When Remote Work Creates Corporate Income Tax Risks. A Practical Example
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Corporate Restructuring
In today's business environment, companies frequently face the need to adapt to changing market conditions, investor requirements, tax regimes, or new strategic objectives. Corporate restructuring and transaction structuring is one of the most effective strategies for ensuring long-term sustainability and growth - not merely a legal or financial procedure, but a strategic instrument for optimising resources, reducing risk, and creating a platform for the future.
Corporate Reorganisation
is the process by which existing legal entities are merged, divided, converted, or otherwise modified to achieve defined economic or strategic objectives. In Latvia, this is governed by the Commercial Law as well as applicable tax, accounting, and financial supervisory legislation.
Corporate Structuring
is a broader concept encompassing adjustments to the operating model, ownership structure, capital architecture, and governance of a business. It includes tax planning, investment structuring, the establishment of subsidiaries, and the design of international group arrangements.
Typical Situations Requiring Restructuring
Typical Situations Requiring Restructuring
Business Expansion
The company seeks to expand into new markets or segments, requiring a new corporate structure.
Attracting Investors
Prospective investors require a clear and transparent corporate structure.
International Operations
The company is commencing or expanding activities outside Latvia and needs to establish an international structure.
Tax Optimisation
The existing structure is generating an inefficient tax burden and restructuring is required.
Types of Reorganisation
Merger
two or more companies combine, forming a new entity or by absorption into one of the existing companies.
Acquisition
one company is absorbed by another, ceasing to exist as a separate legal entity.
Demerger
the assets and liabilities of a company are divided between multiple new or existing entities.
Conversion
the legal form of a company is changed (for example, from a limited liability company to a joint stock company).
Elements of Corporate Structuring
Elements of Corporate Structuring
Holding Structure Design
shareholders establish a holding company that controls all subsidiaries. This centralises management, reduces risk, and provides more flexible tax planning.
International Structure Development
companies establish international structures to optimise the tax position and gain access to new markets.
Governance Restructuring
the management structure is reviewed and optimised to improve decision-making processes.
Function and Asset Transfers
asset transfers between group entities, contract novation, employee redeployment, and implementation of structural changes.
Process Stages
1
Analysis and Objective-Setting
assessment of the existing corporate structure, market position, financial profile, and ownership objectives.
2
Plan Development
preparation of the legal and tax plan, scenario modelling, and risk analysis.
3
Tax and Financial Analysis
assessment of the impact on corporate income tax, VAT, personal income tax, and other applicable taxes; preparation of a risk analysis and ensuring legal compliance.
4
Accounting and Valuation
valuation of assets, liabilities, and capital; preparation of accounting entries and financial statements.
5
Legal Advisory and Documentation
drafting the reorganisation agreement or plan, filing documents with the Commercial Register, and shareholders' resolutions.
6
Tax Authority Coordination
determination of the tax implications of the reorganisation; coordination with the State Revenue Service (SRS) where required; preparation of opinions.
7
Practical Implementation
end-to-end coordination of the reorganisation plan, working with auditors, accountants, notaries, and the Commercial Register.
8
Post-Restructuring Monitoring
ongoing compliance monitoring, management of tax risk, and support with subsequent audits.
How We Can Help
Structuring Strategy
we design the optimal corporate model in line with the objectives of owners and investors.
Tax Planning and Compliance
we assess the impact of the restructuring on corporate income tax, VAT, personal income tax, and other applicable taxes, prepare a risk analysis, and ensure legal compliance.
Financial and Asset Valuation
we provide an independent assessment of the company's assets, liabilities, and capital structure.
Practical Implementation
we manage the end-to-end implementation of the restructuring plan, working with auditors, accountants, notaries, and the Commercial Register.
International Structure Development
we assist in establishing and optimising international corporate structures.
Dispute Resolution
where disputes arise with the State Revenue Service (SRS) or shareholders in the course of a restructuring, we provide legal representation and advisory support.
