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Practice areas

  • Tax

    Tax

    Tax, Customs

    Our tax specialists, some with prior experience of working for the tax authorities, advise and represent clients in all issues related to tax and customs law: structuring transactions, relations with tax authorities and tax disputes (i.a. tax crimes). The vast and highly recognised experience with tax disputes allows us to foresee and address the potential risks already prior to executing transactions.

    Latvia

    Associate partners
    • Kęstutis Rudzika
    • Vaidas Radvila
    • Lina Balčiūnė
    • Jurgita Najulytė
    Partners
    • Marius Grajauskas
    • Gintaras Balčiūnas
    Senior Associates
    • Gintaras Stankevičius
    • Konradas Pabijanskas
    • Artūras Liutvinas
    • Vilma Platelienė
    • Tomas Mickus
    • Tomas Karpičius
    • Aušra Grubytė
    Associates
    • Tadas Puzinas
    • Kamilė Žilinskytė
    • Kotryna Pociūtė
    • Diana Karabinaitė
    Legal assistants
    • Ieva Karpičiūtė
    Support staff
    • Ramunė Urbanavičė
    • Viktorija Šostak
    • Inga Štarolytė
  • Regulatory & compliance

    Regulatory & compliance

    Energy, Data protection, Consumer protection, Sports, Administrative proceedings

    Given the ever-expanding set of local and international rules and regulations which impact the daily lives of companies of all sizes, compliance has been getting more and more attention as a potential source of corporate issues. Our team of specialists has vast experience in helping our clients to understand and deal as efficiently as possible with all the rules and regulations that apply to them.

    Latvia

    Associate partners
    • Kęstutis Rudzika
    • Vaidas Radvila
    • Lina Balčiūnė
    • Jurgita Najulytė
    Partners
    • Marius Grajauskas
    • Gintaras Balčiūnas
    Senior Associates
    • Gintaras Stankevičius
    • Konradas Pabijanskas
    • Artūras Liutvinas
    • Vilma Platelienė
    • Tomas Mickus
    • Tomas Karpičius
    • Aušra Grubytė
    Associates
    • Tadas Puzinas
    • Kamilė Žilinskytė
    • Kotryna Pociūtė
    • Diana Karabinaitė
    Legal assistants
    • Ieva Karpičiūtė
    Support staff
    • Ramunė Urbanavičė
    • Viktorija Šostak
    • Inga Štarolytė
  • Real estate & construction

    Real estate & construction

    Construction, Zoning and planning, Infrastructure, Environment, Real estate

    Our practice includes counselling on a variety of real estate related issues: real estate development (i.a. zoning & planning, permits, infrastructure, construction contracts, financing, environment), rights and obligations stemming from ownership (e.g. co-ownership, servitudes, access roads), as well as rent and lease of immovables. International publications have, for years, recognised our professionalism in dealing with these matters.

    Latvia

    Associate partners
    • Kęstutis Rudzika
    • Vaidas Radvila
    • Lina Balčiūnė
    • Jurgita Najulytė
    Partners
    • Marius Grajauskas
    • Gintaras Balčiūnas
    Senior Associates
    • Gintaras Stankevičius
    • Konradas Pabijanskas
    • Artūras Liutvinas
    • Vilma Platelienė
    • Tomas Mickus
    • Tomas Karpičius
    • Aušra Grubytė
    Associates
    • Tadas Puzinas
    • Kamilė Žilinskytė
    • Kotryna Pociūtė
    • Diana Karabinaitė
    Legal assistants
    • Ieva Karpičiūtė
    Support staff
    • Ramunė Urbanavičė
    • Viktorija Šostak
    • Inga Štarolytė
  • Medical & pharmaceuticals

    Medical & pharmaceuticals

    Heath care, Medical & pharmaceuticals

    We provide legal advice and represent our clients in all matters related to pharmaceuticals, which is one of the fastest growing industries with rapidly changing rules and regulations that varies from one country to another. Our attorneys, in cooperation with medical field professionals, advise on a regular basis on the requirements for manufacturing medical products, the promotion of medical products and requirements for performance of clinical trials. We also have a comprehensive practice in representing clients in medical malpractice cases.

