Amendments of the Law on Corporate Income Tax connected with stocks and dividends.

With taxation period, which starts from year 2013, taxable tax will not increase the tax period losses from the sale of securities. Gains or losses from alienations of stocks will be exempt when determining the taxpayers taxable income, except for income, which is gained if holding company is from low tax countries resident. It should be noted that the term – stock – in Law is meant also as shares and other documents, which gives the right to receive dividends.

In the beginning of year 2013 alienation of stocks will be exempt with corporate income tax, except if these stocks will be alienation from low tax countries shareholding companies. Respectively losses will not be deductible to Law purposes.

It is important to note that Latvia's standards are very liberal comparing to other countries, because it does not set minimal participation, minimum shareholding time or other restrictions in relation to shares.

Under the current Law for dividends in Latvia it is obligated to apply corporate income tax, that applies to dividends that are received from the Latvia's companies and if these companies are applying corporate income tax discounts, offshore companies (not including the European Economic Area (EEA) countries) and these companies have 25% or less from capital and voting right to Latvian taxpayers, and other offshore companies without any obligations. Starting from year 2012 dividends will be applied with corporate income tax, but only those which are paid from offshore companies without any obligations.

Currently only European Union (EU) and EEA companies are exempt of withholding tax receiving dividend, but paying dividends to other countries withholding tax is applied, either 10% or 5% rate. Starting from year 2013 withholding tax will be exempt to dividends from non – residents, except for companies which are from low tax countries. These changes related to Law are very important in that case if Latvian company shareholder is founded not in EU or EEA, for example Russia or United States of America. On 1st January, 2013, with corporate income tax will not be applied to Latvian resident to non – resident paid dividends and from non – resident received dividends. However, dividends which Latvian company is paying to companies from low or tax countries withholding tax will be applied, and it will be 15% instead of 10% which are now.

Starting of year 2013 also will expire legal norm which is included in Law, this legal norm is that allows to extend and to use later the losses from securities (except stocks) selling.

There are two aspects in relation to this – positive and negative. Positive aspect is that now companies will be able to decrease the money which is paid because of corporate income tax and to invest in other areas of their business. On the contrary, the negative aspect is for taxpayers who have stocked substantial unused losses from the sale of securities, because in the beginning of year 2013 it will not be possible to move further these losses and wait for other securities to be sold.