We assisted Digmatix a regional IT services company specialising in digital transformation solutions built on Microsoft Cloud – in obtaining a positive ruling from the Latvian tax authorities regarding the applicability of the thin-cap exemption to interest payments made to an investment fund established in another EU member state.
About the case
The outcome is unprecedented as the Latvian tax authorities was compelled to reconsider its previous position, which had denied that this exemption was applicable to investment funds established in another EU member state. The legal issue in question was particularly complex due to its interdisciplinary and cross-border nature, raising questions regarding:
- the interaction between thin-cap rules and the financial supervision of externally managed investment funds
- the compatibility of the practices of the tax authorities with the EU freedom to provide services and EU state aid rules
This ruling marks another milestone in the development of the Latvian capital market as an alternative to bank financing. It ensures that startups and growth companies raising funds through loans from investment funds will benefit from tax treatment equal to those borrowing from banks, thereby promoting a level playing field for different sources of financing.
Our team
The client was advised by partner Aija Lasmane and of counsel Mārtiņš Rudzītis.
