The Ministry of Finance has suggested how tax legislation should be amended from 2024. This article explores proposals for amending the Corporate Income Tax (CIT) Act and the VAT Act relating to luxury executive vehicles (LEVs).

The Competition Council has started monitoring retail markets in the wake of the recent high-inflation episode. Analysing this information provides insights into the relationship between retailers and suppliers and how this affects the market. The Competition Council is soon expected to publish the data and findings derived from this monitoring, with more attention being paid to breaches of fair trade practices and prohibitions that buyers and retailers have to observe. While it’s difficult to predict what this monitoring will yield, political pressure may lead to significant changes in this sector.

In our article of 11 July 2023 “Commerce Act amended” we informed our MindLink subscribers about the extensive amendments of 16 June 2022 to the Commerce Act that came into force on 1 July 2023. In that article we looked at some of the amended clauses of the Commerce Act. This article explores the Act’s rules for paying up a company’s share capital and relevant changes that came into force in the summer.

It’s been quite a while since Latvia adopted new transfer pricing (TP) rules, yet the State Revenue Service (SRS) did not issue guidelines on charging fines for breaches of requirements for duly submitting or preparing TP files until late September 2023 (approved by SRS order No. 201 of 11 September 2023). This article explores the new guidelines.

Since 2020, companies have been under pressure to adapt to the ever-changing business landscape, which keeps serving up a variety of disruptions. It’s become clear that the ability to effectively respond to the changing conditions is crucial for any company.

In September 2023, the EU VAT Committee published guidelines on how to assess the VAT treatment of fuel card transactions, which had been dealt with earlier by the Court of Justice of the European Union (CJEU) in its ruling C-235/18 Vega International. The CJEU ruled that the Austrian company’s transaction of issuing fuel cards to other companies for fuel purchases, which was invoiced as a supply of fuel, qualifies as a service of granting credit that is exempt from VAT.

There is much talk of various sustainability aspects within and outside the European Green Deal. Sustainability has become a daily routine in the more conscientious companies, as they devise sustainability strategies and report on sustainability goals they have achieved. There are also some companies that seek to exploit this situation by advertising themselves as well as their products and services as green, environmentally friendly or sustainable, because this may give them advantages on the market. This approach is not always seen as honest, and it can mislead consumers or even affect competition.

It’s usual for sellers (and service providers) to make offers such as “buy a product, get another one for free” or “each buyer gets a gift”. For VAT purposes, sellers are not usually concerned about the concept of a gift as long as it’s up to EUR 15, but they do become more careful if gifts exceed this threshold. The restriction on low-value gifts in the Latvian VAT Act is per individual and per year, placing a certain burden on the taxable person to identify the recipient and keep such a record. However, the Act’s definition of a low-value gift contains a disclaimer that this does not apply to goods or services made available free of charge if their costs qualify as advertising or “representation” expenses. The State Revenue Service does not tend to evaluate the seller’s advertising slogans literally but will assess a supply according to its economic substance. This article explores the latest ruling from the Court of Justice of the European Union (CJEU) on how to assess gifts for VAT purposes.

Following the UN Framework Convention on Climate Change, aka the Paris Agreement, the European Parliament signed the resolution on the European Green Deal on 15 January 2020 and urged the member states to carry out the required transition to a climate-neutral society by 2050 at the latest. The Green Deal involves making a variety of important changes. One of such changes is Regulation (EU) 2023/851 of the European Parliament and of the Council of 19 April 2023 amending Regulation (EU) 2019/631 as regards strengthening the CO2 emission performance standards for new passenger cars and new light commercial vehicles in line with the Union’s increased climate ambition. What this Regulation provides for is nothing new in substance, as CO2 emission requirements for vehicles have been adopted earlier, but it does introduce some fairly ambitious goals. This article explores some of its requirements.

To pick up where we left off last week about the Finance Ministry’s proposals for amending the Personal Income Tax (PIT) Act, this article looks at the proposed procedures for computing, reporting and paying PIT.

On 12 September 2023 the European Commission published its proposal for a transfer pricing (TP) directive to align TP requirements across the EU. While most of the member states, including Latvia, are to some extent applying recommendations made by the OECD TP guidelines, the European Commission is proposing the directive and calling on the member states to adopt the same TP standards in order to secure a level playing field. If the new rules are approved in their current version, they will be passed into the member states’ national law by 31 December 2025 and applicable from 1 January 2026.

Directive 2023/970 on equal pay came into force in June 2023. The courts have been hearing equal pay disputes for a long time, yet the number of such lawsuits is likely to grow as more information becomes available under the directive. This article looks at equal pay litigation in Latvia and objective grounds for pay gaps.

For most companies the financial year coincides with the calendar year, so the end of the calendar year means they need to do tasks relevant to preparation of financial statements, including an inventory of account balances and a reconciliation of debtor and creditor balances at the balance sheet date.

The end of September has been productive for farmers and ministries alike. The Ministry of Finance (MOF) has come up with proposals for amending the Personal Income Tax (PIT) Act, packaged into two bills. In this article we look at new additions to the basket of allowable expenses, as well as discussing remote work compensations and other classes of exempt income with an increased exemption threshold provisionally coming into force on 1 January 2024.

We have written before about the directive on the multinational enterprise (MNE) group’s public country-by-country report (CbCR) and how this is being passed into the national laws of EU member states. In this article we will look at Latvia’s progress in passing the directive and find out what aspects Latvian taxpayers need to consider and what issues and challenges they may face.

