Tax case law in Latvia: August and September 2026
Below is a summary of decisions in tax and related matters handed down in August and September 2026.
Once a company has been liquidated, proceedings against a former board member for its tax debt can no longer be started
VID ordered a former board member to pay a company's tax arrears even though the company had already been liquidated. The Administrative Regional Court annulled VID's decision because proceedings against a board member can no longer be started once the company has been liquidated. The Senate refused to open cassation proceedings.
Facts
On 30 October 2024 the State Revenue Service (VID) ordered a former board member to pay the company's tax arrears that had arisen during the board member's term of office. The decision was taken after the company had already been liquidated. The Administrative Regional Court annulled VID's decision, and VID appealed to the Senate.
VID's objections
VID argued that the debt could still be recovered from the former board member because the company's business had been transferred before the liquidation. The transferee had become liable for the company's tax obligations, so in VID's view the tax debt did not end when the company was liquidated.
What the court held
The Regional Court held that the board member liability procedure can only be carried out while the company exists. Once the company has been struck off the commercial register it no longer exists as a legal person, and before taking its decision VID should have checked whether the debt could still be recovered from the former board member.
The transfer of the business does not change this. Any liability of the transferee is a separate matter to be dealt with in other proceedings, and it gives no basis for pursuing the former board member after the liquidation.
The Senate found that VID's appeal in substance merely disagreed with the Regional Court's assessment and did not identify any breach of law that could be examined in cassation.
Outcome
The Senate refused to open cassation proceedings, and the Regional Court's judgment annulling VID's decision became final.
No maternity benefit for a micro-enterprise taxpayer without contributions in the insured-event quarter or the one before
A self-employed micro-enterprise taxpayer paid contributions for the first quarter of 2025 and then received sickness benefit without paying any, but the State Social Insurance Agency (VSAA) refused her maternity benefit from 1 September. The court held that entitlement depends on contributions in the quarter of the insured event or the one before, and that on 1 September she was not insured for maternity. The application was dismissed; the judgment can be appealed.
Facts
From February 2023 the applicant was a sole trader paying micro-enterprise tax, which made her self-employed. She had paid the tax, which includes social insurance contributions, up to 31 March 2025 for the first quarter. Her incapacity for work due to illness began on 7 May, and the State Social Insurance Agency (VSAA) granted sickness benefit from 16 May to 31 August. No contributions were paid during that time.
From 1 September 2025 she was issued a sick-leave certificate for pregnancy, but VSAA refused maternity benefit and upheld the refusal on internal appeal. The applicant brought proceedings before the Administrative District Court.
VSAA's objections
VSAA took the view that on 1 September, when the maternity event occurred, the applicant was not insured for maternity. As micro-enterprise tax is paid quarterly, VSAA looked at contributions in the quarter of the event or the one before, here the second or third quarter. In its view, the first-quarter contributions had been the basis for the sickness benefit, and while receiving it the applicant was covered by pension insurance but not insured for maternity.
The applicant's arguments
The applicant argued that VSAA had cited no legal basis for requiring contributions specifically in the second or third quarter, and that contributions should have been assessed over a longer period of up to 24 months. Since sickness benefit had been granted for a period within the same three-month period for which maternity benefit was refused, she had relied on receiving maternity benefit on the same conditions, and she considered the different treatment of the two benefits discriminatory.
What the court held
The court pointed out that self-employed persons are insured only if contributions have actually been paid. As the micro-enterprise tax rules determine how and when such a person pays contributions, the court agreed with VSAA that the quarter of the event or the one before is decisive. The sickness event fell in the second quarter, so first-quarter contributions sufficed for sickness benefit, whereas the maternity event fell in the third quarter, so contributions in the second or third quarter were relevant.
On the 24-month argument, the court held that being insured on the day of the event and having paid contributions over the earlier period are conditions that must both be met. While receiving sickness benefit the applicant paid no contributions and was not insured for maternity, so the first condition was not met on 1 September.
The court rejected the legitimate expectations argument, since VSAA had given no decision, confirmation or promise concerning maternity benefit and, as VSAA pointed out, contributions to one type of insurance do not give entitlement to a benefit under another. It did not deal separately with the discrimination argument, stating that it had answered the material arguments.
Outcome
The court dismissed the application, so no maternity benefit will be granted; the judgment may be appealed to the Administrative Regional Court within one month of being drawn up.
