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1.1.2011 Latvia tax changes summary in English.
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1.1.2011. tax news
28 February 2011
Rīga
BALTIC TAX FIRM 2010
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LATVIA ESTONIA LITHUANIA BELARUSContent
1. Direct taxes 1. PIT 2. CIT
2. Car tax 3. VAT4. Excise tax5. Natural resources tax6. Taxes and fees7. Real estate tax8. Social security9. Bank levy
VilniusLITHUANIA
RigaLATVIA
MinskBELARUS
TallinnESTONIA
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LATVIA ESTONIA LITHUANIA BELARUSWhere are we?
World bank in its Doing Business 2011 survey among 183 countries places:
Latvia 24th, 59th for paying taxes. Estonia - 17th, Lithuania - 23rd.
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LATVIA ESTONIA LITHUANIA BELARUS
4
CIT (1/4)
Tax allowance for investment project– allowance of 25% of the investments - LVL 5-35 m– allowance of 15% of the investment above LVL 35 m
Conditions: industries to be promoted (mostly production) CM decision on a particular project until 31.12.2013 minimum investment of LVL 5 m within 3 years investment project to be promoted by 31.12.2016 limit of 16 years use no tax debts, insolvency, equity decrease, etc not possible to use other tax rebates
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LATVIA ESTONIA LITHUANIA BELARUSIndustries
Food & drinks production Wood production Chemicals Pharmacy Rubber and plastic production Metalurgy Electronic and optic equipment production Work equipment production Vehicle production Telecoms IT Logistics
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LATVIA ESTONIA LITHUANIA BELARUS
6
CIT (2/4)
Adjusting transfer pricing Associated company (EU, EEA or DTT
country) has increased the taxable income
With the annual accounts, a notice from the respective foreign taxman confirming increase of taxable income must be submitted to the Latvian SRS
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CIT (3/4)
Withholding tax reliefSo far: statement from foreign taxman needed
(complex)– receiver is not considered as a
resident outside the EU – not released from the respective tax
Now also possible: a residence certificate + a written statement by the receiver
himself
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LATVIA ESTONIA LITHUANIA BELARUS
8
CIT (4/4)
Donation allowance clarified
Donation allowance (85% of the donated sum)– also if donated in the EU and EEA
Nothing can be received in return (no logo, etc)
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9
Payroll
1. The general PIT rate from 26% to 25%
2. Tax-free income threshold from LVL 35 to 45 a month
3. Allowance for a dependent person from LVL 63 to 70 a month
4. State mandatory insurance contributions from 33.09% to 35.09%, incl. the
employee's share – from 9% to 11%
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LATVIA ESTONIA LITHUANIA BELARUS
10
Tax on Passenger Cars of Companies
New law, replaces the "car-benefit tax" Tax payers - businesses owning or holding a passenger
car MoF interpretation – favours taxpayers, but.. Monthly payment of the tax depends on engine
capacity: – up to 2,000 cm3 – LVL 19 – from 2,001 cm3 to 2,500 cm3 – LVL 30 – above 2,500 cm3 – LVL 40– if a car registered before 1.1.2005 - LVL 30
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Tax on Passenger Cars of Companies
If the tax is paid: No payroll taxes are payable, nor CIT - adjusted
– even if the employee uses the car for personal needs Simplified accounting
– no road bills– for fuel expense a monthly summary of km driven –
cannot exceed 1.2x the consumption limit 20% of VAT – not deductible for any car!
– for purchase, imports, rent, maintanance– except car rent or sale, transportation of passangers
or goods, etc– no deduction for banks, insurers (50% exempt or out-
of-scope sales)
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LATVIA ESTONIA LITHUANIA BELARUS
VAT - Fiscal representative (1/7)
Possibility for foreigners to avoid VAT registration in Latvia– On imports (besides the permit or 0%, if within 30 days –
to EU)– On exports + customs or excise warehouse– Intra-Community acquisitions in Latvia or inland
transactions by EU VAT payer Good for 3rd country importers & Latvian warehouse keepers FR responsibility
– For VAT and the supporting documents– FR should consider content of the agreements, bank
guarantees, liability insurance, etc
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LATVIA ESTONIA LITHUANIA BELARUSImports + IC dispatch (2/7)
GoodsImport PVN; or no VAT; or 0%Invoice
0% VAT
FRInvoice - 0% VAT
Goods
IM VAD and CMR –RUS sends to FR, FR – to EST
1648.
