantially similar circumstances.
04.03.2019

Tax authority exempts personal income tax on dividends from Latvian company actually received out of income arising before 2018 (2/9/19)
Tax CIT PIT
In late 2018 and early 2019 the State Revenue Service (SRS) published anonymised rulings on the tax treatment of dividend income. Last week we wrote about one of them, and now we are commenting on the other. What the two rulings have in common is the type of income whose tax treatment is being analysed and the approach the SRS takes to interpreting the law without taking the option under the Personal Income Tax (PIT) Act to analyse the transaction or the group structure according to its economic substance. This article explores SRS findings about the CIT and PIT treatment where a dividend paid out of a Latvian company’s profit for 2017 is included in another Latvian company’s profit for 2018 and then paid to an individual.
25.02.2019

Is Latvian personal tax due on dividends from Cyprus companies? (3/8/19)
Tax CIT PIT
On 4 January 2019, the Latvian State Revenue Service (SRS) issued a ruling on how the Personal Income Tax Act should be applied to dividends a Latvian tax resident individual receives from a company registered in Cyprus (“CyCo”). In the ruling, the SRS answers a question that remained unclear under the applicable law and the available legal interpretation.
25.02.2019

Customer’s right of appeal against Procurement Regulator’s decision (2/8/19)
Legal Tax
To complete a public procurement procedure, the customer makes a decision to award a contract to the winner. Other bidders may appeal this decision to the Procurement Regulator. If the regulator’s commission finds that the customer has committed a material breach, the commission will prohibit him from entering into a procurement contract. Can the customer disagree with the commission’s findings and appeal its decision to the courts?
25.02.2019

Brexit: customs implications (1/8/19)
Tax
Brexit negotiations began on 19 June 2017, shortly after the UK’s general elections. Post-Brexit trade with the UK will depend on whether it comes with a deal. This article explores some of the changes potentially affecting companies trading with the UK.
19.02.2019

Brexit
15.02.2019

Areas covered by voluntary transfer pricing risk reviews (2) (1/7/19)
Tax Transfer pricing

This article completes what we wrote last week.
15.02.2019

VAT number in customer identification (3/7/19)
Accounting Tax VAT
The VAT Committee of the European Commission regularly publishes its opinion on questions submitted by member states. While that opinion is merely advisory in nature because the Committee has no mandate to issue any interpretation of EU law, it is worth listening to. This article explores the VAT Committee’s guidelines on customer status identification and the importance attached to having a VAT registration number, in particular for determining the place of supply.
15.02.2019

Adjusting corporate income tax returns (2/7/19)
Tax CIT
Corporate income tax (CIT) returns for 2018 have been filed with the State Revenue Service (SRS) as required by the CIT Act. In practice, however, a company may need to adjust a tax return it has already filed or to file an outstanding one. This article explores some of the rules to consider in adjusting a CIT return.
08.02.2019

Changes to Lithuanian tax legislation effective from 2019 (3/6/19)
Social insurance Tax CIT PIT
This article offers an overview of the latest tax developments in Lithuania.
08.02.2019

How no-deal Brexit will affect personal taxation in Latvia (2/6/19)
Social insurance Tax Employees PIT

Concern is growing about the UK and the EU being unable to agree on a period of transition to continue doing business under the current legal framework as part of Brexit conditions. This article explores some of the tax implications of a no-deal Brexit for Latvian tax residents posted to or employed in the UK after 29 March 2019.
08.02.2019

Issues covered by voluntary transfer pricing risk reviews (1) (1/6/19)
Tax CIT Transfer pricing
The State Revenue Service (SRS) has been implementing Voluntary Transfer Pricing Risk Review, a new control process they call a consulting audit. This process follows from a memorandum on the Advise First! principle signed by the business community and regulators on 15 June 2017 that provides for a customer-focused government.
01.02.2019

Travel agents to pay VAT on receipt of prepayment (2/5/19)
Tax VAT
On 19 December 2018 the Court of Justice of the European Union (CJEU) announced its ruling on case C-422/17 to determine the date for charging VAT where a travel agent covered by the special scheme for travel agents (SSTA) receives a prepayment towards the fee payable for the travel service he supplies to the traveller. This article explores the CJEU findings and their practical application.
01.02.2019

Understated cost of property may lead to more tax (1/5/19)
Legal Tax PIT Real estate
Real estate (RE) acquisitions mean considerable spending, which often has the parties looking to cut their costs. A common solution involves understating the acquisition cost, but that may lead to a dispute with the State Revenue Service (SRS) and an extra tax assessment potentially exceeding the upfront saving. This article explores a few things you’d better omit from your contract relating to the acquisition cost of RE.
31.01.2019

Estonian taxes in 2019 (3/5/19)
Tax CIT
This article provides a comparative overview of the most relevant tax indicators for 2018 and 2019.
25.01.2019

Company officers listed as risk persons (2/4/19)
Legal Tax
A company officer that is legally recognised as a risk person (RP) faces certain business restrictions (a ban on, or a longer time limit for, receiving specified services from the Enterprise Registry). This legal status affects the company’s day-to-day operations and may form the basis for a business suspension order. This article explores some case-law findings concerned with RP status.
25.01.2019

CIT treatment of PE payments to non-resident owner (3/4/19)
Tax CIT
Last year we posted a series of articles 1, 2 and 3 on the corporate income tax (CIT) treatment of a permanent establishment (PE) under the new CIT Act. This article explores the PE’s payments to its non-resident owner that may be recognised as a quasi-dividend.
18.01.2019

Paying dividends to owner of multiple companies (3/3/19)
Tax CIT PIT
The State Revenue Service has published a tax ruling explaining the tax treatment of dividends paid by a subsidiary to its parent and on to their owner, an individual. This consecutive payment of dividends covers profits for 2017 and 2018. The ruling was requested to find out whether paying a dividend out of the profit for 2017 will make the individual liable to personal income tax (PIT).
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