Input VAT denied because an artificial intermediary was inserted into the supply chain, although the goods were bought
The State Revenue Service (VID) refused to let a company deduct input VAT or increase its production costs on the basis of four suppliers' invoices. The Administrative Regional Court found that, although the goods were bought, the suppliers had not been involved in the way and to the extent documented, and that the applicant could not have been unaware of the abuse. The Senate refused to open cassation proceedings, as the appeal merely challenged the assessment of evidence.
Facts
The applicant, a company now in liquidation, reported a VAT overpayment for August 2020, which the State Revenue Service (VID) initially refused to refund. After an audit, VID decided on 9 November 2023 that invoices from four companies did not entitle the applicant to deduct input VAT or increase its production costs; the Senate's decision does not state the amounts. On 11 May 2026 the Administrative Regional Court dismissed the application, endorsing the reasoning of a 2022 Administrative District Court judgment given before the audit and also assessing the audit evidence itself. The applicant appealed to the Senate.
VID's objections
VID found that the four suppliers' invoices did not entitle the applicant to deduct input VAT or increase its production costs. The Senate's decision does not set out VID's own reasoning, but the Regional Court upheld the finding: the applicant had bought the goods without involving the suppliers named on the invoices in the way and to the extent shown in the supporting documents.
The applicant's arguments
In its cassation appeal the applicant argued that the Regional Court should not have relied on a judgment given before the audit, and that it had assessed the evidence selectively, denying input VAT merely because the parties knew each other. Since the goods had been delivered and no abuse had been established, the denial was said to be contrary to the VAT rules, and the applicant had wrongly been held liable for other taxpayers' wrongdoing.
What the court held
The Senate reiterated that in cassation it reviews only how the law was applied and does not reassess the evidence. The applicant had not shown how the law was breached but had simply re-argued the evidence. The Regional Court was entitled to adopt the first-instance reasoning, since the later audit did not in itself prevent it from relying on facts established earlier, and it had also assessed the audit evidence itself.
As the Senate noted, input VAT was not denied merely because the parties knew each other: the Regional Court also relied on inconsistencies in the documents and on the applicant's account not matching other circumstances. Nor was it denied because the goods were not delivered, but because the suppliers had not been involved in the way and to the extent documented. The Regional Court found that, by booking invoices that did not reflect the facts, the applicant could not have been unaware of the abuse, and the appeal offered no counter-arguments.
In the Senate's view, the applicant was held liable for its own conduct, since the judgment as a whole showed that the tax advantage arose from artificially inserting into the chain of transactions an intermediate link that did not reflect how the transactions actually took place. A party merely taking a different view is no ground for opening cassation proceedings.
Outcome
The Senate refused to open cassation proceedings, so the Regional Court's judgment became final and VID's decision stands; the Senate's decision cannot be appealed.
Manager of two companies convicted for knowingly not paying declared taxes although the funds were available
The manager of two construction companies filed their tax returns but deliberately left EUR 248,689.27 in declared taxes and fees unpaid, knowing that the companies had enough money. Hearing the case without examining the evidence, Riga City Court convicted him of tax evasion causing large-scale loss to the State. He was sentenced to 1 year and 6 months of probation supervision and barred from serving as a board member for 2 years.
Facts
The accused ran two construction companies with the same registered address. In the first he was the procurator (holder of general commercial authority) and de facto manager, later a board member, and in the second a board member; he sat on both boards until May 2023. The accountant prepared the tax returns on his instructions and he filed them as the law requires, but the declared amounts were not paid on time.
Between April 2021 and September 2023 the first company ran up tax arrears of EUR 209,998.26, and between June 2022 and July 2023 the second ran up arrears of EUR 38,691.01. Most of the debt consisted of mandatory social insurance contributions, VAT and personal income tax. The total loss to the State came to EUR 248,689.27. Both companies were liquidated in 2024.
The charge
The charge did not concern reporting, as the returns had been filed as the law requires. As the responsible officer of both companies, the accused was charged with deliberately failing, with intent to evade tax, to pay taxes and fees in full and on time. The prosecution based intent on the fact that he personally ran the companies' financial and business operations and knew they had enough cash to make all the payments.
What the court held
The case was heard without examination of evidence. This procedure is available only where the accused admits guilt and does not contest the facts set out in the charge, the legal classification of the offence or the amount of harm. The court gave an abridged judgment with no statement of reasons: it accepted the facts described in the charge as proven without setting out legal reasoning of its own.
