Exclusion from the VAT register usually takes place in the following cases:

At the taxpayer’s own initiative, in cases where:

• a taxpayer (except for the VAT group) submits a substantiated application to the SRS regarding its exclusion from the SRS VAT payers register;
• a taxpayer who is a state or local government institution or local government shall submits a substantiated application to the SRS regarding its exclusion from the SRS VAT payers register, in which it declares that it does not intend to receive construction services and perform taxable transactions in the future;
• The VAT group submits an application to the SRS regarding its exclusion from the SRS VAT payers register and 12 calendar months have passed since the day of registration of the VAT group.

Exclusion from the VAT payers register can also be initiated by the SRS, and these are the most common cases:

– in accordance with the Law of the Republic of Latvia “On Taxes and Duties”, the economic activity of a registered taxpayer has been suspended;

– at least one of the following circumstances occurs during the taxable person’s activity:

1. a) No tax return has been submitted within 30 days after the deadline for submission of the tax return specified in this Law,
2. b) the tax return contains false information,
3. c) The requested information has not been submitted within the term specified in the written request of the State Revenue Service (documents certifying income and expenses of economic activity, accounting documents, as well as other information describing activities that affected or affect the calculation and payment of tax),
4. d) a registered taxpayer has provided unfounded or false information regarding material and technical and financial possibilities to perform economic activity;

– the taxable person (other than a taxable person of another Member State and a taxable person of a third country or third territory) cannot be reached at the registered office or at the address of the declared place of residence or does not actually exist;

If you need day-to-day support in full-cycle financial accounting and consulting and have missed these or other accounting issues due to busy schedule – you need help in proper communication with the SRS, and this is important to you, feel free to contact us here on the website and receive a favorable offer to start cooperation with us!

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If a company uses a car owned by a natural person under a loan agreement for less than 15 days in one calendar month and does not pay company car tax on the vehicle, then the company must keep fuel records during the loan period to justify the use of fuel for business purposes (e.g., with waypoints or route sheets) in accordance with the procedures specified in the documents of the accounting organization.

However, the company may include in its costs only those operating and maintenance costs of the borrowed vehicle that are directly related to the economic activity during the period when the particular vehicle was borrowed.

We suggest you to talk to your accountant before starting the maintenance of a borrowed car!

If you do not have your own accountant or need day-to-day support, or such advice and a full cycle of financial accounting, you have missed these or other accounting issues due to busy schedule and it is important to you, feel free to contact us right here, on our website and receive favorable conditions for starting cooperation with our accounting services office!

Our team will hurry to help you!

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• The client comes to a meeting at the accountant’s office to explain the specifics of his economic activity with a previously unknown companion, who takes the initiative during the conversation and speaks more than the client, explaining the nuances of the client’s business better than the client himself, providing conflicting information about the nature of the transactions;
• The client has made a one-time transaction, which is drastically different from the client’s normal economic activity, which requires the need to become an AML subject, but this is not done;
• The amount of compensation received as a result of this one-time transaction exceeds ten times the market value within the framework of a normal economic activity cycle between independent market participants;
• The client receives payment from third countries instead of his/her client for the provided service, without apparent justification;
• The client receives from his/her client several payments in small amounts in a short period of time, which are immediately transferred to a third party;
• The client himself/herself lends his company a substantial loan of money with no apparent source of cash, since the client’s only sources of income are the minimum wage in his company;
• The client works for a long time with significant losses, but at the same time lends his company significant funds, the origin of which is not clear;
• The order for the client has been placed by a company indirectly subordinated to the state of Belarus under a multi-year contract. The order was placed at the end of 2021. In 2022, the client cannot fulfill this order due to the sanctions regime, because the fulfilled order cannot be sent to the buyer;
• A thriving construction company has commissioned a 100,000 EUR “management consultancy” from a British residential company, with no tangible result of execution;
• An advance was paid to the Estonian residence company for the supply of materials, without physically receiving them for more than half a year, whose beneficial owner and board member owns a small car repair shop in Kengarags;

If you need preventive consultation in the evaluation of such or similar risks, so that you do not get into unpredictable economic life situations, or you need daily support in bookkeeping, please contact us right here on our website and our team will hurry to help you.

