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Latvia: Law on Taxes and Fees Amended

(Nov. 7, 2011) On October 13, 2011, Latvia amended its Law on Taxes and Fees; most of the new provisions will become effective on November 9. A number of the changes affect penalties. When the new Law comes into force, certain tax penalties will be reduced. These include the penalties imposed if a tax audit results in the discovery that the tax owed has been underrepresented or the amount of prepaid tax to be refunded has been overstated. For cases in which the misrepresentation amounts to less than 15% of the total actually owed, the penalty will be decreased from 30% of the misrepresented amount to 20%. If, however, the amount involved is more than 15% of the actual tax due, the penalty, which has been 50% of the understated tax due, will be reduced to 30%.

Further, if the taxpayer is considered cooperative, to the extent that he or she is not a repeat offender and has met deadlines for filing returns and payment of taxes, the amounts of these penalties will be reduced by half. Conversely, penalties will be doubled if the offense is considered a repeat offense under the definitions contained in the Law. If a taxpayer corrects a misrepresentation of the amount owed before such an error is flagged by an audit, the penalty will be further reduced to 5% of the under-declared amount. Previously, this lowest penalty rate was 10%. (Larisa Gerzova, Amendments to Law on Taxes and Fees Adopted, TNS ONLINE (Nov. 3, 2011), International Bureau of Fiscal Documentation online subscription database.)

In addition, under the revised Law, tax payment deadlines may be extended. Among other deadlines that have been eased, starting in July 2012, the tax authorities will be able to divide tax payments for taxpayers who apply for an extended payment plan into installments to be paid over the course of 18 months, rather than merely a year as in the current legislation. In addition, they will be able to postpone payment of an individual's income tax for up to five years on certain types of income. (Id.)

The amended statute also includes new rules on agreements between the authorities and individual taxpayers when they attempt to end disputes over assessments of tax following an audit. Taxpayers who keep their accounting records electronically will face a new requirement. If authorities request it for purposes of an audit, the taxpayer's representative must be able to access the records in the presence of tax authorities. The revised Law also contains new definitions of certain terms, including “business unit,” which will now include websites within the scope of the definition. (Id).