The court found it proven that the accused, as the responsible officer of both companies, was responsible for calculating and paying their taxes. Filing the returns as the law requires did not rule out liability, as the offence concerned payment. The loss covered all unpaid principal amounts, including the minimum social insurance contributions calculated by the State Social Insurance Agency. The non-payment by both companies was classified as a single offence, and the total loss qualifies as large-scale.
The court imposed 1 year and 6 months of probation supervision and, as an additional penalty, barred him from serving as a board member for 2 years. The travel ban is to be lifted once the judgment enters into force, the attachment of a plot of land he owned was lifted, and the judgment does not rule on compensation for the loss.
Outcome
The accused was found guilty; the abridged judgment cannot be appealed, but a full judgment may be requested within 10 days and then appealed to Riga Regional Court within 10 working days as regards the sentence, compensation, the handling of property or procedural breaches.
Board member's inclusion on VID's list of high-risk persons upheld: the company had cash flow but did not pay its taxes
VID put a board member on its list of high-risk persons over the company's tax arrears of EUR 59,472.97, taking the view that the company had money but spent it on other things. The court found that over ten months more than EUR 511,000 left the company's account but only EUR 33,860.53 went towards the tax debt, and held that a general reference to financial difficulties was not enough. The application was dismissed; the judgment can be appealed.
Facts
The applicant had been a board member of the company since 2012. For several periods between August 2024 and May 2025 the company did not pay the taxes it had itself declared in full and on time, and on 26 June 2025 its arrears stood at EUR 59,472.97, mostly social insurance contributions for its 14-16 employees. When the company did not keep to extended payment terms, the State Revenue Service (VID) revoked them, and on 26 June 2025, having recorded that the debt could not be recovered, it added the applicant to its list of high-risk persons.
VID's objections
VID found that the statutory criteria were met, but in substance it objected to how the money had been used: the company had sufficient funds but spent them mainly on other things. As the applicant gave no explanation, VID treated this as avoiding payment of tax.
The applicant's arguments
The applicant argued that part of the company's revenue had gone on taxes and the company had sought a tax payment schedule, so the applicant had not been passive, while the aftermath of the state of emergency, rising raw material prices and partners' defaults had prevented full payment. In the applicant's view, VID had acted disproportionately, had in effect made the applicant personally liable for the company's obligations and had no power to take such a decision at all.
What the court held
The court held that VID had the power to take the decision and that all the statutory conditions were met. Following the Senate's case law, however, it stressed that formal criteria alone are not enough: the reasons for non-payment must be examined, along with whether the person acted to avoid paying tax.
Between 1 August 2024 and 1 June 2025 outgoing payments of EUR 511,743.10 were made from the company's account, but only EUR 33,860.53 went towards the tax debt. The court noted that this does not make every payment unjustified, but it shows that a complete lack of money was not the only reason the taxes went unpaid. The applicant identified neither the payments needed to keep the business going nor any priority creditors and produced no documents showing that payment was impossible, so the general references to hardship did not rebut VID's conclusion.
In the court's view, isolated payments do not amount to proper compliance where an extension is not honoured and substantial sums are being spent elsewhere. As most of the debt was social insurance contributions, whose non-payment affects employees' rights, the board member's conduct called for closer scrutiny, and the company could have applied for insolvency or for legal protection proceedings, a form of court-supervised restructuring, but did not. The court concluded that this was conduct in bad faith, not merely an ordinary business failure, and that the decision does not require the applicant to pay the company's debts but restricts the right to represent other companies.
Cash flow through the company's account from 1 August 2024 to 1 June 2025 The court noted that these figures do not mean that every payment was unjustified, but they show that a lack of money was not the only reason the taxes went unpaid.
Outcome
The court dismissed the application and VID's decision remains in force; the judgment may be appealed to the Administrative Regional Court.
Raw materials in the warehouse do not rebut a finding of sham transactions, and evidence is not reweighed in cassation
The Regional Court convicted the chair of a company's management board of tax evasion because she had entered into sham transactions with two counterparties and wrongly deducted input VAT. The Senate refused to open cassation proceedings because the defence was in substance challenging how the evidence had been weighed, and a reference to the earlier appeal cannot replace the grounds of a cassation appeal.
Facts
The chair of a company's management board was charged with tax evasion in connection with transactions with two companies. The Senate's decision does not state the amount of tax, the period covered by the charge or the sentence. On 2 February 2026 Latgale Regional Court, hearing the case on appeal, found the accused guilty, and defence counsel lodged a cassation appeal with the Senate.
The charge
The accused was charged with having, as chair of the board, entered into transactions with two companies that never actually took place and, on that basis, unlawfully exercised the right to deduct input VAT. According to the charge, this amounted to tax evasion and an intentional breach of tax legislation.
