The saeima has adopted a new corporate income tax (cit) law, which will enter into force on 1 january 2018 and provides for a conceptually new tax payment regime. The reform promises that companies will have more money for development and investment, as well as the motivation to hide real income and profits. We follow the example of estonia the india phone number list most important message for entrepreneurs is that the new cit law sets a new cit rate of 20% instead of the current 15%.Until now, in latvia, cit was calculated on the profit earned during the india phone number list taxation period, and the tax had to be paid regardless of whether the profit has been distributed or not.
The new cit model provides for the deferral of payment until the profit is distributed or directed to expenses that do not ensure the india phone number list further development of the company. Thus, following the example of estonia, latvia has introduced a 0% rate for reinvested earnings. Tax on dividends - only for companies in turn, the calculated dividends will be taxed at the company level at a rate of 20%, ie dividends received by individuals will no longer be subject to personal income tax (pit). However, according to sorainen's tax advisers, the india phone number list effective cit rate will be 25%, as the taxable base must be divided by a factor of 0.8 .Thus, the tax is calculated on the amount of the net taxable object (it remains at 20% of the gross amount).
For example, if 100 dividends are calculated for payment, the tax will be 25 (100 ÷ 0.8 x 0.2). Dividends received from foreign companies, as long as they india phone number list are subject to cit in the country of origin, will not be taxed again in latvia. Beneficiaries - small businesses inguna leibus, a professor at the institute of finance and accounting of the latvia university of agriculture, points out that small companies will also benefit - provided they invest the india phone number list profits in development and do not distribute dividends to the owners. As the cit payments decrease, the net profit and equity of these companies will increase. In addition, the object of the tax will be significantly reduced.