A judgment in the case on the norms of the Law “On Enterprise Income Tax” has been adopted
The Constitutional Court has adopted a judgment in the case No. 2010-70-01 “On Compliance of Section 14 (2) and (3) of the Law “On Enterprise Income Tax” with Article 91 and Article 105 of the Satversme of the Republic of Latvia”
Article 91 of the Satversme establishes equality of all persons before the law and the court, whilst Article 105 of the Satversme protects property right of persons.
Section 14 (1) of the Law “On Enterprise Income Tax” (hereinafter – the Law) provides: If the result of adjustment of profit or losses of a taxation period of a taxpayer, made in accordance with this Law, is losses, they may be covered in chronological sequence from taxable income of the next eight taxation periods. The second and the third part of the same section (the Contested Norms) envisage that if in a taxation period control of a commercial company or co-operative society is acquired by a person or a group of persons that previously did not control such commercial company or co-operative society and fails to maintain its previous type of ordinary activity for five taxation periods after the change in control, losses of pre-taxation periods of such commercial company or co-operative society shall not be covered in the taxation period or in subsequent taxation periods.
The applicant SIA “Kuldīgas RPB” holds that the particular procedure infringes its property right and causes unequal attitude towards the particular company if compared to other companies, wherein control and type of ordinary activity has not changed.
The Constitutional Court recognized that the Contested Norms are aimed at ensuring budget incomes and reduction of tax burden for such companies that preserve their type of or ordinary activity, as well as working places after the change of control.
Consequently, the Court recognized the Contested Norms as consistent with Article 91 and Article 105 of the Satversme.
The Judgment of the Constitutional Court is final and not subject to appeal.
Linked case: 2010-70-01