Many Latvian businessmen and citizens show support for Ukraine in various ways, including in financial form - be it a donation of money or property, providing a job or shelter. Let's look at how to apply taxes to this type of assistance!
In connection with the Russian Federation's attack on Ukraine and the flow of Ukrainian refugees to the territory of Latvia, a new law was issued - the Law on the Support of Ukrainian Civilians. It entered into force on March 5, 2022 and provides support measures for Ukrainian citizens on the territory of Latvia, including determining the application of taxes to donations for general support to Ukrainian society.
CORPORATE INCOME TAX
The Corporate Income Tax Law (CIT Law) does not provide for special procedures and tax benefits for donations to Ukrainian society. Companies can provide assistance and donate to Ukrainian citizens or organizations but cannot apply the tax incentives for donations provided for in the CIT Law.
RECEIVABLE
Settlements with persons in Ukraine are subject to the general procedure of the CIT Law, in which receivables are written off, and no additional relief is provided.
VALUE-ADDED TAX
Article 8.1 of the Law on the Support of Civilians of Ukraine stipulates that a 0% value added tax (VAT) rate is applied to donations to the support of Ukrainian civilians for the supply of goods that the company supplies free of charge to a public benefit organization that exports these goods from the territory of the European Union (EU) or supplies other EU to a body recognized by a member state, as a result of which these goods are transferred or delivered as humanitarian aid or donation to the Ukrainian society. The VAT rate of 0% can be applied only to such goods that are transferred to a Latvian public benefit organization and which are exported from Latvia, confirming this with supporting documents.
PERSONAL INCOME TAX
Individuals who have made donations or gifts to support Ukrainian society can include this amount in their annual income declaration as eligible expenses and receive a personal income tax (IIN) refund.
Source: iTiesības
Subscribe to receive the latest BDO News and Insights
Please fill out the following form to access the download.