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Law on Enterprise Income Tax

(excerpts)

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Section 2. Tax Payers

(1) Enterprise income tax payers are:
1) all of the performers of economic activity referred to in this Clause which carry out economic activity (hereinafter – residents);
a) domestic undertakings,
b) institutions financed from the State budget to which the conditions of Paragraph two of this Section do not apply,
c) institutions financed from local government budgets, which obtain income from economic activity and to which the requirements of Paragraph two of this Section do not apply;
2) foreign commercial companies, natural persons and other persons (hereinafter – non-residents);
3) permanent representations of non-residents (hereinafter – permanent representations).
(2) Enterprise income tax shall not be paid by:
1) natural persons;
2) individual (family) undertakings (including farms and fishing holdings), which have selected not to submit annual accounts in accordance with the Annual Accounts Law;
3) institutions financed from the State budget whose income from economic activity is provided for in the State budget;
4) institutions financed from local government budgets whose income from economic activity is provided for in local government budgets;
5) private pension funds;
6) associations, foundations if the open or hidden aim of the foundation thereof is not the acquisition of profit or the growth of capital for the members thereof;
7) religious organisations, trade unions and political parties;
8) the Finance and Capital Market Commission.

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Section 20.1 Tax Rebate for Donors

[24 September 2009]

(1) Tax shall be reduced for residents and permanent representations by 85 per cent of amounts donated to budget institutions, the State capital companies, which perform the State culture functions delegated by the Ministry of Culture, as well as societies and foundations registered in the Republic of Latvia, and religious organisations or the institutions thereof, to which the public benefit organisation status has been granted, or a non-governmental organisation registered in another Member State of the European Union or a State of the European Economic Area, with which Latvia has entered into a convention on the prevention of imposition of double taxation and tax evasion, if such a convention has entered into force, and which operates in the status comparable to the conditions of a public benefit organisation of Latvia in accordance with laws and regulations of the relevant Member State of the European Union or the State of the European Economic Area.

(2) The total tax rebate in accordance with the provisions of this Section may not exceed 20 per cent of the total amount of tax.

(3) The budget institutions, the State capital companies, which perform the State culture functions delegated by the Ministry of Culture, societies and foundations registered in the Republic of Latvia, and religious organisations or the institutions thereof referred to in Paragraph one of this Section, to which the public benefit organisation status has been granted in accordance with the Public Benefit Organisations Law, shall, by not later than 31 March of the post-taxation period, submit a public report regarding donors, the amounts donated by them and the use of donations received in the taxation year. If for a State capital company, which performs the State culture functions delegated by the Ministry of Culture, the annual report period does not coincide with the calendar year, the referred to capital company shall, within three months after the last day of the taxation period, provide a report regarding donors, the amounts donated by them and the use of donations received in the taxation year.

(4) The tax rebate shall not be applicable to payers whose total tax debt as of the first date of the second month of a taxation period exceeds 150 euros, except tax payments the payment terms of which have been extended in accordance with the Law On Taxes and Fees.

(5) If a taxpayer has violated the provisions of this Section or has concealed taxable income, the amount of tax shall be increased by the amount of such tax rebate.

(6) The property or financial means, which the payer, on the basis of a contract, transfers free of charge to a budget institution, the State capital company, which performs the State culture functions delegated by the Ministry of Culture, or a public benefit organisation (to which such status has been granted in accordance with the Public Benefit Organisations Law) to achieve the purposes specified in the articles of association, constitution or by-law thereof, shall be deemed to be a donation within the meaning of this Section if the recipient is not specified with a reciprocal duty to perform activities, which are deemed a consideration.

(7) A tax rebate in conformity with Paragraph one of this Section shall not be applied if at least one of the following conditions exists:

1) the purpose of the donation, which is specified by the recipient of the donation includes a direct or indirect indication to a concrete recipient of the donated means, which is an undertaking or a related party associated with the donor, or an employee of the donor or a family member of such employee, or

2) the recipient of the donation performs activities of a compensatory nature, which are directed directly or indirectly for the gaining of benefits for the donor, an undertaking associated with the donor, a related party or a relative of the donor up to the third degree or a spouse, or ensures the interests of the donor, which are not associated with philanthropy;

3) the resident and the permanent representation, which donates to a non-governmental organisation registered in a Member State of the European Union or a State of the European Economic Area, together with the declaration have not submitted such documents to the State Revenue Service, which confirm that:

  1. a) the recipient of the donation is a resident of any Member State of the European Union or the State of the European Economic Area;
  2. b) the recipient of the donation has a status comparable to the public benefit organisation in the state of residence;
  3. c) the recipient of the donation is engaged in the field of public benefit, which provides a significant benefit to the society or any part thereof, particularly if it is directed towards charity, the protection of human rights and individual rights, the development of the civic society, the promotion of education, science, culture and health and the prevention of diseases, the support to sport, the environmental protection, the provision of aid in cases of catastrophes and emergency situations, the social welfare improvement of the society, particularly groups of poor and socially vulnerable persons;
  4. d) at least 75 per cent of the amount donated by the payer are used for the purposes of public benefit.

[24 September 2009; 20 December 2010; 6 November 2013]