Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Presentation.News Tax Exec Sum.2011 02 28.Eng.Janist

396 views

Published on

1.1.2011 Latvia tax changes summary in English.

  • Be the first to comment

  • Be the first to like this

Presentation.News Tax Exec Sum.2011 02 28.Eng.Janist

  1. 1. 1.1.2011. tax news 28 February 2011 Rīga BALTIC TAX FIRM 2010
  2. 2. Content <ul><li>Direct taxes </li></ul><ul><ul><li>PIT </li></ul></ul><ul><ul><li>CIT </li></ul></ul><ul><li>Car tax </li></ul><ul><li>VAT </li></ul><ul><li>Excise tax </li></ul><ul><li>Natural resources tax </li></ul><ul><li>Taxes and fees </li></ul><ul><li>Real estate tax </li></ul><ul><li>Social security </li></ul><ul><li>Bank levy </li></ul>Vilnius LITHUANIA Riga LATVIA Minsk BELARUS Tallinn ESTONIA
  3. 3. Where are we? <ul><li>World bank in its Doing Business 2011 survey among 183 countries places : </li></ul><ul><li>Latvia 24 th , 59th for paying taxes. </li></ul><ul><li>Estonia - 17 th , </li></ul><ul><li>Lithuania - 23 rd . </li></ul>
  4. 4. CIT ( 1/4 ) <ul><li>Tax allowance for investment project </li></ul><ul><ul><li>allowance of 25% of the investment s - LVL 5- 35 m </li></ul></ul><ul><ul><li>allowance of 15% of the investment above LVL 35 m </li></ul></ul><ul><li>Conditions: </li></ul><ul><li>industries to be promoted (mostly production) </li></ul><ul><li>CM decision on a particular project until 31 .12. 2013 </li></ul><ul><li>minimum investment of LVL 5 m within 3 years </li></ul><ul><li>investment project to be promoted by 31 .12. 2016 </li></ul><ul><li>limit of 16 years use </li></ul><ul><li>no tax debts, insolvency, equity decrease , etc </li></ul><ul><li>not possible to use other tax rebates </li></ul>
  5. 5. Industries <ul><li>Food & drinks production </li></ul><ul><li>Wood production </li></ul><ul><li>Chemicals </li></ul><ul><li>Pharmacy </li></ul><ul><li>Rubber and plastic production </li></ul><ul><li>Metalurgy </li></ul><ul><li>Electronic and optic equipment production </li></ul><ul><li>Work equipment production </li></ul><ul><li>Vehicle production </li></ul><ul><li>Telecoms </li></ul><ul><li>IT </li></ul><ul><li>Logistics </li></ul>
  6. 6. CIT ( 2/4 ) <ul><li>Adjusting transfer pricing </li></ul><ul><li>Associated company (EU, EEA or DTT country) has increased the taxable income </li></ul><ul><li>With the annual accounts , a notice from the respective foreign tax man confirming increase of taxable income must be submitted to the Latvian SRS </li></ul>
  7. 7. CIT ( 3/4 ) <ul><li>Withholding tax relief </li></ul><ul><li>So far: </li></ul><ul><li>statement from foreign taxman needed (complex) </li></ul><ul><ul><li>receiver is not considered as a resident outside the EU </li></ul></ul><ul><ul><li>not released from the respective tax </li></ul></ul><ul><li>Now also possible: </li></ul><ul><li>a residence certificate + </li></ul><ul><li>a written statement by the receiver himself </li></ul>
  8. 8. CIT ( 4/4 ) <ul><li>Donation allowance clarified </li></ul><ul><li>D onation allowance (85% of the donated sum) </li></ul><ul><ul><li>also if donated in the EU and EEA </li></ul></ul><ul><li>Nothing can be received in return (no logo, etc) </li></ul>
  9. 9. Payroll <ul><ul><li>The general PIT rate </li></ul></ul><ul><ul><ul><li>from 26% to 25% </li></ul></ul></ul><ul><ul><li>Tax-free income threshold </li></ul></ul><ul><ul><ul><li>from LVL 35 to 45 a month </li></ul></ul></ul><ul><ul><li>Allowance for a dependent person </li></ul></ul><ul><ul><ul><li>from LVL 63 to 70 a month </li></ul></ul></ul><ul><ul><li>S tate mandatory insurance contributions </li></ul></ul><ul><ul><ul><li>from 33.09% to 35.09%, incl. the employ e e's share – from 9% to 11% </li></ul></ul></ul>
