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Problems and solutions of VAT refund in Latvia

Problems and solutions of VAT refund in Latvia. Riga, 25 November 2010. 15:00-15:20 Attorney Valters Gencs, Chairman of the Board of the Norwegian Chamber of Commerce in Latvia Solvita Āmare - Pilka, H ead of the Ministry of Finance D epartment of Indirect T axes 15:20-15:50

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Problems and solutions of VAT refund in Latvia

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  1. Problems and solutions of VAT refund in Latvia Riga, 25 November 2010

  2. 15:00-15:20 Attorney Valters Gencs, Chairman of the Board of the Norwegian Chamber of Commerce in Latvia Solvita Āmare - Pilka, Head of the Ministry of Finance Department of Indirect Taxes 15:20-15:50 Marina Kuzenko, Deputy Director of the SRS Tax Administration Indirect Taxes Methods Department 16:00-16:30 Coffee break 16:30-17:00 Kristīne Košinska, Head Lawyer of the SRS Big Taxpayers Department 17:00-17:30 Ļubova Švecova, Deputy Director of the SRS Financal Police Department; Head of the Investigation Department

  3. DirectIncomeofLatvianEnterprises(Lursoft) 2007. – 1.6 billion LVL 2008. – 6x decrease - 252 million LVL 2009. – 812 million LVL loss + bank losses 773.4 milion - total 1.5 billion Tax advances paid from the profit of previous years Tax overpayment problem occurs

  4. VAT is not refunded until construction is commenced Company hasreceived: • Topographicalsurveyservices. • Services ofdesigningthetopographicalplan. • Preliminary design services. • Serviceof designing a development plan. * Received a planningandarchitecturalassignmentfortheconstructionofcomplex. SRS: The received services related to the real estate are not in any way connected with any kind of potential buildingconstruction, but only with maintenance and management of a particular lot.

  5. LV General Contractor 21% LV subcontractor VAT is not refunded for services received in Latvia on transactions with real estate abroad Latvian LLCs are performing reconstruction of premises in construction unit in Scandinavia and receiving services from Latvian LLCs (subcontractors). Construction work in Scandinavia 21% pretax cannot be discharged because the transaction has to be charged without VAT. Question: Why is the sanction applied to general contractor instead of subcontractor? General contractor has paid the VAT to the subcontractor. VAT remains in Latvia.

  6. Problems with Deadlines • Deadline for receipt of refund • Registration • Estonia 2 days • Latvia 7-14 days • Lithuania 3-5 days • Refund • Estonia 7-14 days • Latvia 2-5 months (for export) • Lithuania 1-6 months

  7. EU CourtinLuxemburgCase C-472/08 „AlstomPowerHydro” against VID • Construction work at Plavinas and Kegums hydroelectric power plants1999-2003. • Request for VAT refund in 2004 in Latvia. OpinionoftheEuropean Commission forthe EU courtin 2009: The period of time when the refund was acknowledged and automatically transferred, has to be excluded from the 3 year term. • In 2010 SRS stillhas a question - what to do? • AsofJuly 1, 2010 – no automatictransfer • Totalconsumedtime: 6 yearsfromtherequest; 11 yearsfromthebeginningoftheproject.

  8. How much can we get back? 9% - 18% per year per oneperiodafterthejudgementisaccepted. Theinterestisnotpaidduringthelitigationtime. Theaverageweightedinterestratesin LVL fortheraiseddeposits: 6.7% - year 2007 9.9% - year 2008 11.9% - year 2009

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