Tax Allowances
According to the Law “On Personal Income tax”, when natural persons donate to associations, foundations or religious organisations registered in the Republic of Latvia that have been granted Public Benefit Status according to the Public Benefit Organisations Law, ,the annual taxable income amount is reduced by the amount of the donation before imposing income tax. However, these reductions may not exceed twenty per cent of the annual taxable income.
To receive a tax rebate, the contributor must:
- fill out an annual tax declaration, in which the amount of the donated sum is indicated. This declaration must then be submitted to the SRS;
- submit to the SRS a copy of the Ministry of Finance decision issued to the foundation "Ziedot" (see below) and documents that approve the amount of the sum donated in the portal Ziedot.lv (cash income order or bank payment order). Although the laws and regulations do not precisely set what documents should be enclosed to the annual income declaration, it would be necessary to submit these documents;
- store for 3 (three) taxation years documents that approve the amount of the donated sum.
According to the Law “On Enterprise Income tax”, when businesses donate to a budget institution, as well as associations, foundations or religious organisations registered in the Republic of Latvia that have been granted Public Benefit Status according to the Public Benefit Organisations Law, the businesses have the right to receive an income tax reduction. For legal entities, the income tax is decreased by 75 % from the amount of the donation. However, total reductions may not exceed twenty percent of the total amount of tax.
Property or financial means that the payer transfers to a budget institution or a public benefit organisation (which has been granted such status in accordance with the Public Benefit Organisations Law) on the basis of a contract without charge to achieve the purposes specified in its Articles of Association, constitution or by-laws, shall be deemed to be a donation within the meaning of this Section, providing it is not deemed a reciprocal duty by the recipient to perform activities deemed to be a consideration thereof.
A tax rebate in conformity with Paragraph one of this Section shall not be applied if the purpose of the donation, which is specified for the recipient of the donation, includes a direct or indirect indication to a specific recipient of the donated means, which is an undertaking or a related party associated with the donor, or an employee of the donor or a family member of said employee.
To receive a tax rebate, a legal entity must:
- fill in an annual tax declaration, indicating the amount of the donation therein;
- submit the declaration to the SRS in accordance with the Law;
store a copy of the Ministry of Finances decision on granting Public Benefit Status to the corresponding association or foundation and documents that approve the amount of the donated sum (cash income order or bank payment order) for 5 (five) taxation years.
