Latvia’s parliament approved the Law on Ensuring a Global Minimum Tax Level for Large Enterprise Groups on 6 June, 2024. The law now awaits the president’s approval and publication in the Official Gazette to take effect.
Earlier Latvia had chosen to postpone the implementation of the Pillar Two global minimum tax (GloBE) rules under Council Directive (EU) 2022/2523 of 14 December 2022. The country, however, was still required to partially implement the Directive as required by law. This includes introducing relevant definitions, outlining the scope of the rules, and establishing reporting requirements.
However, the law does not yet include the main Income Inclusion Rule (IIR) and the Undertaxed Payment/Profit Rule (UTPR). These provisions will be introduced later and must be enforced on or after 31 December, 2029.
The Pillar Two global minimum tax introduces the Pillar Two income inclusion rule (IIR) and the undertaxed payment/profit rule (UTPR) to ensure a minimum corporate tax of 15% for large multinational (MNE) groups with annual consolidated revenue of at least EUR 750 million in at least two of the preceding four fiscal years.
The rules apply to all domestic and international groups with a parent company or subsidiary in an EU member state. The bill also proposes implementing a qualified domestic minimum top-up tax (QDMTT) for members of in-scope groups and certain safe harbors.
The IIR and QDMTT apply for financial periods beginning on or after 31 December 2023, while the UTPR generally applies for financial periods beginning on or after 31 December 2024.