The defence's arguments
Defence counsel argued that the charge did not specify the acts by which the accused had evaded tax and that neither the sham nature of the transactions nor direct intent had been proven. The Regional Court had allegedly failed to assess witness testimony that the goods were received and audit findings that the goods were in the company's warehouse, and an expert report on a vehicle's load capacity contradicted its conclusions. Counsel also argued that the Regional Court had misapplied the case law of the Court of Justice of the European Union and of the Senate, but supported this only by referring to the earlier appeal.
What the court held
The Senate recalled that the cassation court reviews only points of law and does not reassess the evidence, and noted that counsel had partly repeated arguments which the Regional Court had already rejected with reasons. That court had found that the charge did set out specific acts, had examined each transaction separately and identified material inconsistencies between the evidence of the accused's former spouse, who was also an officer of the company, and other information in the case.
The Regional Court accepted that there was raw material, namely thread, in the warehouse, but the VAT returns and the accused's own evidence showed that the company regularly bought goods from its established suppliers, so the thread had nothing to do with the sham transactions. Agreeing with the first-instance court, it held that even if a load well above the vehicle's capacity could in theory have been carried, other factors, including the limited time and the lack of staff and equipment, showed that the transactions could not actually have been performed. It based its finding of direct intent on the fact that the accused knew the transactions were sham and deliberately chose those counterparties.
The Senate held that deciding which evidence to believe, and whether it is sufficient to establish guilt, is a matter for the courts trying the case on the merits, so the defence was seeking to overturn the decision on factual rather than legal grounds. A reference to the earlier appeal cannot replace the reasoning in a cassation appeal, which must itself identify a specific breach of criminal law, or a material breach of criminal procedure, that led to an unlawful or unjust decision.
Outcome
The Senate refused to open cassation proceedings, so the Regional Court's decision convicting the accused will not be reviewed in cassation; the Senate's decision cannot be appealed.
If the goods were not supplied by the partner on the invoice, VID can disallow the whole purchase cost, not just the mark-up
VID classified a company's transactions with a Danish business as fictitious, assessed corporate income tax and removed the company from the VAT register. The courts accepted that the goods had been bought but held that the transaction had not taken place with the partner named in the documents, so none of the purchase costs could be recognised, not merely the inflated part. The Senate refused to open cassation proceedings.
Facts
In autumn 2023 the State Revenue Service (VID), having concluded that the applicant had knowingly booked fictitious transactions with a Danish company, assessed corporate income tax and late-payment interest and removed the applicant from the VAT register. The amounts are not stated in the Senate's decision.
The courts did not dispute that the goods had been bought, had gone through customs procedures and had been sold on. However, the invoices contained incorrect references to specifications, and the invoices and acceptance certificates did not give the delivery address, delivery date or country of origin, so they could not be linked to the transport and customs documents. On 8 April 2026 the Administrative Regional Court dismissed the application, and the applicant appealed to the Senate.
VID's objections
VID took the view that the transactions with the Danish company were fictitious, so it refused to treat any of the purchase costs as business-related, not just the portion by which the price might have been artificially inflated.
The applicant's arguments
In its cassation appeal the applicant argued that the goods, their origin, suppliers and intermediaries had all been identified, so the court should have explained which relevant facts the shortcomings in the paperwork had prevented it from establishing, and should have assessed by how much the costs had been artificially inflated rather than disallowing them entirely. The applicant also relied on earlier, in its view essentially identical, transactions with another Danish company that VID had not challenged, and argued that VID and the court had to prove a suddenly formed fraudulent intent.
What the court held
The Senate found that the Regional Court had explained why the shortcomings in the documents mattered: they made it impossible to link the invoices to the transport and customs documents, and the evidence as a whole did not show a clear chain of transactions consistent with commercial reality. The applicant did not rebut these findings but merely raised formal objections to individual points.
On the extent of the costs, the Senate recalled its earlier case law: only by knowing who the supplier is can one verify whether the goods were supplied at the relevant price. If the person named in the documents did not supply the goods, there are grounds to consider that the transaction did not take place, and its costs are then not connected with the business. VID and the court must therefore assess whether the transactions were genuine, not work out what the goods would have cost without the artificial mark-up, and customs clearance and the onward sale do not change that.