  10. 10. Tax on Passenger Cars of Companies <ul><li>New law, replaces the &quot;car-benefit tax&quot; </li></ul><ul><li>T ax payers - b usinesses owning or holding a passenger car </li></ul><ul><li>MoF interpretation – favours taxpayers, but.. </li></ul><ul><li>Monthly payment of the tax depend s on engine capacity : </li></ul><ul><ul><li>up to 2,000 cm 3 – LVL 19 </li></ul></ul><ul><ul><li>from 2,001 cm 3 to 2,500 cm 3 – LVL 30 </li></ul></ul><ul><ul><li>above 2,500 cm 3 – LVL 40 </li></ul></ul><ul><ul><li>if a car registered before 1 .1. 2005 - LVL 30 </li></ul></ul>
  11. 11. Tax on Passenger Cars of Companies <ul><li>If the tax is paid: </li></ul><ul><li>No payroll tax es are p ayable , nor CIT - adjusted </li></ul><ul><ul><li>even if the employee uses the car for personal needs </li></ul></ul><ul><li>Simplified accounting </li></ul><ul><ul><li>no road bills </li></ul></ul><ul><ul><li>for fuel expense a monthly summary of km driven – cannot exceed 1.2x the consumption limit </li></ul></ul><ul><li>20% of VAT – not deductible for any car! </li></ul><ul><ul><li>for purchase, imports, rent, maintanance </li></ul></ul><ul><ul><li>except car rent or sale, transportation of passangers or goods, etc </li></ul></ul><ul><ul><li>no deduction for banks, insurers (50% exempt or out-of-scope sales) </li></ul></ul>
  12. 12. VAT - Fiscal representative (1/7) <ul><li>Possibility for foreigners to avoid VAT registration in Latvia </li></ul><ul><ul><li>On imports (besides the permit or 0%, if within 30 days – to EU) </li></ul></ul><ul><ul><li>On exports + customs or excise warehouse </li></ul></ul><ul><ul><li>Intra-Community acquisitions in Latvia or inland transactions by EU VAT payer </li></ul></ul><ul><li>Good for 3rd country importers & Latvian warehouse keepers </li></ul><ul><li>FR responsibility </li></ul><ul><ul><li>For VAT and the supporting documents </li></ul></ul><ul><ul><li>FR should consider content of the agreements, bank guarantees, liability insurance, etc </li></ul></ul>
  13. 13. Imports + IC dispatch (2/7) Goods Import PVN; or no VAT; or 0% Invoice 0% VAT FR Invoice - 0% VAT Goods IM VAD and CMR – RUS sends to FR, FR – to EST 1648.
  14. 14. Imports + inland (3/7) FR Invoice 22% VAT Goods Goods Invoice0% VAT Import VAT; no VAT; or 0% 450. IM VAD and CMR – RUS sends to FR, FR – to LAT
  15. 15. Inland + exports (4/7) FR Goods 1914. Invoice 0% VAT EX VAD and CMR – LAT FR sends to RUS Goods Invoice 0% VAT
  16. 16. IC acquisition + exports (5/7) FR Goods 1884. Invoice EX VAD and CMR – LAT FR sends to RUS Goods Invoice
  17. 17. Deemed IC acquisition in Latvia (6/7) FR Goods 1595. Invoice
  18. 18. Sale inland (7/7) FR Goods GDP in 2006 Invoice
  19. 19. Other VAT news 1/4 <ul><li>Rates </li></ul><ul><ul><li>21 to 22, </li></ul></ul><ul><ul><li>10 to 12, </li></ul></ul><ul><ul><li>10 to 22 electricity for households </li></ul></ul><ul><li>VAT registration threshhold </li></ul><ul><ul><li>From LVL 10,000 to 35,000 (EUR 50,000) </li></ul></ul><ul><li>Taxable base, invoices, VAT payment order changes for auctions by bailiffs and insolvency administrators </li></ul><ul><li>Place of supply for organising events – B2B </li></ul><ul><li>Any tax returns – only electronically </li></ul>
  20. 20. Other VAT news 2/4 <ul><li>Imports of small items: </li></ul><ul><ul><li>For commercial purposes (B2B) up to EUR 10 – no VAT (was payable also for LVL 0.01); no customs duty – up to EUR 150 </li></ul></ul><ul><ul><li>C2C (non-commercial) up to EUR 45 – no VAT (was up to EUR 150); no customs duty – up to EUR 150 </li></ul></ul><ul><ul><li>Other deliveries (B2C) up to EUR 10 – no VAT </li></ul></ul>