    Latvia

    Associate partners
    • Kęstutis Rudzika
    • Vaidas Radvila
    • Lina Balčiūnė
    • Jurgita Najulytė
    Partners
    • Marius Grajauskas
    • Gintaras Balčiūnas
    Senior Associates
    • Gintaras Stankevičius
    • Konradas Pabijanskas
    • Artūras Liutvinas
    • Vilma Platelienė
    • Tomas Mickus
    • Tomas Karpičius
    • Aušra Grubytė
    Associates
    • Tadas Puzinas
    • Kamilė Žilinskytė
    • Kotryna Pociūtė
    • Diana Karabinaitė
    Legal assistants
    • Ieva Karpičiūtė
    Support staff
    • Ramunė Urbanavičė
    • Viktorija Šostak
    • Inga Štarolytė
  • IT & intellectual property

    IT & intellectual property

    Information technology, Telecommunications, Media, Intellectual property

    _We keep up with the times and acknowledge the vast use of information technologies and the growing importance of intellectual property in today’s business. With individual approach and by looking from clients’ perspective, our team can provide advice on all aspects related to information technologies and intellectual property. We combine our knowledge of conventional business transactions with an in-depth understanding of the related technical aspects. Our attorneys are recognised for having experience e.g. in legal aspects of cloud computing, software licencing and patent registration.

    Latvia

    Associate partners
    • Kęstutis Rudzika
    • Vaidas Radvila
    • Lina Balčiūnė
    • Jurgita Najulytė
    Partners
    • Marius Grajauskas
    • Gintaras Balčiūnas
    Senior Associates
    • Gintaras Stankevičius
    • Konradas Pabijanskas
    • Artūras Liutvinas
    • Vilma Platelienė
    • Tomas Mickus
    • Tomas Karpičius
    • Aušra Grubytė
    Associates
    • Tadas Puzinas
    • Kamilė Žilinskytė
    • Kotryna Pociūtė
    • Diana Karabinaitė
    Legal assistants
    • Ieva Karpičiūtė
    Support staff
    • Ramunė Urbanavičė
    • Viktorija Šostak
    • Inga Štarolytė
  • Dispute resolution

    Dispute resolution

    Litigation, Arbitration, Alternative dispute resolution, Family and inheritance, Enforcement, White-collar crimes

    We have a comprehensive practice in litigation, arbitration, as well as out-of-court debt recovery. Our attorneys are regularly acting as arbitrators, conciliators and bankruptcy trustees. Many of our cases have principally changed the interpretation of law, being often also of interest to the general public. International publications have, for years, recognised us as among top dispute resolution firms on the market.

    Latvia

    Associate partners
    • Kęstutis Rudzika
    • Vaidas Radvila
    • Lina Balčiūnė
    • Jurgita Najulytė
    Partners
    • Marius Grajauskas
    • Gintaras Balčiūnas
    Senior Associates
    • Gintaras Stankevičius
    • Konradas Pabijanskas
    • Artūras Liutvinas
    • Vilma Platelienė
    • Tomas Mickus
    • Tomas Karpičius
    • Aušra Grubytė
    Associates
    • Tadas Puzinas
    • Kamilė Žilinskytė
    • Kotryna Pociūtė
    • Diana Karabinaitė
    Legal assistants
    • Ieva Karpičiūtė
    Support staff
    • Ramunė Urbanavičė
    • Viktorija Šostak
    • Inga Štarolytė
  • Banking & finance

    Banking & finance

    Finance, Banking, Securities, Insurance, Investment, Insolvency, Debt restructuring and recovery

    We advise banks and other financial institutions in all matters related to financial transactions and supervision. International publications recognise LEADELL offices as among leading law firms in advising on debt restructuring and rescheduling. The experience gained by advising leading banks of the Baltics allows our team to adequately address the interests of all parties to a transaction, as well as requirements applicable to them. Our team is also competent in counselling on fintech matters that have arisen due to the radical changes in traditional financial services caused by digital innovations.

