Accounting and taxation peculiarities in transformation processes of enterprises
Accounting and taxation peculiarities in transformation processes of enterprises

Summary/Abstract: The main legal act regulating transformation conditions of enterprises is the Commercial Code passed in 2002. According to the Commercial Code, an enterprise may be transformed by way of merger, division or transformation. A transforming company has to include in its balance sheet the assets and liabilities in their fair value and prepare the transformation balance. In the situation of transformation of enterprises, it is necessary to assess the assets value anew or revaluate them. From the point of view of accounting, valuation is a process, in result of which the enterprise’s objects or elements become expressed in cash. In the frame of the Commercial Code, in 2004 and 2005, a transformation process of individual enterprises into capital companies, i.e. into Ltd. and stock companies, or into registered individual businesses was carried out. For businessmen, it is more favourable to become registered as taxpayers of corporate income tax, because the rate of this tax is considerably lower in comparison with the rate of the personal income tax. It does not provide equal conditions of competition in entrepreneurship of Latvia regarding different enterprise forms. The profit of small enterprises becomes taxed by a larger income tax than the profit of big enterprises. The next problem that enterprises have to face after the change of their form is the amount and method of accounting for social security payments. In the case of enterprise transformation, the methods of taxation of immovable property and the adequate payment order may change considerably.

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