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Section 20 of the “Commercial Law” of the Republic of Latvia, which defines:

• If an undertaking or an independent part thereof is transferred to the ownership or use of another person, the acquirer of the undertaking shall be liable for all the obligations of the undertaking or its independent part. However, in respect of those obligations which arose prior to the transfer of the undertaking or its independent part to the ownership or use of another person, and the terms or conditions for the fulfilment of which come into effect five years after the transfer of the undertaking, the transferor of the undertaking and the acquirer of the undertaking shall be solidarily liable.
• In the case of the transfer of ownership or use of an undertaking or an independent part thereof, claims and other rights included in the undertaking or its part shall be transferred to the acquirer of the undertaking.
• An agreement, which is in contradiction to the provisions of this Section, shall be void as to third parties.

In practice, the transfer of the company is detected and it is often used by the SRS to supplement the state treasury, especially in the context of a budget deficit, to collect unpaid taxes on the company from the acquiring company, and in most cases it is an unpleasant surprise for entrepreneurs, because the entrepreneurs have not previously evaluated it and taken it into account. We recommend that you take this very seriously, because in most cases, it is covered only after the SRS ascertains what happened. In practice, the transfer of the company can be detected in the following cases, if the following or a similar set of circumstances are met:

• The acquiring company is registered at the same address as the previous company;
• The acquiring company performs economic activity in the same premises and in the same sector where the company operated;
• An acquiring company has the structure and board of the same owners or their close relatives;
• For the acquiring company, the structure of the owners and the board after a period of half a year – up to three years is the same as that of the previous company, which means that the acquiring company has actually been registered on “nominees” and faces legal liability for it;
• The former owner or member of the board moved into employment with the acquiring company, at first even in a non-influential position that does not make any decisions;
• The acquiring company has kept the same identity, including the website, trademark – even when signing a lease agreement and publications in the public space, which were made by the previous company;
• Most of the employees have transferred to the acquiring company;
• The acquiring company cooperates with the same, or at least to a large extent, the same buyers and suppliers of goods;
• The acquiring company shortly after the start of operations buys part of the assets – also at market prices, including goods warehouse balances from the previous company;
• Sudden appearing arbitration judgments to justify various of the above-mentioned circumstances in favor of the acquiring company;

If you need advice on this type of issues in an objective risk assessment, or help in dealing with daily accounting issues, please place your order on to our website and you will receive a favorable cooperation offer from our team of accountants.

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In accordance with the Corporate Income Tax Law (CIT Law), the entrepreneur is obliged to account for the fuel expenses of his vehicle for the number of kilometers actually driven each month in accordance with the fuel consumption rate per 100 kilometers consumption, which does not exceed the city cycle fuel consumption rate specified by the manufacturing plant by more than 20 %.

We pay a lot of attention to the fact that the condition “urban cycle fuel consumption norm” included in the mentioned norm is based on the fact that it is possible to evaluate the highest of the consumption indicators, which is determined for cars with fuel consumption by manufacturers.

Taking into account the specifics of electric cars, which are significantly different from cars that use fossil fuel, as opposed to cars with fuel consumption, an electric car with the consumption norm specified in the certificate can travel more kilometers in city mode than when making trips in normal mode outside the city.

Taking into account the above, as well as in order to ensure that the same criteria would be observed for the application of corporate income tax for the electricity consumption of electric cars, when applying Section 8 (5), Paragraph 5 of the CIT Law, the highest of the electricity consumption indicators determined by the manufacturer or any of the indicators of publicly available average consumption, or, for example, one of the indicators of a publicly conducted test.

In addition, if the company pays the company’s light vehicle tax (CLVT) in the state budget, it is not necessary to carry out detailed electricity accounting (for example, with road signs or route sheets) in order to justify the use of electricity for ensuring economic activity.

In such a case, the entrepreneur who pays CLVT in the state budget must provide in the documents of the accounting organization the procedure for documenting and accounting for vehicle use expenses, including establishing the procedure for drawing up internal justification documents and registers, in which the number of kilometers actually traveled will be counted, based on the readings of the vehicle’s odometer at the beginning of the month and at the end, and in which the electricity consumption will be determined. When documenting the use of a vehicle, information on electricity consumption should be provided so that documents certifying electricity consumption are identified with a specific vehicle that consumes electricity.

On the other hand, if the company does not pay CLVT for the vehicle in question, then in order to justify the use of the vehicle for the purposes of economic activity, a detailed accounting of electricity must be carried out (for example, with road tickets or route sheets) in accordance with the procedures specified in the documents of the accounting organization.

