As of January 1, 2004, the new Goods and Services Lottery Law will enter into force, which will regulate the manner in which goods and services lotteries are organized, the receipt of permits for such lotteries, as well as the manner of control over these lotteries which, until now, have lacked the relevant normative regulation.

In the future, businesses that manufacture or sell goods, or supply services and who wish to organize a lottery of goods or services for which the prize fund will exceed 500 Latvian Lats, will be required to obtain a lottery permit from the Lotteries and Gambling Supervision Inspectorate of the Ministry of Finance (hereafter, the Inspectorate). The law also establishes the procedure by which a lottery permit can be obtained.

This new law introduces a new state fee in the amount of 25 percent of the lottery prize fund which the business must pay before the lottery permit can be issued. Up until now, when organizing lotteries, both the advertising expenses and the prize fund amount could be characterized as direct expenses relating to the principal business activity of an enterprise and could, therefore, be deducted from the profit of the enterprise for the purpose of calculating corporate income tax.

This will also effect the income tax applicable to residents, as this new law will establish that income tax will no longer be payable for prizes won by residents in goods and services lotteries. 

Only those goods and services lotteries whose prize fund will not exceed 500 Latvian Lats will not be required to obtain a lottery permit and pay the applicable state fee. In such cases the business will only have to notify the Inspectorate regarding the organization of such lottery.

The law states that within one calendar year a business may organize no more than three goods or services lotteries with regard to a certain type of goods or services. The law also provides that lottery prizes may not be non-physical assets. If the lottery prize is money it will be necessary to clearly identify the person who has won the lottery. Furthermore, it will be prohibited to place this money inside the packaging of goods.

It will also be prohibited to organize any goods and services lotteries which require that the particpant purchase alcoholic beverages (including beer), tobacco and medications. Furthermore, these goods may not be offered as lottery prizes as well.

The law also states that the winners of the goods or services lottery must be publicly named.

Those lotteries that were initiated prior to the effective date of this law can proceed up until March 1, 2004.