SRS Imposes Security Measures – Common Practice or an Emergency!?

We quite regularly receive questions from existing and potential clients regarding whether the SRS has acted unlawfully by imposing security measures at the start of a tax audit.

According to the regulatory acts of the Republic of Latvia governing the application of enforcement security measures, the tax administration primarily decides on the necessity of such measures upon receiving the results of control measures (for example, a decision on audit results).

In special circumstances, when the tax administration finds that a taxpayer is engaging in unlawful activities with the aim of avoiding the payment of overdue taxes (for example, alienating, hiding, or concealing their property) or actions that could make it impossible to execute the SRS’s final decision on the uncontested recovery of tax debts, the tax administration may apply security measures even before a decision on the audit results is made. However, case law at the Senate level indicates that an SRS official’s decision to secure a claim before the audit decision can only be made if all interrelated prerequisites exist simultaneously, namely:

• The SRS has obtained relevant evidence regarding the aforementioned;

• This evidence confirms conscious, intentional actions by the taxpayer, indicating bad faith on the part of the management (board);

• These actions could lead to the impossibility of recovering tax debts.

If you find yourself in a situation where the SRS has initiated tax control measures against the company you manage, we encourage you to speak with your accountant! If you do not have an accountant, need daily support, require a consultation, or need full-cycle financial accounting services—or if you have overlooked these or other accounting-related matters due to a busy schedule and they are important to you—feel free to contact us right here on our website to receive favorable terms for starting a partnership with our accounting firm.

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