    Latvia

    Associate partners
    • Kęstutis Rudzika
    • Vaidas Radvila
    • Lina Balčiūnė
    • Jurgita Najulytė
    Partners
    • Marius Grajauskas
    • Gintaras Balčiūnas
    Senior Associates
    • Gintaras Stankevičius
    • Konradas Pabijanskas
    • Artūras Liutvinas
    • Vilma Platelienė
    • Tomas Mickus
    • Tomas Karpičius
    • Aušra Grubytė
    Associates
    • Tadas Puzinas
    • Kamilė Žilinskytė
    • Kotryna Pociūtė
    • Diana Karabinaitė
    Legal assistants
    • Ieva Karpičiūtė
    Support staff
    • Ramunė Urbanavičė
    • Viktorija Šostak
    • Inga Štarolytė
  • Corporate & commercial

    Corporate & commercial

    Corporate governance, Public procurement, Public-private partnerships, Transactions and trade, M&A, Competition, Employment, Migration, Transport

    Our group of specialists provides top-quality counselling on various aspects of corporate and commercial law: corporate governance, transactions and trade (including M&A), public procurement, public-private partnerships, competition etc. Our clients range from some of the biggest companies in the market to small start-ups, and thus the issues that we advise them on vary respectively. Our competence has been consistently recognized to be one of the best in the market by the annual international publications.

    Latvia

    Associate partners
    • Kęstutis Rudzika
    • Vaidas Radvila
    • Lina Balčiūnė
    • Jurgita Najulytė
    Partners
    • Marius Grajauskas
    • Gintaras Balčiūnas
    Senior Associates
    • Gintaras Stankevičius
    • Konradas Pabijanskas
    • Artūras Liutvinas
    • Vilma Platelienė
    • Tomas Mickus
    • Tomas Karpičius
    • Aušra Grubytė
    Associates
    • Tadas Puzinas
    • Kamilė Žilinskytė
    • Kotryna Pociūtė
    • Diana Karabinaitė
    Legal assistants
    • Ieva Karpičiūtė
    Support staff
    • Ramunė Urbanavičė
    • Viktorija Šostak
    • Inga Štarolytė
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Our Experience

News

Effects on business form – upcoming tax reforms in Latvia and Estonia

24.10.2017LEADELL

Year 2018 will come with some significant tax reforms in Latvia and Estonia affecting businesses of all size. Latvia is introducing 0% tax rate on reinvested profit, Estonia is lowering the income tax rate for regular profit distribution and other measures to improve the competitiveness of each country are taken. To give a better insight in the upcoming tax reforms, LEADELL law offices have prepared comparative overview of the most important changes.

TAX FOR REINVESTED PROFITS

One of the main changes in Latvia that will come into effect on 1st January 2018 is the 0% corporate income tax (CIT) rate on reinvested profit. The aim of the tax reform is to motivate entrepreneurs to keep the money in the company. It should improve the capitalization and facilitate the fund raising for further development of the company. It is also anticipated that 0% rate would improve attraction of foreign investments, as it would greatly facilitate cash flow during the investment period. This system already is working in Estonia. While, in Lithuania there are similar initiatives under consideration; however, no specific decisions are made yet. At the moment, in Lithuania a standard CIT in amount of 15% applies also on reinvested profits. Nevertheless, some significant differentiated CIT rates in Lithuania should be highlighted – entities whose average number of employees does not exceed 10 and whose income over the taxable period does not exceed EUR 300 000 is usually taxed at a rate of 5%. The same rate of 5% is applied for agricultural companies. Moreover, the participation exemption is applied in Lithuania which means that dividends received by a Lithuanian entity from Lithuanian or foreign entities where the Lithuanian entity that receives dividends continuously (for at least 12 past months, including the moment of distribution of dividends) owns more than 10% of voting shares (interest) usually is not subject to the income tax.

With the new CIT regime, a new taxation period of one calendar month is introduced in Latvia and Estonia. The taxation period in Lithuania is 1 fiscal year. In addition to that, all three Baltics states provide a different calculation coefficient for the taxable base, which is 0.85 in Estonia, 0.8 in Latvia and 0.86 in Lithuania.