Regarding the deduction of VAT input tax on the electricity used to charge an electric car, regardless of the type of fuel of the light vehicle (including electricity), the input tax deduction limits set out in Section 100 of the Value Added Tax Law (VAT Law) are applicable to these expenses. For example, if a 50% input tax was deducted for a purchased, rented or imported passenger car, the number of seats, excluding the driver’s seat, does not exceed eight seats, in accordance with Section 100 (2) of the VAT Law, then also for the purchase of electricity for such car, 50% input tax is deductible for charging. Which effectively means that an electric car has no advantage over a car that uses fossil fuels in terms of daily maintenance expenses and taxation.

If you need advice on these matters, or any kind of bookkeeping supervision in everyday life, contact us here on our website and our team will rush to help you, offering favorable terms of cooperation.

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• The fixed monthly amounts, which include all the necessary communication with the SRS, submission of reports and consultations needed for everyday life;
• Fees for salary calculations, depending on the number of employees;
• Fees for making journal entries depending on the number of accounting operations

If you need daily support in bookkeeping, please contact us right here on our website and our team will rush to help you.

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• The biggest mistake of businessmen is that “I don’t need to prove anything myself when the SRS tries to prove that I have hidden income, I didn’t pay taxes, I’m dishonest, and so on.” Although often, indeed, everything is in order, during the SRS audit there is a so-called principle of “participation” or “cooperation” with the SRS, which in this case is strictly assessed and often plays a decisive role in the SRS audits;
• Be proactive, no one knows about the nature and nuances of your transactions better than you, so it is not at all necessary to create problems with explaining the terms of transactions;
• If you have the impression that the SRS staff ask you again and again about the same information that you have already provided, talk to the SRS auditors without undue emotions, do not show stress. Since you may not have provided complete information on any issue. Sometimes it is also a tactic of the SRS staff to confuse you;
• The tactic “throw accounting documents on the SRS table and let them look for what they need” is the worst possible, since this can be considered as a refusal to cooperate with the SRS, and then big problems may arise;
• All evidence confirming your innocence must be presented during the SRS audit and not during the appeal process in court, since the court may not perceive them as supporting, and thereby you will lose the dispute with the SRS.

If you need help with accounting, or have difficulties with a SRS audit, our team is ready to help you. Contact us here on our website!

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We are happy to announce that we have managed not only to maintain good relations with the client’s family, but also to complete the accountant’s annual work in less than 3 months!

We did it!

If you need day-to-day support or a different kind of “fire” in full-cycle financial accounting and have missed these or other accounting issues due to busy schedule, and this is important to you, feel free to contact us by writing here on the website and get advantageous offers for cooperation.

Our team will hurry to help you!

The post The server is burnt out, or the accounting data is lost – an indelible “fire”, or are there any solutions!? appeared first on Investors.

We are happy to announce that we have managed not only to maintain good relations with the client’s family, but also to complete the accountant’s annual work in less than 3 months!

We did it!

If you need day-to-day support or a different kind of “fire” in full-cycle financial accounting and have missed these or other accounting issues due to busy schedule, and this is important to you, feel free to contact us by writing here on the website and get advantageous offers for cooperation.

Our team will hurry to help you!

The post The server is burnt out, or the accounting data is lost – an indelible “fire”, or are there any solutions!? appeared first on Investors.

The State Revenue Service may initiate administrative proceedings for compensation of overdue tax payments from a member of the Board (for tax debts of legal entities) only in cases when all the following conditions are met simultaneously in a particular situation:

• the amount of overdue tax payments exceeds the total amount of 50 (fifty) minimum monthly wages (500 euros) specified in the Republic of Latvia (25,000 euros in 2022);
• the decision on recovery of overdue tax payments has been notified to the taxpayer – a company that is actually in debt to the State budget;
• it has been established that the company has disposed its assets to the interested party after the formation of the tax debt;
• a deed has been drawn up on the impossibility of recovering the tax debt from the company;
• the Board of the legal entity itself has not fulfilled the obligation specified in the Insolvency Law to submit an application for insolvency proceedings of the legal entity.

Having established all the aforementioned circumstances, the State Revenue Service within three months from the date of a deed on the impossibility of recovery, shall warn the legal entity and the member of the Board in writing that the procedure for reimbursement of overdue tax payments is initiated.

If a legal person has several members of the board, they are jointly and solidarely liable for the late payment of taxes by the legal entity.

The State Revenue Service may not initiate the recovery of a tax debt from a member of the Board if the member of the Board proves that justifying circumstances have existed for not submitting an application for insolvency proceedings or documents will be submitted according to which the member of the Board would not be held liable.

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