Tax case law in Latvia: October 2026
Below is a summary of decisions in tax and related matters handed down in October 2026.
If the work was not done by the partner named on the invoice, neither the input VAT nor the expenses are recognised
In a tax audit, the State Revenue Service (VID) found that a construction company's transactions with three foreign subcontractors had not actually taken place and assessed additional taxes. The court agreed that the fact that the construction work was done on site does not prove it was done by the partners named on the invoices, and dismissed the application.
Facts
In a tax audit, VID found that a construction company's transactions with three foreign subcontractors had not actually taken place and assessed additional taxes. After the objection stage, what remained was mainly corporate income tax (CIT) of EUR 319,072 plus penalties and late-payment interest.
VID also disallowed input VAT on expenses unrelated to the business - personal goods and wedding costs - and found that personal income tax (PIT) had not been withheld and declared on certain payments.
VID's objections
The agreements are generic, the documents contain material inconsistencies, the partners had neither staff nor resources, and one of them had filed invoices with the same details with the Lithuanian tax administration for a supply of cars.
The company's arguments
All the construction work on the sites was completed, the documents contain only minor errors, and a long-term cooperation agreement cannot specify particular sites and deadlines.
What the court held
A transaction must have taken place in the way the documents describe it. The fact that the construction work was actually carried out does not mean it was carried out by the declared partners.
The inconsistencies in the documents are not minor, and the company submitted neither work orders nor schedules.
The company could not explain why it chose these partners; their line of business had nothing to do with construction, and they were represented by Latvian residents. Taken together with the other circumstances, this points to knowing participation in a scheme.
Expenses for transactions that did not take place were rightly added to the CIT base.
Outcome
The court dismissed the application, so VID's decision stands. The judgment can be appealed.
The description in a taxpayer's VID rating can be reviewed by the courts
In its public database, VID gave a law firm the rating "B - Compliance needs improvement", although the firm has no outstanding obligations to the state. The district court refused to accept the application because the rating was purely informative. The Senate held that publishing the rating affects the taxpayer individually and is therefore open to review by the courts.
Facts
In its public database, VID gave a law firm, as a taxpayer, the rating "B - Compliance needs improvement".
The firm did not challenge the "B" level itself but the description, which it considers untrue and misleading because it has no outstanding obligations to the state - something VID does not dispute either.
The district court refused to accept the application, taking the view that the rating is purely informative.
The district court's position
The rating is not binding, is not addressed to a specific person and has no direct consequences, so it cannot be challenged.
The firm's arguments
Even information that is merely informative must be true; a negative public assessment can deter partners from doing business with the firm and harms its reputation.
What the court held
The fact that information is informative in nature does not mean its publication cannot have consequences - that has to be assessed on the substance.
The legislature knew that business partners would use the rating to assess transaction risk; VID itself recommends doing so.
Publishing the rating is VID's final assessment and affects the taxpayer individually, so it is open to review by the courts.
Outcome
The Senate set aside the judge's decision and sent the matter back to the district court for reconsideration.
A carrier is not liable for a wrong commodity code in the consignor's customs declaration, or for customs breaches beyond its control
A Lithuanian carrier's driver presented to customs an export declaration, prepared by the consignor, in which some goods carried the wrong commodity code, and VID fined the carrier for giving false information to customs. The regional court held that the declarant, not a carrier acting in good faith, is responsible for the content of the declaration, and dismissed VID's appeal.
Facts
A Lithuanian carrier's driver presented to customs an export declaration, prepared by the consignor, for used car parts bound for Kazakhstan.
Some of the goods had been declared under the wrong commodity code, and VID fined the carrier for providing false information to customs. The district court overturned the fine.
VID's objections
The carrier should have checked the cargo more carefully, especially given the sanctions risk, and it is obliged to provide true information about the goods being exported.
The carrier's arguments
The declaration was prepared by the consignor; the carrier checked that the cargo matched the invoice and could not have known about the wrong code.
What the court held
Responsibility for a declaration lies with the person who used it to express the intention to place the goods under a customs procedure - the declarant (here, the consignor).
By handing customs all the documents it had, the carrier fulfilled its obligations and acted in good faith.
A carrier cannot be penalised for a breach it could neither foresee nor prevent.
Outcome
The regional court dismissed VID's appeal and upheld the district court's judgment. The judgment is final.
Excise duty and VAT are due on illegal (unmarked) cigarettes even if they were never sold
Two people were convicted of illegally storing 42,200 unmarked cigarettes and ordered, jointly, to compensate the unpaid excise duty and VAT. The Senate held that the taxes become chargeable when smuggled goods are seized after entering the EU; a sale is not required. The judgment was set aside only as regards the second defendant's sentence.
Facts
Two people were convicted of illegally storing 42,200 unmarked cigarettes and ordered, jointly and severally, to pay the compensation claimed by VID for unpaid excise duty and VAT.
