New register of “high-risk” persons in Latvia

NICOSIA, Cyprus - Dec. 6, 2013 - PRLog -- The amendments introduced the notion of a “risk person” for tax purposes and imposed an obligation on the Tax Authorities to maintain a special register of “high-risk” persons.

From 1 January 2014, individuals included in the new register will not be able to become owners and executives of newly established companies in Latvia. The Tax Authorities will first have to inform the Commercial Register about the individual included in the new register, and the Commercial Register will, in return, refuse registration of such persons. The individuals concerned will be able to appeal against the decision of the Tax Authorities.

The Latvian Director General of State Revenue Service, Inara Petersone, ensured that honest taxpayers should not worry, as they will definitely not be included in the new register. However, the persons who will be included need to be aware that they will not be able to register anything at the Register of Enterprises.

The draft amendments aim to deter those with risk person status from further involvement in the business environment, and, ultimately, to prevent tax avoidance.

Individuals who satisfy at least one of the following criteria valid within the last five years are defined as “risk persons”:

They are the sole executive of a company, whose aim, was not to conduct business, or who has become the sole executive at the request of third parties;

Their data was used without their permission for the purposes of registration with the Commercial Register.

Their registered address is a “risk address”.

They are, or have been, the sole executive of a company at time when the company’s activity was suspended by the tax authorities due to an infringement, which still persists;

They are, or have been, the sole executive of a company at a time when the tax authorities removed the company from the VAT register due to an infringement, which still persists;

Their overdue tax exceeds €7,000, payment extension does not apply, no insolvency application is filed and tax collection is not possible;

§  They are, or have been, the sole executive of a company at a time when the company’s overdue tax exceeded €15,000, no insolvency application was filed and tax collection was not possible.

The new procedure has caused concerns to Latvians, mostly because an individual may be included in the new register only based on conclusions of the Revenue Service and without a court ruling.

To become law, the draft amendments must be first approved by the Cabinet of Ministers and adopted by the Parliament.