Board Members Must Cover Unpaid Taxes to the SRS – Really!?

According to the provisions of the Republic of Latvia Law “On Taxes and Duties,” a board member’s personal liability may be applied to a legal entity’s overdue tax payments incurred after January 1, 2015.

The State Revenue Service may initiate an administrative process for the recovery of overdue tax payments from a board member (regarding the tax debts of legal entities) only in cases where all of the following conditions are met simultaneously in a specific situation:

• the total amount of overdue tax payments exceeds 50 (fifty) times the minimum monthly wage set in the Republic of Latvia (€500) (in 2022 – €25,000);
• the decision on the recovery of overdue tax payments has been notified to the taxpayer – the company that actually owes the state budget;
• it has been established that after the tax debt was incurred, the company transferred assets to an interested party;
• a statement has been drawn up regarding the impossibility of recovering the tax debt from the company;
• the board of the legal entity has failed to fulfill the obligation set out in the Insolvency Law to file an application for the legal entity’s insolvency proceedings.

Upon establishing all the aforementioned circumstances, the State Revenue Service shall, within three months of the statement on the impossibility of recovery, issue a written warning to the legal entity and the board member that a process for the recovery of overdue tax payments is being initiated.

If a legal entity has several board members, they are jointly and severally liable for the legal entity’s overdue tax payments.

The State Revenue Service may choose not to initiate the recovery of tax debt from a board member if the board member proves that objective circumstances existed for not filing the insolvency process application, or if documents are submitted showing that the board member should not be held liable for the legal entity’s obligations.