Financial Services, Latvia, Legislation, Markets and Companies, Taxation

Under the draft law, a 20% tax will be charged on dividends at the company level, while no personal income tax will be charged on the dividends paid out to individuals. The same 20% tax rate will also apply to the rest of the profit that is not reinvested into the business.

The taxable period will be shortened from one year to one calendar month.

Under the new corporate income tax regulation companies will not be required to make advance tax payments, except for a transition period from January 1, 2018 to June 30, 2018, which is expected to improve the cash flow.

The Finance Ministry indicated that the new corporate income tax regulation is essentially incompatible with tax rebates and allowances, because the personal income tax is charged on expenses that have no reason for exemption.

In order to prevent tax evasion and optimization, the draft law contains provisions intended to prevent attempts to reduce the tax base.

As reported, the Cabinet of Ministers today is revising the remaining bills related to tax reform – amendments to the Law on Personal Income Tax, the Law on Solidarity Tax, the Law on Excise Tax, the Law on State Social Insurance, the Law on Corporate Income Tax, and Micro Enterprise Tax Law.

After the government adopts the amendments, they will be sent to Saeima who might adopt the bills in the second reading on July 21.