The rise of sustainability, a dynamic and fast-growing part of business, is significantly driven by EU climate and social goals and the subsequent legislation. This legislation mainly lays down requirements for disclosing information on a company’s key sustainability impact areas and relevant performance. However, these requirements are gradually expanding beyond the company’s direct impacts.

A directive requiring multinational enterprise (MNE) groups to prepare public country-by-country reports (“CbCR”) was published in the EU Official Journal in December 2021. The member states had until 22 June 2023 to pass the directive into their national laws. In this series of articles we will look at the progress made by Latvia and other member states and will explore the directive’s history, goals, potential benefits and taxpayer challenges.

Transfer pricing (TP) experts of the State Revenue Service (SRS) have agreed to meet up with Latvian TP consultants on several occasions in late September to debate some pressing TP concerns and to set out the SRS opinion on how to solve current and future TP problems. In this article we will outline SRS comments on TP validation and look at some of the topics and questions put up for debate with the SRS.

A proper analysis of workforce data can transform how organisations make decisions and optimise their resources. This has become crucial for today’s talent management, staff engagement, performance management and productivity purposes. In our earlier articles we looked at the significance of adopting human resource (HR) technologies to conduct a proper analysis of HR data and use it for business purposes. In this article we will explore various categories of workforce data that companies can gather in-house. Analysing the accumulated data will help you obtain an idea of what is working and what needs improving, allowing you to identify issues and come up with solutions faster, while revising and improving your processes.

We have written before about situations that could have taxpayers confused about the right period for including non-business expenses in the taxable base on the corporate income tax (CIT) return. To pick up where we left off, let’s now explore how and when the company should respond if its non-business expenses have been included in the taxable base but a credit note has arrived for those expenses.

A while ago Riga Regional Court passed Ruling CA-1102-22/7, which deals with a former employee’s right to recover outstanding wages from the employer for a period of posting and how to apply the concept of daily allowance and exercise the resulting right to include it in the worker’s hourly rate. Given the common practice of paying daily allowances to workers, in this article we will look at how this ruling defines the court’s vision for paying a legally reasonable daily allowance and making it part of the total remuneration.

The Cabinet of Ministers is expected to approve a bill amending the Anti Money Laundering and Counter Terrorism and Proliferation Financing (AML/CTPF) Act. Although the bill has yet to undergo parliamentary review and may therefore be modified, we suggest you familiarise yourselves with the proposed changes, as they will significantly affect persons governed by the AML/CTPF Act that make foreign exchange cash purchases or sales, and legal arrangements, including trusts.

In this article we will find out if a structured electronic document and an electronic invoice (e-bill) serves as a supporting document and what additional requirements companies need to consider.

A worker is subject to the employer’s procedures and orders. In addition to a contract of employment that lays down the parties’ mutual rights and duties, the worker also has to comply with his job description and the employer’s internal rules, terms of business, and code of ethics in certain cases. If the rules of conduct described in these documents are seriously breached during working hours, this may lead to dismissal. In this article we will find out if it’s possible to terminate employment because the worker’s breach involves activities outside working hours.

As the Year of Knowledge begins, we are opening registration for the 16th season of our “Tax Foundation Course”. This is a training programme created by PwC Latvia experts that invites people with various backgrounds to become familiar with the Latvian tax system and learn how to apply taxes properly under the direction of highly qualified and experienced lecturers. This programme has been completed by more than 1,100 company representatives and individuals wishing to enhance their understanding and consolidate their knowledge of tax matters.

Latvia’s current transfer pricing (TP) rules came into force back in 2018, bringing changes to the structure of TP documentation (TPD) and to materiality thresholds that require taxpayers to prepare a specified form of TPD. Many taxpayers are still confused about the right way to measure the amount of a controlled financial transaction, which results in an obligation to prepare, or to prepare and file, a specified form of TPD if the taxpayer has no other types of controlled transactions. This article explores the procedure for determining the controlled transaction amount (CTA) for various types of financial transactions according to Latvian TP rules and international law, as well as looking at the practice in Lithuania and Estonia, the most similar economies to Latvia.

Remote work has become a standard form of employment, as evidenced by increasing numbers of people choosing jobs with the option of working from home. This drives workforce globalisation, with technology allowing people to work anywhere in the world without changing their home. Remote work also allows people to change employers rather quickly. A digital nomad is one who takes maximum advantage of remote work. Despite their popularity, however, these new arrangements pose tax risks for workers and their employers alike. Many tax experts and researchers are therefore convinced that extensive and comprehensive reforms need to be devised in this area as soon as possible to prevent the current tax rules from lagging behind the trends in the international labour market.

The Corporate Income Tax (CIT) Act requires companies to include their non-business expenses in the taxable base for a particular tax period. Since the tax period is one month, various situations can have you confused about the right period to report such expenses. This article examines four different situations.

Identifying the ultimate beneficial owner (UBO) of a legal entity is key to securing compliance with the anti-money laundering (AML) rules and making sure that no business is done with sanctioned persons. Yet there are some other aspects to be considered because the rules vary as to how a UBO is defined in each particular case. This article explores how these differences can be detected and applied for daily purposes to ensure compliance with the AML rules and the sanctions rules.

This article wraps up what we wrote last week.