LAW ON ENTERPRISE INCOME TAX (1 March 1995 as amended through 22 November 2001) (unofficial translation, excerpt)


Section 2. Tax Payers

(1) Enterprise income tax payers are:

1) domestic undertakings, which carry out entrepreneurial activity, public and religious organisations, and institutions financed from the State budget or local government budgets, which obtain income from economic activity and to which the requirements of Paragraphs two, three and four of this Section do not apply (hereinafter - residents)


CHAPTER II. Determining Taxable Income

Section 4. Taxable Income of a Resident and of a Permanent Representative Office


(11) Taxable income in respect of public organisations and their associations, religious organisations, as well as other taxpayers to which the Law On Annual Accounts of Undertakings, the Credit Institution Law and the Law On Insurance Companies and their Supervision are not applicable and which obtain income from economic activity and to which Section 2, Paragraphs two, three and four of this Law do not apply, is the difference between revenue from economic activity and expenses relating to the obtaining of the revenue mentioned and shall be adjusted in accordance with this Law.


Section 5. Expenses not Directly Related to Economic Activity

(1) There shall be included in expenses that are not directly related to economic activity, all expenses incurred by an undertaking for relaxation, pleasure trips and, recreation of owners and employees, for travel with the motor vehicles of an undertaking by owners and employees and benefits, gifts, credits and loans turned into gifts of owners and employees, as are not related to entrepreneurial activity, and other disbursements in cash or other form (in kind) to owners or employees that are not set out as remuneration or that are not related to the entrepreneurial activity of the taxpayer.


(4) Included in expenses that are not related to economic activity shall be donations or gifts to other persons, amounts of guarantees, which an undertaking as a guarantor is required to pay in accordance with an agreement of guarantee, deductions from profit, from turnover or other base quantity carried out by an undertaking on its own initiative, by order of its owner or in accordance with laws, and such expenses as are economically not related to economic activity of an undertaking.

CHAPTER III. Tax Rebates


Section 20. Tax Rebate for Donors

(1) Tax shall be reduced for residents and permanent representative offices by 85 per cent of amounts donated to budget institutions, as well as public cultural, educational, scientific, sports, charitable, health and environmental protection organisations and funds registered in the Republic of Latvia, and religious organisations which have been granted permits to receive donations, the donors receiving a tax rebate. The Cabinet shall determine the procedures for the issuance and cancellation of the permits referred to, the term of validity and the documents to be submitted, as well as approve the form of the report on donors, the amount of donations and the utilisation of donations which shall be submitted.

(2) Tax shall be reduced for residents and permanent representative offices by 90 per cent of amounts donated to the Latvian Culture Foundation, the Latvian Olympic Committee and the Latvian Children’s Fund.

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

(4) The organisations, funds and budget institutions referred to in Paragraphs one and two of this Section shall by no later than 1 March of the post-taxation period submit a public report on donors, the amounts donated by them and the use of sums regarding donations received in the taxation year.

(5) The tax rebate is not applicable to payers indebted for taxes for previous years as of the first date of the second month of a taxation period.

(6) If an undertaking has violated the provisions of this Section or has concealed taxable income, the amount of tax shall be increased by two times the amount of such tax rebate.

Section 21. Special Tax Rebates

Undertakings comprising societies for the disabled or as are medical in nature, as well as other charitable fund undertakings shall, pursuant to a list submitted by the Cabinet and approved by the Saeima, be exempt from payment of tax if they transfer to the mentioned funds (programmes, organisations) amounts exceeding the amounts of such tax assessed.