COBALT has successfully represented Bauer Spezialtiefbau GmbH in a VAT dispute with the Latvian State Revenue Service (SRS), securing a favourable judgment before the Administrative Regional Court.
The Administrative Regional Court dismissed the SRS’s appeal in its entirety, upholding the first-instance judgment and confirming that the SRS must issue a favourable administrative act and refund EUR 143,844.45 in VAT to Bauer Spezialtiefbau GmbH within one month after the judgment enters into force.
The judgment clarifies that the SRS cannot refuse a VAT refund merely on the assumption that a foreign taxable person carried out economic activity in Latvia. Such a conclusion must be supported by evidence demonstrating that the company itself actively performed taxable transactions in Latvia using its own personnel and resources.
The court agreed that factors such as the duration of a construction project, the place of performance indicated on invoices, or the involvement of persons associated with the company are not, by themselves, sufficient to establish a taxable presence in Latvia. It found that the SRS had relied on general assumptions without identifying evidence that Bauer Spezialtiefbau GmbH itself had carried out activities or maintained a presence in Latvia.
The court also confirmed that the concept of a permanent establishment under the Law on Taxes and Duties, which is relevant for corporate income tax purposes, differs from the concept of a fixed establishment under the EU VAT Directive and the Latvian VAT Law. Accordingly, the existence of a permanent establishment obligation alone cannot serve as proof that a foreign company carried out VAT-registerable economic activity in Latvia.
The judgment is not yet final and may be appealed before the Supreme Court.
Bauer Spezialtiefbau GmbH was represented by COBALT team led by Partner Sandija Novicka, and included Specialist Counsel Sabīne Vuškāne, and Senior Associate Gabriela Šantare.
Leading experts
