Saspiestais brūnais naudas maks uz baltā fona

4 LEGAL METHODS FOR YOU TO SAVE ON CORPORATE INCOME TAX

by Current Events

Currently, SRS employees no longer have any special difficulties in recognising illegal tax reduction methods with the help of fictitious transactions. However, the desire of businessmen to reduce the amounts payable to the state budget is not diminishing, so the task of accounting is to find legal solutions.

From 1 January 2018, the corporate income tax system in Latvia changed fundamentally. Corporate income tax no longer has to be paid automatically from your financial result. It is still very difficult to adjust both upwards and downwards when determining taxable income, and in addition to paying the statutory advance payments. And this does not mean that corporate income tax no longer exists at all …

In order to avoid paying unnecessary corporate income tax, we will consider 5 completely legal methods for reducing your company’s corporate income tax:

1 Restaurant visits for business dinners or team building events

You can definitely go to a business dinner or organise a Christmas party for a team, allocating the costs to the operating expenses. All you have to do is make sure that these expenses do not exceed 5% of the previous period’s tax salary fund.

2 Buying an expensive and good car

Purchasing an expensive car will prove the success of your business for everyone, but so that at the time of purchase it does not immediately pay 25% of the amount of corporate income tax, make sure that the purchase amount does not exceed 50 thousand EUR plus VAT! Maybe the solution is to buy a slightly used car from Stuttgart? But you have to look at life through a three-pronged star, haven’t you?!

3 Recovery from debtors (receivables)

Payment discipline in the Latvian business world in the post-crisis period is weak, and the legislator has already provided for it. If the collection of the debtor’s debt is not successful, it is best not to allow this situation, but to start working with the debtor in time so that it settles in time, even in instalments. If this does not happen, the legislator has provided for 3 years to recover the money. If the debt cannot be recovered, you will have to pay 25% corporate income tax, as the taxable income is increased by the amounts of uncollectable debts …

4 Loans to related parties

In the past, it was very popular to lend funds to related parties, even without interest and for a very long time. Currently, this is only possible in the short term, i.e. up to one year. Otherwise this payment will be equated to the payment of dividends and will be subject to 25% corporate income tax. Better return the money and borrow again!

May everything planned succeed!

P.S. And next time I’ll tell you why it’s not a good idea to entrust accounting to your relative. There was a case once …

By applying for the service on the website, you will receive a free solution for the transfer of accounting data in order to more easily start cooperation with us. As well as a 2-hour free consultation on how to improve your business!
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Vecs automobilis zaļajā krāsā

WHY YOU MUST PAY COMPANY CAR TAX (CCT)

by Current Events

In accordance with laws and regulations:

… Company car tax (CCT) must be paid for a vehicle registered in the ownership or possession of the company (merchant, branch of a foreign merchant, farm) or used on the basis of an employment or lending contract.

The purpose of any tax as such is to supplement the Treasury. In this case, it is disguised as fair compensation to the state budget for the benefit of the use of non-private road transport by the user for his/her own private use.

1 The tax is paid for a car:

Intended for the carriage of passengers and their luggage;
Whose number of seats (excluding the driver’s seat) does not exceed 8;
That is registered as a car, passenger car or utility car;
A box van with a maximum mass not exceeding 3000 kilograms, registered as a box van (category N1) and having more than three seats (including the driver’s seat).

The tax is paid for the car:

Registered in property or possession;
That is used on the basis of an employment contract (regardless of the number of days in a month);
That is lent and used for more than 15 days in one calendar month.

The tax is paid by the car holder!

If a taxable car has both an owner and a holder, the tax is paid by the holder of the car.

2 Paying the tax

The tax is paid to the state budget:

Before the state technical inspection to be performed in the relevant taxation period for the months from the beginning of the relevant taxation period until the month (inclusive) in which the state technical inspection of the vehicle is performed;
The remaining part of the tax for the remaining months of the taxation period and the months of the next taxation period until the state technical inspection shall be paid to the State budget in the next taxation period prior to the state technical inspection of the car;
For a car which is registered in Latvia for the first time, the tax on the day of registration of the car shall be paid to the State budget only for the calendar month in which the car is registered.
If the car is used on the basis of an employment contract or loan agreement entered into with a person who is not a merchant (including a branch or farm of a foreign merchant), the tax shall be paid every month during this contract until the 15th day of the following month.

The taxation period is one calendar year.

The taxpayer has the right to pay the tax in full before the state technical inspection for the entire calendar year.

3 Tax refund and overpayment

In order to receive a tax refund, a taxpayer shall submit an application to the SRS for a tax refund, in which the make, model and registration number of each car for which the tax refund is requested and the number of months for which the tax refund is requested, as well as information on the reasons for overpayment. The SRS shall refund the tax within 30 days after receipt of the application for tax refund.

If the taxpayer has overpaid the tax, the overpaid tax amount may be used to cover the tax payment for another car (indicating the registration number of this car) within the taxation period.

4 Evaluate the frequency of car use

If the company does not need a car every day, but only minimally, then you can safely lend your private car for up to 15 days a month on the basis of a loan agreement and not legally pay CCT, but remember that you can only refuel at the company’s expense – no repair or maintenance costs may be covered.
If the car is needed by the company every day and it is an objective work tool that needs to be maintained and repaired, then it is more economical to pay CCT, because you will not be afraid to bring your mother to market on Sunday and cover all expenses related to car maintenance.

P.S. And next time on how the employee to avoid becoming a tax debtor!

By applying for the service on the website, you will receive a free solution for the transfer of accounting data in order to more easily start cooperation with us. As well as a 2-hour free consultation on how to improve your business!
Free Consultation