Flash News offers the latest information on current tax, accounting, legal and other business issues.
The mergers and acquisitions (M&A) space is justifiably perceived as one of the indicators of economic activity – greater interest in acquiring, merging and investing in companies means more dynamic development of the economy. Compared to recent years, 2021 set a record in terms of number and volume of transactions (up by 48% in the Baltic States) but 2022 saw a slowdown in M&A activity because of geopolitical turmoil. Some transactions are still taking place, while others are put on hold, and the business community is preparing for times that will bring more certainty and stability. Since a successful M&A transaction needs preparation, this is a good time to do the homework while considering the next cycle of economic activity.
The Electrical Energy Tax Act and the Cabinet of Ministers’ Rule No. 52 of 24 January 2017, Procedures for Applying Electrical Energy Tax Exemptions, have been amended with effect from 1 January 2023. Key amendments relate to exemptions on electricity that directly ensures the production of electrical energy.
Thanks to the considerable interest in PwC Academy’s introductory lecture in November, which offered an overview of the content of PwC’s Digital Academy (still available as a video recording), in January PwC’s Digital Academy Latvia launched a series of three webinars for managers, accountants, bookkeepers and everyone who works with data, reports and standard processes on a daily basis.
We are happy to share with our MindLink.lv readers the topics we discuss in our webinars.
In our article of 27 September 2022 we explored what Power Query is like and why we should use it, as well as giving a brief overview of what the tool offers. This article explores how we can benefit from using Power Query to compare data, because participants of PwC Digital Academy Latvia’s upcoming webinar on 23 February will have the opportunity to find out how they can set up templates in practice for comparing various types of data.
Cashback is one of consumer incentive programmes that are currently popular with manufacturers and wholesalers. This could involve a manufacturer (or a wholesaler) refunding a certain amount of money to the end consumer for buying goods they have manufactured (distributed). The refund may be a fixed price for a particular product or expressed as a percentage of the purchase value. A cashback may also occur as a discount coupon distributed by the manufacturer, which the end customer uses with the retailer, who then seeks reimbursement from the manufacturer. This procedure directly stimulates the end consumer’s choice because the manufacturer’s discount reaches him directly instead of being accumulated in the chain of traders. With many companies expanding their business beyond Latvia, a discount may also be granted to customers in other member states. This article explores whether a cashback made by the manufacturer (wholesaler) to the end customer affects the VAT payable by the manufacturer (wholesaler).
On 19 January 2023 the Cabinet of Ministers met to debate and approve proposals for amending the Company and Consolidated Accounts Act (CCAA), which provide for extending the time limits set for small companies to file their financial statements (FS). The amendments are to cover FS prepared for the year ended on 31 December 2022 and later. The proposed extension is one month.
On 8 December 2022 the European Commission (EC) published proposals for amending the VAT directive (2006/112/EC) and Council Implementing Regulation (EU) No 282/2011. The proposals are designed to modernise the EU VAT system in the digital age, make it work for companies, and render it more resilient against fraud. The proposals also aim to address VAT issues caused by the platform economy.
Companies are increasingly trying to create a diverse and inclusive environment for their workers. One of the tools for doing this is worker surveys that include questions about sexual orientation, religious belief, health and other sensitive information that is not necessary for carrying out their direct job duties. The data obtained often fails to produce the expected result. On the contrary, this increases discrimination in the workplace or even has huge financial consequences for the company. This article explores what to focus on when it comes to worker surveys including questions about diversity and inclusion in the workplace.
Latvian transfer pricing (TP) rules provide that a company’s transactions with related parties must be arm’s length, whether the parties are Latvian or foreign tax residents. The arm’s length principle dictates that a company making comparable transactions under comparable conditions must receive comparable revenue, whether the transaction is with a related or an unrelated party. Basically companies know and understand this, yet there are various facts and circumstances that make this requirement difficult to enforce in real time. This is because before or during the transaction, companies often lack sufficient information on arm’s length prices that unrelated parties apply in comparable transactions. This is where companies can use a TP adjustment, which is not always so painful as it might originally seem. This article explores what TP adjustment a company can make by adjusting its taxable base for corporate income tax (CIT) purposes.
Family disputes are often a complicated emotional process affecting several areas of law. One of the questions that parents living separately often disagree on is who is eligible for statutory tax allowances for a child in their custody. The answer is not so clear-cut, yet the case law sheds light on criteria to be assessed.
The European Commission (EC) has been working for a long time to develop the idea of a capital markets union (CMU) aimed at creating a single capital market across the EU and promoting collaboration between the member states, as well as securing the EU economy’s growth and competitiveness. The EC began to work on this more actively in 2015 and developed its first CMU action plan, which has now largely been completed. The EC announced its second action plan on 24 September 2020, given the adverse effects of Covid-19 on the CMU.
