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Religious organizations and taxation in Latvia: recommendations are pending

  • May 2020

Religious organisations in Latvia must each year submit a report to the State Revenue Service (SRS) about income and expenditure, including donations and gifts. Congregations do not have to pay company income tax, nor do they have to pay it for income received, for example, from the rental of real estate or from business. Donations are not included in the category of company income tax if the donations are received to achieve a goal defined in the religious organisation’s statutes and do not have a profit-making purpose. Respectively, tax payments do not have to be made for donations, but the flow of money should be trackable: the donation received has to be registered and its utilisation must be clearly visible.

There are no restrictions on the receipt and utilisation of donations and gifts currently in Latvia, which is why any person can make a donation or gift. Congregations must observe general bookkeeping requirements. Donations must be collected in accordance with the procedure approved by the head of the religious organisation and must be listed as income for the congregation and a receipt prepared. If a religious organisation receives a donation or gift of property, then the partner to the transaction must prepare a justificatory document, which confirms the donation or gift which has been made by, for example, a deed of conveyance. The general procedure is that everything which has been received must be registered. It should be added that the religious organisation must issue a SRS registered receipt for the donation received at the donor’s request.

If a religious organisation receives a donation or gift of property, then the tax does not have to be paid, but the gift must be registered in bookkeeping inventory documents. For example, there has to be a deed of conveyance in which the quantity of the donated or gifted property, as well as its approximate value in money terms, appears. Whereas, if the gift has been received by a priest, the same requirements are applied as for any other physical person. Personal income tax does not have to be paid for a gift from a third-degree relative. If the donor and the priest are not connected by kinship to the third degree, then income tax must be paid from a gift which exceeds 1,425 euros per year. Gifts from legal persons are subject to tax and the legal person has an obligation to pay the tax.

Payments for religious rituals, for example, baptisms, weddings, funerals, etc., should be evaluated in accordance with the prescribed procedure for the specific denomination. If a donated payment (a donation in cash) is made for religious rituals, then this payment should be registered as a gift. Whereas, if a payment is made as if it was for a service, this payment is registered as income from religious activities in accordance with the procedure for a religious ritual prescribed by the head of the congregation.

Previously, the SRS had not focused particular attention on religious organisations, as they were not the largest taxpayers. Currently, the SRS, the Ministry of Justice and the Ministry of Finance are developing recommendations for religious organisations. It can be expected that the issue of taxation policy for religious organisations in Latvia will become more topical as quite diverse proposals have been received on the improvement of the system and amendments to acts.

D 25 May 2020    AAnita Stasulane

CNRS Unistra Dres Gsrl

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