  21. 21. Other VAT news 3 /4 <ul><li>Upon the year end VAT must be refunded within 10 days after approval of the overpayment! </li></ul><ul><ul><li>Previous wording – within 30 days after December return </li></ul></ul><ul><li>In VAT return – ask for the refund only if the surplus arose from fixed assets with VAT over Ls 100 </li></ul><ul><li>An immediate VAT refund criteria - adjusted: </li></ul><ul><ul><li>if the VAT surplus - more than LVL 8k (was - 15k) </li></ul></ul><ul><ul><li>At least 20% transactions with a place of supply outside Latvia (was – at least 20% transactions with a rate of 10%) </li></ul></ul><ul><li>SRS may extend 30 days monthly refund deadline </li></ul><ul><ul><li>if SRS informs of data review of the contracting party </li></ul></ul><ul><ul><li>If SRS asks for an additional info – has to decide in 75 days as of the return </li></ul></ul>
  22. 22. Other VAT news 4 /4 <ul><li>Auctions by administrators (A) and bailiffs (B) </li></ul><ul><ul><li>Taxable amount </li></ul></ul><ul><ul><ul><li>auction value (A) </li></ul></ul></ul><ul><ul><ul><li>notified by the owner, if no – auction value (B) </li></ul></ul></ul><ul><ul><li>Invoice: (A, B) </li></ul></ul><ul><ul><ul><li>in the name of the owner, </li></ul></ul></ul><ul><ul><ul><li>within 15 days after the calculation by A or B is effective </li></ul></ul></ul><ul><ul><li>VAT payable: </li></ul></ul><ul><ul><ul><li>(A) – in 20 days of the next month </li></ul></ul></ul><ul><ul><ul><li>(B) – in 20 days after the calculation by B is effective </li></ul></ul></ul>
  23. 23. The future? <ul><li>VAT Green paper: http :// ec.europa.eu / taxation_customs / resources / documents / common / consultations / tax / future_vat /com%282010%29695_en.pdf </li></ul><ul><li>New VAT law – at the CoM </li></ul><ul><li>VAT invoicing directive of 13.07.2010., effective as of 1.1.2013. </li></ul><ul><ul><li>Same requirements for invoices in all EU </li></ul></ul><ul><ul><li>More – in SORAINEN Tax Newsflash No. 22 (08.2010.): under Publications/Archive </li></ul></ul>
  24. 24. 3 year limitation period <ul><li>As of 1.7.2010 – new VAT refund system </li></ul><ul><ul><li>not possible to carry fwd ‘old VAT’ </li></ul></ul><ul><li>SRS used this as grounds for refusal of refunds </li></ul><ul><ul><li>esp. for real estate developers who used to carry fwd the VAT </li></ul></ul><ul><li>In such case consider appealing! </li></ul><ul><li>Grounds: </li></ul><ul><ul><ul><li>Does the law really prohibit to carry fwd? </li></ul></ul></ul><ul><ul><ul><li>Against the EU VAT Directive? </li></ul></ul></ul><ul><ul><ul><li>Legitimate expectations </li></ul></ul></ul><ul><ul><ul><li>ECJ and Latvian court ( Alstom ) </li></ul></ul></ul>
  25. 25. Our 2010 observations <ul><li>On tax disputes resolved without a court </li></ul><ul><ul><li>Well grounded explanations – prior to the decision of the SRS audit </li></ul></ul><ul><ul><ul><li>VAT refund possible even during business termination – important – intent when gods or services were purchased </li></ul></ul></ul><ul><ul><ul><li>SRS tries to ‘play fool’ </li></ul></ul></ul><ul><ul><li>SRS GD may accept a positive decision </li></ul></ul><ul><ul><ul><li>VAT refundable even if no sales yet </li></ul></ul></ul>
