The deadline for share capital conversion is slowly approaching

In connection with the introduction of the euro in 2014, the Commercial Law of the Republic of Latvia was amended. The changes provide that during the period from 1 January 2014 to 30 June 2016 companies shall register the share capital from lats currency in euro currency in the Register of Enterprises. This means that the conversion of the share capital into euro will not be done automatically.

The conversion of the share capital of the euro requires the decision of the Participants meeting that will be registered in the Register of Enterprises. The amendments of the articles of association as well as the amendments of the divisions of the shareholders registers shall also be made. In connection with this process other acitivities must be carried out.

In addition, a new form of shareholders register as a ”Division of the Register of Shareholders” has to be submitted to the Register of Enterprises until the 30th of June 2015. If the company has not yet committed it, conversion of share capital and submission of shareholders registers should be done simultaneously.

The procedure for applying Corporate Income Tax relief for payments to non-residents will be simplified

Draft amendments have been developed and published in the Regulations No. 178 of the Cabinet of Ministers. They determine the procedure for applying a  reduced tax rate or a tax relief provided by international agreements for the avoidance of double taxation and prevention of fiscal evasion.

The project stipulates that Latvian merchants shall have the right to apply a 100% exemption or reduced tax rate for payments to non-residents, if the paying agent has the beneficiary’ s certificate of residence at the time when an annual report and corporation income tax declaration have been submitted to the tax authorities. The current procedure requires to obtain this certificate and confirmation from the tax authorities before payments are made.

Non-residents’ rights to submit tax recalculation for income from management services and the use of property located in Latvia

Such rights to non-residents are provided in the amendments to the law "On Corporate Income Tax" which entered into force on January 1, 2015.

Non-resident is entitled to submit the tax recalculation only if the tax at the time of income payout, depending on the type of income, is withheld at the rate of 5% or 10%. In this case, gross income is taxed. Submitting tax recalculation, the gross income is reduced for expenses directly related to income generation, profit is taxed at the rate of 15%.  

The conversion procedure will be determined by the Cabinet of Ministers Regulations No. 556 “Procedure for the application of the Law “On Corporate Income Tax”,  draft amendments have been just published.

Contacts of Tax Advisory unit

If you have any questions or need more detailed information, please contact:

Ina Spridzāne (ina.spridzane@leinonen.lv, tel. 67358635) or Alla Bistrova  (alla.bistrova@leinonen.lv, tel. 67358607).

If you are interested in the news of tax, employment and other business-related legislation in Estonia and Lithuania, please visit http://leinonen.ee/news/news and http://leinonen.lt/news/news.