Suspension of the decision by Latvian State Revenue Service
Our client has performed several transactions for the purchase and sale of goods within the European Union and applied 0 tax rate in accordance with the Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax.
In the course of the audit of the client’s company, the SRS believed that the 0 tax rate did not apply to the performed transactions. According to SRS, such transactions had to be taxed at the rate of 21%. Therefore, SRS imposed an obligation on the client to pay to the state budget additional VAT in the amount of 21% of the transactions in question, as well as all late payment fees related thereto. Our client did not consent to such a decision by SRS and believed that it was correct to apply 0% tax rate.
The decision by SRS was disputed to a higher instance, and then appealed to the court. However, filing an appeal to the court against the decision of SRS does not automatically suspend the operation of such decision (excluding the part of it which relates to the payment of penalties). Therefore, decisions by SRS are enforced and tax debts recovered long before the court has the chance to test the legality of SRS decisions by means of considering the matter on the merits.
Nevertheless, the law permits to apply to the court for suspension of operation of the SRS decisions up until the moment the final judgment is rendered in the case. The satisfaction by the court of such application results into the suspension of the enforcement and recovery of the tax debt until the final judgment enters into force. Of course, the necessity to have the SRS decision suspended shall have substantial reasons and shall be motivated in a proper manner.
In this case Belyaev & Belyaev experts have drafted the application for the suspension of the operation of the SRS decision. Upon consideration of the ancillary complaint in respect of the judgment of first instance, the Administrative Regional Court has satisfied our application and ruled to suspend the operation and enforcement of the SRS decision for payment of tax debt. The bank accounts of the client’s company have been released.
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