Martin Gauss

Even after ending up under control of the State, the management of the national airBaltic airline under Martin Gauss plans to use the practice once adopted by former president of the company – Bertold Flick. This practice provides for avoiding paying a significant portion of taxes from pilots’ wages, Pietiek portal’s information states.

In order to reduce the tax burden, which is to be paid to the Latvian state from pilots’ wages, airBaltic informed its pilots about the work of an offshore company on Cyprus – Baltic Airlines Services Ltd – in 2009. A scheme was developed to optimize taxes. This scheme involved selling shares of the company on Cyprus to pilots, from which they were paid monthly dividends in the amount of 35 LVL. This guaranteed flight captains monthly income of 4 000 EUR, first officers received around 1 800 EUR per month.

In order not to create additional tax burden for the involved company, solutions were being sought that would ensure a continued tax optimization, according to the portal. airBaltic’s management discussed the possibility of organizing the same practice in a new or current daughter company of airBaltic, but one that would be registered in Latvia and otherwise allow continuing Flick’s introduced tax optimization practice.

It is planned that the pilots will continue to receive dividends from shares they own, just like they did in relation to the company located on Cyprus. It is also proposed that some part of pilots’ wages will be used to pay for social tax and PIT, according to the information form sources within the airline and Transport Ministry. The tax burden to be paid from dividends is 15%, which is significantly less than state mandatory payments from salaries. Also, non-residents, some of which are airBaltic pilots, have an even lower dividend tax rate – 2%-15%.

Chairman of airBaltic Council, deputy Secretary of State to the Economy Ministry Andris Liepins was not ready to comment the planned solutions in the question of pilots’ wages. The fact that the so called «ReShape» plans includes expense optimization measures in relation to pilots’ wages was not denied by another Council member – Kaspars Briskens. He represents the Transport Ministry in airBaltic’s Council. Without revealing any details, Briskens, who is also Transport Minister Aivis Ronis’ advisor, said that all taxes will be paid regardless of the situation, but he did not say which taxes.

«airBaltic is restlessly working on different optimization measures as part of the «ReShape» plan, taking into account the experience of leading global airlines’. In any case, the final decision will be made, most importantly, in accordance with legislation of the Republic of Latvia and, secondly, will ensure the payment of all taxes in Latvia, thereby respecting the largest airBaltic shareholder – the Latvian State,»- Briskens explained.

Ref: 102.109.109.3393