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


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1.1.2011 Latvia tax changes summary in English.

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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 :// / 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> </li></ul><ul><li> </li></ul>Contact Information