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Saeima supports giving SRS more freedom to fight VAT fraudsters

Photo: facebook.com/vidgovlv
On Thursday, 11 April, Latvia’s Saeima approved in the first reading amendments to the Value Added Tax Law, which provide for expanding the freedom of the State Revenue Service in the fight against VAT fraud schemes, as confirmed by the parliament’s press-service.

It is planned to expand the law with wider rights for SRS in tax administration and set stricter criteria for the issue of a special VAAT regime for transactions dealing with imports of goods. It is planned to outline responsibility of taxpayers for transactions.

It is planned for SRS to exclude from the VAT payers registry taxpayers who fail to disclose a single transaction in twelve months. If VAT declaration does not contain information on transactions performed in the previous six months, SRS will be provided with the right to exclude entrepreneurs from the VAT registry if it is uncovered that there is a risk associated with payment of taxes causing damages to the state budget.

Information from SRS shows that in 2017 authorities registered 553 entrepreneurs that had submitted empty VAT declaration and after that they had submitted declarations detailing worth more than EUR 70,000. The damages caused to the state budget in 2017 and the first half of 2018 amounted to EUR 40.8 million, as mentioned in the annotation to the legislative draft.

On top of that SRS will have the right to exclude taxpayers from the VAT registry if the entrepreneur replaces all officials prior to starting business activities. Amendments were initiated because it was found out that such actions are often associated with VAT fraud or tax avoidance, authors of amendments say. Lately VAT fraud schemes in Latvia have included persons from Lithuania, Poland and Czech Republic.

Law amendments also introduce stricter criteria for the issue of a special VAT regime when carrying goods to Latvia without paying VAT immediately, postponing payments until after a declaration has been submitted. Results of inspections performed by SRS show that special VAT regime for import transactions has become a tool for dishonest activities and fraud. Of all import deals in Latvia approximately 87% are applied with a special VAT regime.

Additionally, changes to the law are planned to increase taxpayer’s responsibility. The legislative draft states that failure to submit information requested by SRS in time will carry a penalty of a fine equal to 21% of a specific deal’s value.


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