Corporate Tax 2010 - BMR Advisors

Klavins & Slaidins LAWIN
Latvia
calculated amounts are payable within 15 days of submitting the
annual corporate income tax return due within 4 months after the
close of the financial year.
ordinary income. It is anticipated that a capital gains tax will be
introduced in 2010.
Latvia
4.3 What is the tax base for that tax (profits pursuant to
commercial accounts subject to adjustments; other tax
base)
The tax base is the financial profit/loss as per the annual accounts
subject to adjustments for tax purposes.
5.2 If so, is the rate of tax imposed upon capital gains
different from the rate imposed upon business profits
Capital gains are taxed the same as ordinary income at the flat
corporate income tax rate of 15%.
5.3 Is there a participation exemption
4.4 If it otherwise differs from the profit shown in commercial
accounts, what are the main other differences
Adjustment that must be made for arriving at taxable income
include exempt income, non-deductible expenses and statutorily
prescribed depreciation rates.
4.5 Are there any tax grouping rules Do these allow for relief
in Latvia for losses of overseas subsidiaries
Latvian law does not allow for group taxation or fiscal unity.
However there are grouping rules which allow for the transfer of
losses within a group subject to certain preconditions. Under the
group relief rules a subsidiary resident in the EEA or in a country
with which Latvia has an effective double tax treaty can in limited
circumstances transfer losses to the Latvian company which
qualifies as a member of the group.
4.6 Is tax imposed at a different rate upon distributed, as
opposed to retained, profits
No it is not.
4.7 What other national taxes (excluding those dealt with in
“Transaction Taxes”, above) are there - e.g. property taxes,
etc.
Real estate tax is payable by the owners. The current rate is 1% of
the cadastral value but it is expected the rate and tax base for real
estate tax will be changed in 2010.
Excise tax is payable on excised goods such as petroleum products,
alcohol and tobacco. Rates vary with respect to a particular
product.
Natural resource tax is payable by entities that acquire natural
resources, carry on polluting activity, distribute polluting goods
including packaging.
4.8 Are there any local taxes not dealt with in answers to
other questions
Generally local taxes do not exist but in limited circumstances
municipalities have limited rights to impose specific taxes or state
fees for specific services.
5 Capital Gains
5.1 Is there a special set of rules for taxing capital gains and
losses
Participation exemptions are available with respect to dividends
only. To qualify for the participation exemption, a company must
hold at least 25% of voting shares in the non-resident subsidiary,
which must not be incorporated in any of the statutorily designated
low tax zones. Dividends received from an EEA resident company
qualify for the exemption regardless of the percentage of
ownership.
5.4 Is there any special relief for reinvestment
Current law does not provide for relief for reinvestment with the
exception relating to the updating of fixed assets. Income gained
from the sale of fixed assets is not taxed provided within a 12-
month period before or after the sale of the fixed assets new fixed
assets of a functionally similar type are acquired.
6 Branch or Subsidiary
6.1 What taxes (e.g. capital duty) would be imposed upon the
formation of a subsidiary
There are no capital duties payable upon the formation of a
company.
6.2 Are there any other significant taxes or fees that would be
incurred by a locally formed subsidiary but not by a
branch of a non-resident company
As a general rule a branch of a non-resident company is taxed the
same as a subsidiary. A branch for tax purposes is treated as an
independently operating entity subject to certain adjustment for
transactions carried out with the head office.
6.3 How would the taxable profits of a local branch be
determined
Absent of a double tax treaty, a branch calculates taxable income
the same as a company. A branch would be required to prepare an
income/loss statement as if it were a separate entity from its head
office which would be the basis for calculating taxable income.
6.4 Would such a branch be subject to a branch profits tax (or
other tax limited to branches of non-resident companies)
Latvian law does not provide for a separate branch profits tax. If
the first financial period of a branch is less than 12 months then the
branch can apply a simplified tax calculated as 20% of the branches
revenues.
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Current law does not differentiate between capital gains and
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