A new year, a new beginning! As usual, this article summarises the provisions of tax laws and other legislation affecting the calculation of national social insurance (NSI) contributions, solidarity tax (ST) and personal income tax (PIT) on wages and salaries in 2023.
Taxpayers involved in cross-border transactions with related parties widely use globally recognised methods of analysis to show that their prices match market values. Selecting the most accurate method depends on the economic substance of a transaction and on the availability of credible information. Having limited access to a comparable data set often becomes an insurmountable obstacle to applying a particular method. This article explores some problems with data use, as well as international practice and potential solutions where the comparable uncontrolled price (CUP) method is used.
The last decade has seen a considerable increase in regulatory requirements in the governance and non-financial reporting space. At the same time, various stakeholders (shareholders, employees, customers etc) are expecting reliable, high-quality and standardised information from companies on their governance practices and non-financial performance. Both of these factors affect companies in Latvia as well.
On 13 December 2022 the Cabinet of Ministers passed amendments to Rule No. 656 of 24 November 2015, setting a new monthly minimum wage for normal working hours and laying down procedures for calculating the minimum hourly tariff rate. The amendments are coming into force on 1 January 2023.
We are fast approaching the year end and the time to prepare our annual reports. As you may know, the last two years saw a 3-month filing extension, which allowed us more time to prepare our financial statements. Based on currently available information, no extension is expected this year. This article will remind you of things to consider when it comes to preparing your annual report, including whether it requires a statutory audit or a limited review.
There are various programmes out there aimed at increasing a company’s sales by raising the productivity of its employees joining the programme, by increasing customer loyalty etc. Cross-border programmes are also implemented in Latvia, and their tax issues are very topical as well as complicated. This article explores employee incentive programmes in the light of a recent VAT ruling from the Court of Justice of the European Union (CJEU).
In November the OECD published the 2021 statistics for the mutual agreement procedure (MAP) covering 127 jurisdictions and practically all MAP proceedings around the world. This article explores global MAP trends in 2021, looks at Latvian statistics and analyses how last year’s statistics in Latvia compare to global trends.
Council Regulation on an emergency intervention to address high energy prices came into force on 8 October 2022. Its purpose is to prescribe a set of measures that will contribute to the member states’ energy supply and mitigate the impact of high energy prices on consumers and the member states’ economies. This article explores several groups of measures the member states are required to adopt under the Regulation.
The Personal Income Tax (PIT) Act has been amended with effect from 14 November 2022. This is a follow-up to our article “Personal Income Tax Act to be amended in 2022”. Changing the PIT Act affects some other pieces of legislation, so amendments to the National Social Insurance (NSI) Act were sent to the Ministry of Finance and the Ministry of Justice for approval on 10 November 2022.
Section 5(1) of the Corporate Income Tax (CIT) Act lists payments made to non-residents that are taxable at source. Section 2(2) lists persons that are not subject to CIT. In practice this raises the question of whether non-CIT payers are liable to withhold it on payments made to non-residents. This article answers the question.
Dropping all the hype about the Great Resignation and stiff competition for talent, we invite you to look at investing in your people from a few rational down-to-earth perspectives. Based on a number of PwC surveys, you might end up finding a good argument in your budgeting process in favour of investment initiatives targeting your people.
When it comes to drawing up non-financial statements or sustainability reports, there are a variety of guidelines and standards that prompt companies to identify and approach their various stakeholders in order to work with them in the course of preparing non-financial statements. It’s even more important to build collaboration in order to accommodate your stakeholder views and visions when your company is setting its key directions of sustainable development and goals it wants to achieve.
Multinational enterprise groups tend to centralise their functions, such as support functions in a region that is economically important and advantageous. Particularly interesting cases of transfer pricing (TP) determinations and valuations involve a group’s distributors (intermediaries) that make centralised purchases of goods from the group manufacturers and sell them on to the group wholesalers. This article looks at TP challenges in such economically linked transactions within the same global supply chain.
The business community keeps asking questions about restrictions imposed by the sanctions and how this affects doing business with existing and new clients in the future. The EU has adopted a number of sanctions packages since Russia invaded Ukraine on 24 February 2022. This article explores the eighth package launched on 6 October.
Several sections of the Taxes and Duties Act define a taxpayer’s obligations. Section 15.2 requires the taxpayer to prepare a local transfer pricing (TP) file within 12 months after the end of the financial period and, depending on the circumstances, to submit it to the State Revenue Service (SRS) for the financial period:
Situation 1 – within 12 months after the end of the financial period; or
Situation 2 – within one month after receiving a request from the SRS.
This article is meant just for you if you are interested in learning more about a crucial relief in Situation 2. The taxpayer has the right to revise his local TP file every three years if he satisfies a certain condition and meets one annual requirement.