PROFIT DISTRIBUTION

Amended tax regulations will apply in Latvia and Estonia also in case company decides not to invest its profits back in the company, but rather to pay dividends to shareholders. In Latvia the tax rate will be increased from 15% to 20%, but in Estonia on the contrary – a lower income tax rate of 14% will be available for regular profit (amounts that are lower or equal to the average divided profit of previous three years) distributions. The profit distributions exceeding regular profit amount are still charged with the standard 20% rate. In Lithuania the general tax rate applicable to profit distribution is 15%.

Reduction of tax rate for regular profit distribution in Estonia is a major move. The amendments were elaborated to motivate entrepreneurs to distribute the profit of previous tax periods and keep the profit distribution active also in the forthcoming periods. As a result of these amendments, it becomes more useful for companies to distribute profit throughout years as stable as possible since the tax liability will be significantly lower in such a case. It should also increase   the    competitiveness    of    Estonia in comparison to the rest Baltic countries and make Estonia more attractive to investors.

The same rate as it is for legal entities will be applied also to natural persons for profit distribution in Latvia. In other words, 20% rate will be applied and no additional personal income tax shall be due. However, in Estonia and Lithuania additional taxation is applicable. In Estonia the profit charged with 14%   rate   and   distributed   to   a     natural person is subject to an additional 7% income tax withholding by the company paying out the dividends. In Lithuania the profit is charged with 15% rate and natural persons are also charged with additional 15% of personal income tax. Accordingly, Latvia for shareholders – natural persons should be in a more favorable position by the given lower tax rate.

NON-REFUNDABLE AND LONG-TERM taxable loans

Adopted amendments will also affect the lending among related companies. Estonian government attempts to guarantee a better inflow of income tax by taxing non-refundable or long-term loans that have been given by a subsidiary to a parent company or another company functioning on a higher rank in the chain of companies, also to a so-called sister company, and the loans exceeding the total amount of   loans    taken  by    this    company    and   the contributions made into the equity. The same model is also introduced in Latvia with the amendments coming into effect on January 1st, 2018. Such system is already working in Lithuania. The aim of the said amendments is to prevent hidden take-out of profit from companies. Before the amendments companies used to pay the profit without any income tax to the parent company, calling it a loan. In practice this means that loan is given for an extremely long period or the term of payment is extended several times. Actual interest rate is hardly ever paid from the loan but it is added to the amount of loan. The enforcement of these amendments should end such behavior and guarantee that the transactions for taking out profit in the future would be charged with the standard income tax rate.

TO SUM UP:

  • Latvia is becoming more attractive for investors by introducing 0% CIT rate on reinvested profits.
  • Estonia will have the lowest CIT rate of 14% for regular profit distributions for legal entities.
  • Profit distribution to natural personas in Latvia will not be taxable with personal income tax.
  • Lithuania is more attractive for small and agricultural companies with the reduced CIT rate of 5%.
  • No more hidden profit takeout in form of long term loans to related companies.

 

  LV LT EST
Corporate income tax for reinvested profits  

§ 0%

 

§ 15%

 

§ 0%

Taxation period

 

§ 1 calendar month § 1 fiscal year § 1 calendar month
Charged amount subject to rate § 0.8 § 0.85 § 0.86
       
Tax rate in case of profit distribution to legal entities § 20% § 15% § 14%*

§ 20%**

Tax rate in case of profit distribution to natural persons § 20% § 15% + 15% § 14% + 7%

 

*for regular profits

**when exceeding regular profits

 

News prepared by:

LEADELL Pilv / Estonia/ Jaak Siim/ jaak.siim@leadell.com;

LEADELL Balčiūnas & Grajauskas/ Lithuania/ Artūras Liutvinas/ arturas.liutvinas@leadell.com;

LEADELL Fogels, Vītols & Paipa/ Latvia/ Artūrs Rubins/ arturs.rubins@leadell.com.

 

 

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