On 13 December 2018, Latvian parliament Saeima passed a law of amending the corporate income tax act which provides for the implementation of new controlled foreign company (CFC) rules in line with the EU Anti-Tax Avoidance Directive (ATAD). The rules apply to the foreign permanent establishments and foreign companies. A taxpayer himself or a group of related persons shall have a qualifying holding in a foreign company either (i) the taxpayer owns, directly or indirectly, more than 50 per cent of the shares or voting rights of the foreign company, either alone or together with the affiliated persons or (ii) the taxpayer is entitled to receive more than 50 percent of the profits of the foreign company, either alone or together with related persons.
CFC rules shall not apply if the CFC profit during the reporting year does not exceed EUR 750,000 and non-trading income does not exceed EUR 75,000 (income not from the sale of goods and services). Exemption provision does not apply for the companies established in a low or no-tax jurisdiction or jurisdictions specified through regulation. The law came into force on 1 January 2019.
