Does the State plan to introduce special support measures in the field of taxation for taxpayers?
Yes, on 22 March 2020 the Law “On measures for the prevention and management of national emergency and its consequences in relation to the spread of COVID-19” came into force, by which, inter alia, the following measures are introduced:
- tax payers operating in the sectors stipulated by the Cabinet of Ministers can ask to defer or split into installments accrued and current tax payments for a period up to 3 years, without paying late payment interest. Taxpayers must submit a respective application within 2 months' time from the due tax payment term or from 22 March 2020. According to the current wording of the law such support counts towards the de minimis limit of state aid and should be respectively recorded (de minimis aid is aid which, due to its low amount, is insignificant and therefore does not require clearance from the European Commission; the general threshold is EUR 200 000 over any period of three years, yet in several areas of business the limits are different);
- the approved VAT sums will be repaid to all tax payers within 30 days’ time after the submission of a return;
- individual economic operators are released from the obligation to make advance PIT payments in year 2020, without paying late payment interest;
- time for the submission of the annual reports for 2019 extended for 3 months;
- municipalities will have the right to postpone real estate tax payments within 2020;
- the tax authority is not obliged to adopt negative decisions in respect of participants of the enhanced cooperation program until year 2023 if the respective participant is affected by the Covid-19 crisis.
N.B. According to the information provided by the Minister of Finances, the rules regulating support to the companies operating in the affected industries as defined by the Cabinet of Ministers will be changed soon.
Is it possible for other tax payers to defer the payment of taxes?
On 26 March 2020 the Cabinet of Ministers decided that possibility to defer or split delayed tax payments into installments for a period up to 3 years, without paying late payment interest will be available to any company (notwithstanding the industry in which it operates), if the following criteria are met:
- the turnover from commercial activity during March or April 2020 has decreased by at least 30% in comparison to the same month of 2019 due to the spread of Covid-19; or
- the turnover from commercial activity during March or April 2020 has decreased by at least 20% in comparison to the same month of 2019 due to the spread of Covid-19 and at least one the following additional criteria is met:
- the amount of export in 2019 constitutes 10% of the total turnover or is not less than EUR 500 000; or
- the average monthly gross salary paid to its employees during 2019 is not less than EUR 800; or
- long term investments in fixed assets as on 31 December 2019 are at least EUR 500 000.
Tax payers that do not meet any of the above criteria can ask to defer the payment of outstanding taxes for a time period up to 1 year by splitting payable amount in installments. However, a late payment interest would be applied at the rate of 0.0125% for every day throughout the entire period of delay. Exception to this is extension of payment term due to force majeure circumstances. An emergency situation that has been declared by the Latvian Cabinet of Ministers is not a basis to automatically assume an occurrence of a force majeure situation. An assessment whether the declared emergency situation constitutes force majeure circumstances must be made on a case by case basis.
An application regarding this must be submitted no later than within 15 days after the due payment date. If the delay of the payment is due to a force majeure situation, there is no set time limit for the submission of the application regarding split of payment into installments or deferral of tax payments for 1 year, however, it would be recommended to do it within a reasonable time after the occurrence of the force majeure circumstances. The payment of the taxes resulting from the audit may be divided over the period of up to 5 years. The application must be submitted 3 days before the due payment date. The application form can be found within the EDS (Application for the deferral of the payment of taxes (in Latvian: Iesniegums samaksas termiņa pagarinājuma piešķiršanai).
In respect to the taxes that must be paid to the municipal budgets, a decision is adopted by the relevant municipality. Accordingly, an application regarding such taxes shall be addressed to the relevant municipality.
Please contact COBALT Latvia Partner Sandija Novicka for more specific insight and advice.