Court finds no transfer of business in construction company’s tax dispute with the State Revenue Service

2024 - 02 - 21

On 15 February 2024, the Administrative District Court ruled in favour of a Latvian construction company Basu Projekti SIA in case No A42-00889-24/16 annulling the decision of the State Revenue Service of Latvia to recover the overdue tax payments from the complainant.

The dispute focused on whether there had been a transfer of business from one enterprise to the complainant, Basu Projekti SIA, and another legal entity, and consequently, whether the Service was entitled to claim the tax debt of the enterprise from Basu Projekti SIA.

In the dispute, the Administrative District Court determined that there was no legal basis for the approach used by the Service to determine the transition of one undertaking as an organisational unit into two separate, unrelated companies. The Court held that the Service had failed to sufficiently justify the legality of such approach  and the actual conditions indicating a connection and cooperation among all the companies involved, which, according to the Service, collectively continue the economic activity of a single undertaking. The judgement of the Court is conclusive.

“We are pleased that the Court has meticulously scrutinised all the hallmarks of a transfer of undertakings in typical cases, as set out in the case law of both the Latvian courts and the Court of Justice of the European Union. It has concluded that the Service based its decision on mere assumptions and hypotheses. Therefore, the alleged coincidences and circumstances which were used by the Service did not evidence the business transfer,” comments Senior Associate Gabriela Šantare.

Representation of the client before the court was ensured by COBALT Partner Sandija Novicka and Senior Associate Gabriela Šantare.

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Senior Associate