The earlier transactions with a different partner were no obstacle because, as the Regional Court pointed out, each VID decision is assessed on its own facts. Nor did VID and the court have to prove a suddenly formed fraudulent intent; they only had to establish whether the specific transactions were genuine. The Senate also noted that the Regional Court had identified the tax advantage, as the applicant had inflated its purchase costs several times over, reducing its profit and underpaying corporate income tax, and that the judgment clearly concluded that a fraud scheme existed in which the applicant had knowingly taken part.
Outcome
The Senate refused to open cassation proceedings, so the Regional Court's judgment and both VID decisions remain in force; the Senate's decision cannot be appealed.
Once a company is struck off, a missed deadline to appoint a liquidator can no longer be reinstated
An application to appoint a liquidator was filed one month and 11 days late, and the Register of Enterprises struck the company off. The Senate held that after the strike-off only the decision's lawfulness can be reviewed, and that proportionality turns on whether the person could have avoided the consequences. The Regional Court's judgment was set aside and the case sent back for a new hearing.
Facts
On 11 November 2021 the State Revenue Service (VID) decided to terminate the company's operations. On 2 February 2022 the Register of Enterprises published a notice in the official gazette inviting applications for a liquidator within one month, but an application arrived only on 13 April, one month and 11 days late, though still before the company was struck off on 20 April.
The applicant, the company's sole board member and shareholder, challenged the strike-off. On 21 March 2024 the Administrative Regional Court granted the application: it found the consequences disproportionate, as the company's two properties had passed to the State, and held that the missed deadline should be reinstated. The Register appealed.
Application filed after the deadline but before the strike-off - 11 Nov 2021VID terminates the company's operations (effective 13 Dec 2021)
- 2 Feb 2022Notice in "Latvijas Vēstnesis": one-month deadline starts
- 13 Apr 2022Application to appoint a liquidator: 1 month 11 days late
- Company struck off - deadline can no longer be reinstated
- 20 Apr 2022Register strikes the company off, entry made the same day
- 16 Jun 2022Chief State Notary upholds the strike-off
Once the strike-off is entered, the deadline can no longer be reinstated; the court can only assess whether the decision was lawful.
The Register's position
The Register argued that only applications made within the one-month period count, and that in this situation the law requires a strike-off, with a departure possible only in an atypical case of manifestly disproportionate interference with a person's rights. Owning real estate is not atypical, since the law itself provides that remaining property passes to the State, and a shareholder is entitled only to a share of the liquidation proceeds, not to the company's property.
The arguments of the applicant and the third party
The applicant and a third party who had also challenged the strike-off argued that both the company's registration and the deadline should be restored, as the company had owned two properties right up to the strike-off. Failing that, they sought a referral to the Constitutional Court on whether the rules respect the constitutional protection of property.
What the court held
The Senate held that, since the law does not provide for restoring a struck-off company, a strike-off that has been entered can no longer be annulled, only reviewed for lawfulness. That review is permissible here because the applicant has a financial interest linked to the property the company lost. The deadline can be reinstated only where refusal would seriously affect human rights, and only until the strike-off is entered, so that is no longer possible.
Lawfulness is assessed on the facts known to the authority when it decided, so it must be established whether the applicant, when filing the late application, asked for the deadline to be reinstated. Proportionality turns on whether the person could have avoided the consequences. The Regional Court should have considered that the applicant, as sole board member and shareholder, could control the company and start a liquidation, and that greater diligence is expected of someone active in commercial affairs.
The applicant lost the right to a share of the liquidation proceeds, not to any specific property, so if the outcome depended on the applicant's own conduct, the transfer of property to the State is not in itself a serious interference with human rights. The Regional Court had relied on an earlier, erroneous view of the Senate that a strike-off can be annulled even after it has been entered, and found disproportionality too readily. The Senate saw no grounds to turn to the Constitutional Court.
Outcome
The Senate set aside the judgment and sent the case back to the Administrative Regional Court, which can only rule on whether the strike-off decision was unlawful; the Senate's judgment cannot be appealed, but the final outcome is not yet known.
Board member's inclusion on VID's list of high-risk persons upheld: the company repaid a loan to the board member while it owed tax
VID placed a company's sole board member on its list of high-risk persons because the company had tax arrears of EUR 30,012.51 that could not be recovered. The Administrative Regional Court found that the debt did not arise simply from a lack of money: in several months the account held enough, but EUR 41,000 went on repaying a loan from the board member. The application was dismissed; the judgment can be appealed to the Senate.
Facts
The applicant has been the company's sole board member since 2005. The company failed to pay on time taxes it had itself declared, and by 1 August 2024 its arrears stood at EUR 30,012.51. On 24 August and 22 October 2021, while it owed tax, the company repaid a loan to the applicant totalling EUR 41,000.
