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On 14 August 2008, the Ministry of Finance presented certain amendments to tax laws. These proposals introduce several new tax incentives. Some of the amendments will align the existing Latvian rules with EC law. In order to become effective, the amendments must be approved by the Cabinet of Ministers and adopted by the parliament. Most of the amendments are intended to come into effect in 2009. The main features of the amendments are summarized below.

Further details will be reported subsequently.

Corporate taxation

The most important proposals are as follows:

-   abolition of the 5% withholding tax currently imposed on payments made to non-residents for the use of aircraft employed in international transportation;
-   introduction of the "notional interest deduction", i.e. the possibility to deduct notional interest expense from the taxable income, which will be calculated based on the amount of retained earnings, if any, and the specific interest rate on loans granted to Latvian enterprises, as determined by the Bank of Latvia;
-   introduction of a reinvestment incentive, under which any gains on the disposal of a fixed asset (subject to certain exceptions, such as for assets held for resale, transportation vehicles, artworks, etc.) will be disregarded if the proceeds are reinvested
-   into a more useful similar asset, within the prescribed time limits;
-   extension, until the end of 2013, of the period within which the acquisition of the qualifying high technology equipment will give rise to an accelerated depreciation. (The period is currently set to end in 2010.) It is also proposed to maintain at 1.5 the index applied to the acquisition costs of such equipment for depreciation purposes. The index would normally decrease annually;
-   accelerated depreciation of registered trademarks and patents by means of applying the index of 1.5 to their acquisition costs for depreciation purposes; and
-   extension of loss carry-forward from 5 to 8 years