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

According to the Law of the Republic of Latvia “On Taxes and Fees,” the personal liability of a board member may be applied to the overdue tax payments of a legal entity that have accrued after January 1, 2015.

The State Revenue Service may initiate an administrative process for the recovery of overdue tax payments from a board member (for the tax debts of a legal entity) 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) minimum monthly wages set in the Republic of Latvia (500 EUR) (in 2021 – 25,000 EUR);

• the decision on the recovery of overdue tax payments has been notified to the taxpayer – the company that is actually indebted to the State budget;

• it has been established that after the tax debt was incurred, the company transferred assets to an interested party;

• an act has been drawn up regarding the impossibility of recovering the tax debt from the company;

• the board of the legal entity itself has failed to fulfill the obligation set out in the Insolvency Law to submit an application for the insolvency proceedings of the legal entity.

Upon establishing all the aforementioned circumstances, the State Revenue Service, within three months from the act on the impossibility of recovery, shall warn the legal entity and the board member in writing 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 overdue tax payments of the legal entity.

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 submitting the insolvency process application, or if documents are submitted according to which the board member would not be considered liable for the obligations of the legal entity.

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