  26. 26. Customs <ul><li>11 new Incoterms 2010; substitute 13 Incoterms 2000 </li></ul><ul><li>New EU Regulation (430/2010) on amendments to the EU Customs code Implementation Regulation 2454/93 </li></ul><ul><ul><li>MoF prepares amendments to CoM regulations on Customs clearance re. Supplies to ships and aircraft </li></ul></ul><ul><li>New Combined Nomenclature – 5.10.2010. EU Reg. 861/2010 </li></ul><ul><li>15.12.2010. EU Reg. 1228/2010 amending the customs tariffs: </li></ul><ul><ul><li>A new chapter 99 – special CN codes </li></ul></ul><ul><li>Amended CoM reg. On customs guarantees </li></ul><ul><ul><li>No guarantee, if approved business </li></ul></ul><ul><ul><li>Customs broker has a permit for 10 years </li></ul></ul><ul><li>As of 1.1.2011. simplified customs clearance offices work 24/7 </li></ul>
  27. 27. <ul><li>EXCISE TAX </li></ul>
  28. 28. Rates <ul><li>Increase: </li></ul><ul><ul><li>non-alcoholic drinks – LVL 5.2 for 100 l (was LVL 4) </li></ul></ul><ul><ul><li>cigars and cigarillos – LVL 24 for 1000 items (was LVL 11) </li></ul></ul><ul><ul><li>tobacco for 1000 g – LVL 29 (was LVL 23) </li></ul></ul><ul><ul><li>fuel with biofuel mix: </li></ul></ul><ul><ul><ul><li>LVL 269 (for 1000 l) </li></ul></ul></ul><ul><ul><ul><li>disel – LVL 234 (for 1000 l) </li></ul></ul></ul><ul><li>Changes in definitions </li></ul>
  29. 29. <ul><li>NATURAL RESOURCES TAX </li></ul>
  30. 30. In essence <ul><li>Relief for used means of transport </li></ul><ul><li>20x penalty! </li></ul><ul><li>Increased rates for </li></ul><ul><ul><li>air pollution </li></ul></ul><ul><ul><li>Water pollution </li></ul></ul><ul><ul><li>Pplastic packaging and plates, cups, forks, knifes & spoons (1x used) - LVL 0.90 / kg (was LVL 0.65) </li></ul></ul><ul><ul><li>Sotrage of waste </li></ul></ul>
  31. 31. <ul><li>TAXES AND FEES </li></ul>
  32. 32. <ul><li>REAL ESTATE TAX </li></ul>
  33. 33. <ul><li>Increase </li></ul>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
  34. 34. NB! <ul><li>Because of different rates – all changes (e.g. In the purpose of use) must be notified to the municipality within 1 month! </li></ul><ul><li>Many exemptions on the to starting pay RET date </li></ul><ul><li>Changes with respect to 25% increase limitation: </li></ul><ul><ul><li>Not applicable to </li></ul></ul><ul><ul><ul><li>Dwellings </li></ul></ul></ul><ul><ul><ul><li>If start to use for business </li></ul></ul></ul><ul><ul><ul><li>If purpose of use is changed to non-dwelling </li></ul></ul></ul>
  35. 35. <ul><li>SOCIAL SECURITY </li></ul>
  36. 36. SSC <ul><li>Rate increse from 33.09% to 35.09% </li></ul><ul><li>Employee definitions </li></ul><ul><ul><li>Renting out of personnel by a foreigner to LatCo, </li></ul></ul><ul><ul><li>6 PIT criteria to requalify service contract into employment </li></ul></ul>
  37. 37. If no employment agreement <ul><li>The SSC calculation period extended </li></ul><ul><ul><li>From 1 to 3 months </li></ul></ul>
  38. 38. <ul><li>BANK LEVY </li></ul>
  39. 39. In essence <ul><li>Rate – 0.036% p.a. </li></ul><ul><li>Taxable object: </li></ul><ul><ul><li>Liabilities at the year end, less </li></ul></ul><ul><ul><li>Deposits </li></ul></ul><ul><ul><li>Mortgage bonds issued by the bank </li></ul></ul><ul><ul><li>Subordinated liabilities in the bank’s equity </li></ul></ul><ul><li>Should be declared to FKTK by 15 April of the following year </li></ul><ul><li>Payers: </li></ul><ul><ul><li>Credit institutions registered in Latvia </li></ul></ul><ul><ul><li>Branches abroad of credit institutions registered in Latvia </li></ul></ul><ul><ul><li>Branches in Latvia of foreign credit institutions </li></ul></ul>
  40. 40. Thank you! <ul><li>Jānis Taukačs </li></ul><ul><li>Partner , Tax & Customs </li></ul><ul><li>[email_address] </li></ul><ul><li>Quick & short Tax News: </li></ul><ul><li>www.twitter.com/Sorainen_tax </li></ul><ul><li>www.twitter.com/Nodokli </li></ul>Contact Information

×