LATVIA Law and Practice Contributed by: Jānis Kārkliņš, Annija Kārkliņa, Ēriks Krēsliņš and Rihards Strads, BERG
distributions by investment or alternative investment funds to their investors. Gains from the disposal of real property are subject to personal income tax. However, exemptions may apply, particularly depending on the length of own - ership and the use of the property (eg, as a primary residence). 8.5 Tax Benefits Real estate may be classified as a fixed asset that is used in the course of economic activity. In such cases, the taxpayer (if it is a physical person) may apply depreciation in accordance with the applica - ble tax regime: where the declining-balance method is elected, a depreciation rate of 5% per tax period applies, whereas under the straight-line method the asset is depreciated over a period of 35 years. Where a building (or part thereof) is used only partially for the purposes of economic activity, depreciation must be calculated on a pro rata basis, by reference to the proportion of the total area that is so used.
Furthermore, a taxable person registered in the Repub - lic of Latvia is entitled to deduct input tax incurred on the acquisition or construction of immovable property, provided that such property is intended to be used for the purposes of taxable transactions.
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