On 6 August 2024, having established that the debt could not be recovered from the company, the State Revenue Service (VID) placed the applicant on its list of high-risk persons. The Administrative District Court dismissed the application, and the applicant appealed.
VID's objections
VID found that the statutory criteria were met but also examined whether the board member had acted in good faith. Payments to the budget were neither regular nor sufficient, even though incoming funds would have allowed the taxes to be paid, and while the debt was outstanding EUR 41,000 was repaid to the applicant, more than the taxes then overdue. Other obligations had thus been given priority. VID also noted that the applicant had shown no efforts to recover the company's receivables of around EUR 800,000.
The applicant's arguments
The applicant argued that non-payment alone is not enough and bad faith must be shown, whereas VID and the first-instance court had applied the criteria as a formality. The difficulties were caused by the insolvency of business partners and the liquidation of a bank that had promised financing. The company had paid EUR 23,909 in taxes over the period in dispute and had deliberately not filed for insolvency, as the taxes can be paid only if the business keeps operating. The applicant also pointed out that VID itself had not applied for the company's insolvency and that the listing was public, so banks and partners refused to do business.
What the court held
The Regional Court endorsed the first-instance court's reasoning: inclusion on the list is not automatic, the reasons for the debt and the applicant's conduct had been examined, and in difficulty a board member should pay, reach an arrangement with VID or file for insolvency rather than keep trading in the hope that things would improve. The complaint of a formalistic approach was therefore unfounded.
The Regional Court also compared the account balances with the debt itself. On 31 July 2021 the account held EUR 51,131.50 against a tax debt of EUR 11,234.36. Even after EUR 20,000 was repaid to the board member on 24 August, the balance at the end of that month still exceeded the debt, yet only EUR 5,000 was paid to the budget in September. On 22 October the company paid EUR 5,000 in taxes and EUR 21,000 to the board member on the same day. The court concluded that the debt arose not simply from a lack of money but from the board member's decision to put obligations to the applicant first, and that the partial tax payments did not change this.
The plans to keep trading were theoretical, as VID had already suspended the company's business activity. It made no difference that VID had not applied for insolvency, since solvency issues are primarily the company's own responsibility. Nor had the applicant shown that the listing was public.
The company's funds and tax debt in 2021 Outcome
The Regional Court dismissed the application, so VID's decision to place the applicant on the list of high-risk persons was not annulled; the judgment may be appealed to the Senate within one month.
VID's decision to reclaim Covid-19 aid annulled: VID had not shown that a financial activity was the company's principal activity
VID reclaimed Covid-19 support from the applicant, treating it as a financial institution because it advised companies on capital structure and business strategy. The Administrative Regional Court annulled the decision, as VID had not shown that this was the applicant's principal activity. The Senate dismissed VID's cassation appeal: the court did not have to establish the principal activity in VID's place.
Facts
The applicant, a consultancy, received support from the State Revenue Service (VID) to offset the drop in its working capital flow for January and February 2021. VID later concluded that the applicant was a financial institution and therefore not eligible, and by a decision of 11 March 2022 ordered it to repay the support.
On 20 March 2024 the Administrative Regional Court annulled that decision. It held that neither the registered activity nor the list of services by itself showed that the applicant advised on capital structure and strategy, and that VID had not assessed whether such activity was the applicant's principal activity. VID appealed to the Senate.
VID's objections
VID took the view that the applicant was a financial institution under EU law because its services, such as outsourced CFO services, business consulting, and financial planning and budgeting, involved analysing companies' capital structure and business strategy and making recommendations.
In its cassation appeal VID argued that the Regional Court had misjudged the evidence, since the applicant had not denied advising on business strategy in its explanation, and outsourced CFO services by definition include such advice. VID also pointed out that the applicant had not submitted contracts or invoices and argued that, if the court found the evidence insufficient, it should have obtained it itself.
The applicant's arguments
The applicant sought annulment of the decision ordering repayment. In an explanation of 6 June 2021 it had already stated that it did not analyse capital structure or advise clients on investment matters, and before the Senate it argued that VID's appeal was unfounded.
What the court held
The Senate held that under EU law an undertaking is a financial institution only if it actually carries on one of the financial activities listed in EU law and that activity is its principal activity. This is borne out by the European Commission's opinion of 2023, under which the principal activity is determined by the value added attributable to it or, where that information is not available, by other objective criteria. VID had examined only the first condition, so the Regional Court was right to find the decision insufficiently reasoned.
