In the judgment (SKA-160/2024, dated November 21, 2024), the Senate of the Republic of Latvia reviewed an administrative case initiated by SIA ‘Ideas Motors Limited’ (whose legal successor is SIA ‘INNOVATOR’) regarding the term of tax relief application under the double taxation agreement between Latvia and the United States. The case was reviewed following an appeal by the State Revenue Service (SRS) against the decision of the Administrative Regional Court.
Key facts:
- The applicant requested a five-year tax relief for income derived from professional activities with a U.S. resident.
- The SRS approved the relief only for the year 2020, based on a certificate issued by the U.S. tax authorities.
- The Administrative Regional Court granted the application, requiring the SRS to issue a tax relief certificate valid for five years, but the SRS objected.
Senate’s decision:
- The Senate found that the SRS misinterpreted Regulation No. 178. A five-year term applies unless there are specific obstacles or information indicating that a shorter term is necessary.
- The certificate issued by the U.S. tax authorities, which specified the tax year 2020, does not preclude the application of tax relief for five years. In the absence of additional information, it is presumed that the taxpayer will remain a resident in subsequent years.
- The judgment stated that the application of tax relief for future periods is permissible based on the presumption unless evidence to the contrary exists.
Outcome:
This decision reinforces the approach that tax relief should be granted in the most favorable way for the taxpayer unless there is direct evidence to the contrary.
Full judgment available: Lieta Nr. A420186121, SKA-160/2024
©INNOVATOR 22.11.2024.