Does the State plan to keep special support measures in the field of taxation for taxpayers after the end of emergency situation?
Yes, on 10 June 2020 the Law on Overcoming the Consequences of the Spread of Covid-19 Infection came into force, by which, inter alia, the following measures are maintained:
- in accordance with the Regulation of the Cabinet of Ministers tax payers can ask to defer or split into installments accrued and current tax payments for a period up to 3 years, without paying late payment interest. Taxpayers must submit a respective application within 15 days from the due tax payment term.
In accordance with the Regulation of the Cabinet of Ministers possibility to defer or split delayed tax payments into installments for a period up to 3 years, without paying late payment interest will be available to any company (notwithstanding the industry in which it operates), if the following criteria are met:
- the turnover from commercial activity during March, April, May or June 2020 has decreased by at least 30% in comparison to the average monthly turnover during 12 months in 2019 or to the average monthly turnover in the months in the period from 1 January 2019 to 1 March 2020 in which the company has actually operated; or
- the turnover from commercial activity during March, April, May or June 2020 has decreased by at least 20% in comparison to the average monthly turnover during 12 months in 2019 or to the average monthly turnover in the months in the period from 1 January 2019 to 1 March 2020 in which the company has actually operated and at least one the following additional criteria is met:
- the amount of export in 2019 constitutes 10% of the total turnover or is not less than EUR 500 000; or
- the average monthly gross salary paid to its employees during 2019 is not less than EUR 800; or
- long term investments in fixed assets as on 31 December 2019 are at least EUR 500 000.
- the VAT sums approved from 1 April 2020 to 31 December 2020 will be repaid to all tax payers within 30 days’ time after the submission of a return;
- individual economic operators are released from the obligation to make advance PIT payments in year 2020, without paying late payment interest;
- time for the submission of the annual reports for 2019 extended for 3 months;
- municipalities will have the right to postpone real estate tax payments within 2020;
- the tax authority is not obliged to adopt negative decisions in respect of participants of the enhanced cooperation program until year 2023 if the respective participant is affected by the Covid-19 crisis.
Is it possible for other tax payers to defer the payment of taxes?
Tax payers that do not meet any of the above criteria can ask to defer the payment of outstanding taxes for a time period up to 1 year by splitting payable amount in installments. However, a late payment interest would be applied at the rate of 0.0125% for every day throughout the entire period of delay. Exception to this is extension of payment term due to force majeure circumstances. An emergency situation that was declared in Latvia is not a basis to automatically assume an occurrence of a force majeure situation. An assessment whether the specific situation constitutes force majeure circumstances must be made on a case by case basis.
An application regarding this must be submitted no later than within 15 days after the due payment date. If the delay of the payment is due to a force majeure situation, there is no set time limit for the submission of the application regarding split of payment into installments or deferral of tax payments for 1 year, however, it would be recommended to do it within a reasonable time after the occurrence of the force majeure circumstances. The payment of the taxes resulting from the audit may be divided over the period of up to 5 years. The application must be submitted 3 days before the due payment date. The application form can be found within the EDS (Application for the deferral of the payment of taxes (in Latvian: Iesniegums samaksas termiņa pagarinājuma piešķiršanai).
In respect to the taxes that must be paid to the municipal budgets, a decision is adopted by the relevant municipality. Accordingly, an application regarding such taxes shall be addressed to the relevant municipality.
Please contact COBALT Latvia Partner Sandija Novicka for more specific insight and advice.