A cassation court does not reassess the evidence. The Senate agreed with VID that the applicant had expressly denied only capital structure analysis and investment advice, but the Regional Court had examined what the activities actually involved and found that budget control and monitoring of financial indicators amounted to data processing and providing information, not advice on strategy. VID's argument about outsourced CFO services was merely a different view of the evidence, since what a service is called does not in itself determine its legal classification, and the Senate found no error in the Regional Court's assessment.
Where a decision is adverse to the person concerned, the authority must prove its grounds, and the fact that the transaction documents are in the applicant's hands does not shift that burden. The court did not have to obtain the contracts and invoices: VID had not asked for them on appeal and had maintained that the information on file was sufficient, and in any event they would go only to the first condition. Nor was there any basis for the court to establish the principal activity for the first time, as a judgment against the applicant would then rest on new circumstances not cited in VID's decision.
Outcome
The Senate dismissed VID's cassation appeal and upheld the Regional Court's judgment, so VID's repayment decision remains annulled; the judgment cannot be appealed.
VID may reject a declared CIT overpayment only under a statutory procedure; citing a data reliability check is not enough on its own
In April 2021 a bank in liquidation corrected its 2017 corporate income tax return, increasing the declared overpayment. VID refused to recognise it after a so-called data reliability check, and the Administrative Regional Court agreed. The Senate held that taxpayers may use the full correction period and that the right to an overpayment can be restricted only under a procedure laid down by law, so it quashed the judgment and sent the case back.
Facts
In April 2021, about a month before the three-year deadline expired, a bank in liquidation corrected its 2017 corporate income tax return and increased the declared overpayment. The State Revenue Service (VID) carried out neither a tax audit nor a data compliance check, only a so-called data reliability check, and on 27 October 2021 refused to confirm the overpayment. On 13 May 2024 the Administrative Regional Court dismissed the bank's application.
VID's objections
VID argued that choosing the type of control was within its competence and that a data reliability check allowed it to act promptly when a return contained false information. The Regional Court agreed: in its view a month before the deadline was too short to open and carry out any check, and the bank had acted in bad faith, because its auditor had pointed out an inaccuracy in the return as early as 2018, yet the corrections were filed only in 2021.
The applicant's arguments
The bank argued that it had filed the corrections within the statutory deadline and that VID had denied the overpayment without carrying out any of the control measures provided for by law. The Regional Court had endorsed this without citing any legal provision that would allow it.
What the court held
The Senate agreed with the bank that a taxpayer may use the full correction period. The Regional Court had found no legal obstacle to the corrections and had itself accepted that the deadline was met, so its finding that they were late was self-contradictory, and bad faith cannot be based on assumptions about the taxpayer's motives. Nor was a month too short, because a check may be opened within the deadline and completed later.
An overpayment is in substance the taxpayer's property, and the return remains the basis for calculating the tax until VID, following a check, sets a different calculation by decision. That did not happen here.
The choice of check is for VID, and it may assess the reliability of data, but the right to an overpayment can be restricted only under a procedure laid down by law. Neither the Regional Court nor VID identified any provision allowing that after a data reliability check. The Senate did accept that VID's actions might in substance correspond to a check regulated by law, but this must be assessed case by case, including whether the procedural rules and deadlines were observed.
Outcome
The Senate quashed the Regional Court's judgment and sent the case back for a new hearing, so whether the overpayment must be refunded has not yet been finally decided.
In a board member liability case, the court must also check whether the procedure was carried out while the company still existed
In 2023 VID made two individuals liable for a company's tax arrears, although the first-instance court found that the company had been liquidated in August 2022. The Administrative Regional Court held that the statutory criteria for liability were met. The Senate quashed that judgment and sent the case back, because the Regional Court must also check whether the statutory procedure, which can only be carried out while the company exists, was followed.
Facts
By two decisions of 25 May and 16 June 2023, the State Revenue Service (VID) ordered two applicants to compensate the state budget for a company's tax arrears. The Administrative District Court found that the company had been liquidated on 25 August 2022, several months before VID's decisions. On 9 April 2025 the Administrative Regional Court dismissed the application, endorsing the District Court's reasoning.
VID's position
VID took the view that the applicants had to cover the company's tax debt, and the lower courts found that all the statutory criteria for such liability were met. The Senate's judgment does not set out VID's reasoning in any detail, nor does it say when VID warned the applicants that proceedings were being opened.