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LATVIA ESTONIA LITHUANIA BELARUSImports + inland (3/7)
FR
Invoice22% VAT
Goods
Goods
Invoice0% VAT
Import VAT; no VAT; or 0%
450.
IM VAD and CMR –RUS sends to FR, FR – to LAT
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LATVIA ESTONIA LITHUANIA BELARUSInland + exports (4/7)
FR
Goods
1914.
Invoice0% VAT
EX VAD and CMR –LAT FR sends to RUS
Goods
Invoice0% VAT
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LATVIA ESTONIA LITHUANIA BELARUSIC acquisition + exports (5/7)
FR
Goods
1884.Invoice
EX VAD and CMR –LAT FR sends to RUS
GoodsInvoice
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LATVIA ESTONIA LITHUANIA BELARUS
Deemed IC acquisition in Latvia (6/7)
FR
Goods
1595.Invoice
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LATVIA ESTONIA LITHUANIA BELARUSSale inland (7/7)
FR
Goods
GDP in 2006Invoice
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LATVIA ESTONIA LITHUANIA BELARUSOther VAT news 1/4
Rates– 21 to 22, – 10 to 12, – 10 to 22 electricity for households
VAT registration threshhold – From LVL 10,000 to 35,000 (EUR 50,000)
Taxable base, invoices, VAT payment order changes for auctions by bailiffs and insolvency administrators
Place of supply for organising events – B2B Any tax returns – only electronically
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LATVIA ESTONIA LITHUANIA BELARUSOther VAT news 2/4
Imports of small items: – For commercial purposes (B2B) up
to EUR 10 – no VAT (was payable also for LVL 0.01); no customs duty – up to EUR 150
– C2C (non-commercial) up to EUR 45 – no VAT (was up to EUR 150); no customs duty – up to EUR 150
– Other deliveries (B2C) up to EUR 10 – no VAT
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LATVIA ESTONIA LITHUANIA BELARUSOther VAT news 3/4
Upon the year end VAT must be refunded within 10 days after approval of the overpayment!
– Previous wording – within 30 days after December return
In VAT return – ask for the refund only if the surplus arose from fixed assets with VAT over Ls 100
An immediate VAT refund criteria - adjusted:– if the VAT surplus - more than LVL 8k (was - 15k)– At least 20% transactions with a place of supply outside
Latvia (was – at least 20% transactions with a rate of 10%)
SRS may extend 30 days monthly refund deadline– if SRS informs of data review of the contracting party– If SRS asks for an additional info – has to decide in 75 days
as of the return
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LATVIA ESTONIA LITHUANIA BELARUSOther VAT news 4/4
Auctions by administrators (A) and bailiffs (B) – Taxable amount
auction value (A) notified by the owner, if no – auction value (B)
– Invoice: (A, B) in the name of the owner, within 15 days after the calculation by A or B is effective
– VAT payable: (A) – in 20 days of the next month (B) – in 20 days after the calculation by B is effective
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LATVIA ESTONIA LITHUANIA BELARUSThe future?
