The State Revenue Service (SRS) is increasingly exercising its statutory power to have a company’s board member pay an overdue tax liability if that debt cannot be collected from the company. For the board member this often means thousands of euros to pay, private accounts blocked, and properties seized. This article explores the legal grounds for such actions and outlines substantial errors in decisions made by the SRS.
The Court of Justice of the European Union (CJEU) has examined a question that often faces Latvian taxable persons. May an excessive price of advertising services and the fact that they are not clearly necessary for the company’s business give the tax authority grounds for denying a deduction of input tax on the advertising expenses? This article explores the court findings and their practical implications.
A litigation and dispute resolution lawyer’s clients often prefer to avoid arguing with the authorities in the hope of building a relationship or performing an obligation, even one that has no basis in law. From a strategy perspective it is sometimes useful to concede a small point in order to secure a bigger gain, such as time or progress. And unreasonably complaining right and left is not considered good style. However, you should not be afraid to speak up where this is necessary and to engage in a meaningful discussion with the authorities when it makes sense. The government is not a small child who will take offence and seek revenge at the first opportunity. Below is a story of successful communication with two fairly bureaucratic government agencies: the State Revenue Service and the Citizenship and Migration Office.
The autumn sees the State Revenue Service (SRS) sending requests to taxpayers for information on transactions making up their bank account turnover and discrepancies with the information available to the SRS. This article explores the process and practical communication with the SRS (more details in “Bank account turnover out of line with tax filings”).
Transfer pricing (TP) rules laid down by section 15.2 of the Taxes and Duties Act effective from 1 January 2018 require that a taxpayer’s master file and local file, or only his local file, provide evidence that the TP applied in a related-party transaction (the “controlled transaction”) is arm’s length. Although there is no publicly available information about amounts the State Revenue Service (SRS) has charged for the lack or incompliance of TP documentation/ analysis of controlled transactions over the last three years, we are aware that those are being evaluated, mainly as part of the “Advise First!” principle, as we have written earlier. This article explores common substantial errors in TP documentation pointed out by an SRS official who attended a seminar the Latvian Chamber of Commerce and Industry organised in May 2021.
Proposals for amending the Company and Consolidated Accounts Act (the “CCAA”) were announced at the meeting of state secretaries on 12 August 2021. Although the proposals are still to be debated by the Cabinet of Ministers and need parliamentary approval, certain amendments would apply when preparing financial statements for 2021.
The rapid evolution of digital financial services has led to virtual currency (“VC”) being increasingly used in everyday payments. In July 2021 the State Revenue Service issued guidance on the tax and accounting treatment of virtual currency transactions, offering insights into the practical application of laws and regulations to income people earn from VC dealings. This article explores the personal income tax (“PIT”) treatment where an individual buys and sells VC.
On 6 July 2021 Parliament amended the Taxes and Duties Act to give the State Revenue Service (“SRS”) the right to publish information on SRS decisions of public importance from 5 August 2021. This article explores the goals of the amendments and the nature of information the SRS will be allowed to publish.
To deal with the Covid-19 crisis in 2020 and 2021, the governments have imposed tight restrictions, including travel restrictions, to contain the pandemic. Various exit and entry restrictions forced many people to stay in Latvia or another country. If you are performing your job duties in Latvia then you may need to consider tax treatment aspects. This article explores how Covid-19 affects the way tax residence is determined under Latvian law.
The legal form, meaning the contract between related parties and its provisions, has always been among the factors that come into play when assessing whether prices applied in controlled transactions are arm’s length. This article discusses why the legal form of a transaction is important, looks at a common approach to preparing intragroup contracts, and explores some rules that should be followed when drafting those contracts to mitigate transfer pricing risks.
The power of the State Revenue Service (“SRS”) to adjust the amount of tax due is primarily laid down by section 23(1) of the Taxes and Duties Act. The period open to review is limited to three years, and it is generally accepted that a person’s tax burden cannot be revised outside this period. Yet the SRS takes the view that a person’s obligation to pay taxes is not limited in time and is not really covered by the statute of limitations. We have encountered a practice in which, on finding an incorrect tax payment for a period outside the three years, the person was given the option of voluntarily filing the relevant tax returns and paying additional taxes. To stimulate this voluntary action, the person was warned that the SRS might pass their information to the Finance Police in order to decide on starting a criminal prosecution. This practice is now developing in such a way that a taxpayer’s mistake in filing tax returns for earlier periods is interpreted as voluntary performance of their obligation and an action that cannot be rectified.
Section 15.2 of the Taxes and Duties Act requires a taxpayer to meet requirements for the timeliness of information included in their transfer pricing (“TP”) documentation and for regular updates to reflect the present situation. During a period of calm in preparing and filing TP documentation, we asked the State Revenue Service (“SRS”) to answer some confusing questions about updating comparable data and revising financial data, including the scope for taking the roll forward approach.