The applicants' arguments
The applicants sought the annulment of both decisions and argued in their cassation appeal that the Regional Court had misinterpreted two of the statutory criteria for liability. The judgment does not summarise the appeal in any further detail.
What the court held
The Senate held that checking the liability criteria is not enough on its own: it must also be established that VID followed the procedure laid down by law. Under that procedure VID first warns the company and the board member in writing. The proceedings are closed if the court then opens legal protection proceedings (a court-supervised restructuring) or declares insolvency, or if the debt is paid in full.
The Senate repeated its earlier finding that this procedure is to be carried out while the company still exists. Once it has ceased to exist, the proceedings can no longer be closed through an application for legal protection or insolvency proceedings, and VID can no longer choose whether to recover the debt from the company or from the board member, who is jointly and severally liable with it. Proceedings against a board member therefore cannot be opened once the company no longer exists, and this also covers cases where VID opened the proceedings before the company was struck off the commercial register and before the tax debt was written off.
Since the first-instance court had found that the company was liquidated on 25 August 2022, the Regional Court must assess these principles in the light of that fact, as it could affect whether VID was entitled to open the proceedings. The Senate did not itself find VID's decisions unlawful. It is for the Regional Court to check whether VID's actions comply with the statutory procedure and the Senate's case law. For reasons of procedural economy, the Senate did not address the arguments in the appeal.
Outcome
The Senate quashed the Regional Court's judgment and sent the case back for a new hearing, so the final outcome depends on the Regional Court's fresh assessment.
Withdrawal of public benefit status for a late annual report annulled: VID had not considered a less severe measure
VID withdrew an association's public benefit organisation status because it had still not filed its 2024 annual report when VID took its decision. The court accepted that the breach was serious, but VID had not considered whether an administrative penalty would suffice or weighed the withdrawal against the benefit the association provides. VID's decision was annulled, but the judgment is not yet final.
Facts
Since 2022 the association had held public benefit organisation status in the field of support for sport. Its 2024 report was due with the State Revenue Service (VID) by 31 March 2025 but was not filed on time. According to the association, the report was ready, but filing was held up by discrepancies in employee data that VID flagged only after the deadline, and then by the auditor's workload.
On 9 May 2025 VID warned the association of administrative liability and of a possible finding that its activities were inconsistent with the nature of public benefit work, and on 3 July it withdrew the status. According to the association, it had asked on 30 June for an extension until 21 July and filed the report on 10 July. The association also says that in 2024 it received EUR 1,543,281 in donations and spent all of it supporting sport for around 400 children and young people.
Late report and loss of status - 31 Mar 2025Deadline for the 2024 report - not filed
- 9 May 2025VID warns of the consequences of not filing the report
- 30 Jun 2025Association requests an extension to 21 Jul 2025
- Status withdrawn
- 3 Jul 2025VID withdraws public benefit status
- 10 Jul 2025Association files the report
The events of 30 Jun 2025 and 10 Jul 2025 are as stated by the association.
VID's objections
VID stated that without the report neither VID nor the Public Benefit Commission could check the association's activities and use of funds. In VID's view, the status is a special privilege granted by the state, carrying an obligation to file a report every year, and since the report had still not been filed by the time of the decision, the association's activities were inconsistent with the nature of public benefit work.
The association's arguments
The association argued that the delay had objective causes, which VID knew about, and that withdrawing the status was disproportionate, because it would make it harder to attract donations and would in effect reduce support for children's and youth sport.
What the court held
The Administrative District Court held that failure to file the report is a serious breach, because without it VID cannot check how funds were used, and the status, with its tax reliefs for the organisation and its donors, is a special privilege granted by the state. However, VID has discretion when withdrawing status, so it also had to consider whether withdrawal was appropriate in the particular case.
For the same breach the law also provides for an administrative penalty, either a warning or a fine. Applying both measures together is not ruled out, but VID did not even assess whether the aim could be achieved by a penalty without withdrawing the status. This was particularly important because, on the association's account, which VID did not dispute, the delay did not stem from bad faith or gross negligence, and no previous breaches had been found.
Withdrawing status is the harshest measure available against a public benefit organisation. VID referred only in general terms to the interest in supervising such organisations and did not assess what public gain justified such a step, even though it did not dispute in substance the large donations raised or the support given to several hundred children. VID therefore exercised its discretion incorrectly, and the decision is unlawful.
Outcome
The court granted the application and annulled VID's decision with effect from the date it was adopted, but the judgment may be appealed to the Administrative Regional Court within one month.