VAT Green paper: http://ec.europa.eu/taxation_customs/resources/documents/common/consultations/tax/future_vat/com%282010%29695_en.pdf
New VAT law – at the CoM VAT invoicing directive of 13.07.2010.,
effective as of 1.1.2013. – Same requirements for invoices in all EU– More – in SORAINEN Tax Newsflash No. 22
(08.2010.): under Publications/Archive
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3 year limitation period
As of 1.7.2010 – new VAT refund system – not possible to carry fwd ‘old VAT’
SRS used this as grounds for refusal of refunds – esp. for real estate developers who used to carry fwd the VAT
In such case consider appealing! Grounds:
Does the law really prohibit to carry fwd? Against the EU VAT Directive? Legitimate expectations ECJ and Latvian court (Alstom)
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Our 2010 observations
On tax disputes resolved without a court – Well grounded explanations – prior to the
decision of the SRS audit VAT refund possible even during business
termination – important – intent when gods or services were purchased
SRS tries to ‘play fool’ – SRS GD may accept a positive decision
VAT refundable even if no sales yet
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LATVIA ESTONIA LITHUANIA BELARUSCustoms
11 new Incoterms 2010; substitute 13 Incoterms 2000 New EU Regulation (430/2010) on amendments to the
EU Customs code Implementation Regulation 2454/93– MoF prepares amendments to CoM regulations on
Customs clearance re. Supplies to ships and aircraft New Combined Nomenclature – 5.10.2010. EU Reg.
861/2010 15.12.2010. EU Reg. 1228/2010 amending the customs
tariffs:– A new chapter 99 – special CN codes
Amended CoM reg. On customs guarantees– No guarantee, if approved business– Customs broker has a permit for 10 years
As of 1.1.2011. simplified customs clearance offices work 24/7
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LATVIA ESTONIA LITHUANIA BELARUS
EXCISE TAX
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LATVIA ESTONIA LITHUANIA BELARUSRates
Increase:– non-alcoholic drinks – LVL 5.2 for 100 l (was LVL 4)– cigars and cigarillos – LVL 24 for 1000 items (was LVL 11)– tobacco for 1000 g – LVL 29 (was LVL 23)– fuel with biofuel mix:
LVL 269 (for 1000 l) disel – LVL 234 (for 1000 l)
Changes in definitions
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LATVIA ESTONIA LITHUANIA BELARUS
NATURAL RESOURCES TAX
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LATVIA ESTONIA LITHUANIA BELARUSIn essence
Relief for used means of transport 20x penalty! Increased rates for
– air pollution– Water pollution– Pplastic packaging and plates, cups, forks, knifes & spoons (1x used)
- LVL 0.90 / kg (was LVL 0.65)– Sotrage of waste
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LATVIA ESTONIA LITHUANIA BELARUS
TAXES AND FEES
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LATVIA ESTONIA LITHUANIA BELARUS
32
REAL ESTATE TAX
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LATVIA ESTONIA LITHUANIA BELARUS
Increase
33
Rates - dwellings
Cadastral value (Ls) New rates (%) Old rates (%)
< 40 000 0.2 0.1
40 001-75 000 0.4 0.2
> 75 000 0.6 0.3
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NB!
Because of different rates – all changes (e.g. In the purpose of use) must be notified to the municipality within 1 month!
Many exemptions on the to starting pay RET date Changes with respect to 25% increase limitation:
– Not applicable to Dwellings If start to use for business If purpose of use is changed to non-dwelling
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SOCIAL SECURITY
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LATVIA ESTONIA LITHUANIA BELARUSSSC
Rate increse from 33.09% to 35.09%
Employee definitions – Renting out of personnel by a foreigner to LatCo,– 6 PIT criteria to requalify service contract into employment
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If no employment agreement
The SSC calculation period extended – From 1 to 3 months
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BANK LEVY
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In essence
Rate – 0.036% p.a. Taxable object:
– Liabilities at the year end, less– Deposits– Mortgage bonds issued by the bank– Subordinated liabilities in the bank’s equity
Should be declared to FKTK by 15 April of the following year Payers:
– Credit institutions registered in Latvia– Branches abroad of credit institutions registered in Latvia– Branches in Latvia of foreign credit institutions
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LATVIA ESTONIA LITHUANIA BELARUSContact Information
Thank you!Jānis Taukačs
Partner, Tax & [email protected]
Quick & short Tax News:www.twitter.com/Sorainen_tax
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