In cassation, one of the defendants argued that the cigarettes had never been sold, so no tax could be claimed, and challenged the lawfulness of the evidence.
What the court held
The Senate does not reassess the evidence; the investigative steps and the search were lawful.
Where smuggled goods are seized after they have entered the EU, excise duty and VAT become chargeable - a sale is not required. There is no reason to refer the matter to the Court of Justice of the European Union.
An aggravating circumstance was wrongly applied to the second defendant, so his sentence has to be reviewed.
Outcome
The Senate set aside the judgment as regards the second defendant's sentence and sent that part back to the appeal court; the rest of the judgment stands.
No Covid-19 wage subsidy where the services could have been provided remotely
A legal services company applied for a Covid-19 wage subsidy for October and November 2021, but VID refused because the drop in revenue was not linked to the restrictions. The regional court agreed with VID: legal services could have been provided remotely, so no causal link was established, and the application was dismissed.
Facts
A legal services company applied for a wage subsidy for October and November 2021. Its revenue had fallen, and it could not provide its services in the usual way.
VID refused, finding that the drop in revenue was not linked to the restrictions; the district court upheld the application, and VID appealed.
VID's objections
Providing legal services was not prohibited - they could be provided in full remotely, using any means of communication.
The company's arguments
Its clients were unvaccinated and could not enter the country or come to the office, only one client at a time could be received in the office, and these obstacles were beyond its control.
What the court held
The link between the restrictions and the drop in revenue may be indirect, but a causal link must be established.
A lawyer's work allows advice to be given by phone or video and documents to be sent by email; the company did not show what prevented this.
Situations in which remote assistance is impossible are exceptions and do not establish a causal link.
Outcome
The regional court found the district court's judgment wrong and dismissed the application. The judgment can be appealed.
Micro-enterprise tax is also due on the commission withheld by a ride-hailing platform
A driver who carried passengers via an online platform paid micro-enterprise tax only on the amounts credited to his account, but VID added the commission withheld by the platform to his turnover and assessed additional tax of EUR 3,204. The court held that the revenue is the full fare paid by the passenger, since expenses cannot be deducted, and dismissed the application.
Facts
The carrier, a micro-enterprise taxpayer, provided commercial passenger transport by car through an online platform that withheld a commission from each fare.
He paid tax only on the amounts credited to his account, so VID included the commission in his turnover and assessed additional tax of EUR 3,204 plus late-payment interest.
VID's objections
The commission is an expense of the carrier - economically it makes no difference whether the platform withholds it straight away or the carrier pays it himself.
The carrier's arguments
VID's guidance was published only in 2025 and cannot be applied retroactively; the tax base should be the money actually received in the account.
What the court held
Micro-enterprise tax is calculated on revenue, not on the difference between revenue and expenses - expenses cannot be deducted.
The carrier's revenue is the full fare paid by the passenger; the net amount shown in the platform's reports does not change the tax base.
As a party to the contract, the carrier must have known about the commission; if anything was unclear, he could have asked VID for a ruling.
Outcome
The court dismissed the application. The judgment can be appealed.
A 2022 sanctions breach can be punished administratively where criminal liability has been replaced
In 2022 a customs broker declared rubber seals for export to Russia under the wrong commodity code; correctly classified, they were subject to EU sanctions. After such breaches were decriminalised in 2025, the criminal proceedings were closed and VID imposed a fine of EUR 10,000. The regional court held that a more lenient law applies retroactively even where criminal liability has been replaced by administrative liability, and the fine stands.
Facts
In 2022 a customs broker declared rubber seals for export to Russia under the wrong commodity code - correctly classified, they were subject to EU sanctions.
In 2025 such breaches were decriminalised, the criminal proceedings opened in 2022 were closed, and VID imposed a fine of EUR 10,000. The first-instance court overturned the fine because no administrative liability existed in 2022.
VID's objections
The legislature changed the type of liability rather than removing liability; administrative liability is more favourable to the person concerned.
The customs broker's arguments
The new rules do not apply retroactively, and it did not know that customs would classify the goods differently.
What the court held
A more lenient law applies retroactively - including where an offence has been decriminalised and criminal liability replaced with administrative liability.
By providing customs services for goods subject to sanctions, the broker breached EU sanctions.
The fine was set at the minimum level, so there is no reason to change it.
Outcome
The regional court set aside the first-instance judgment; the EUR 10,000 fine stands. The judgment is final.
The withholding tax exemption can be denied even where the parent company carries on a genuine business
In Neo Group (C-203/25), the Court of Justice of the European Union held that the withholding tax exemption on dividends can be denied even where the parent company carries on a genuine economic activity, if it is part of a formal chain of transactions through which the funds reach the ultimate owner of the group. The whole chain must be assessed, and it is enough that one of its participants knew or could have known about it.
Facts
A Lithuanian company paid dividends to its Cypriot parent, which carried on a genuine economic activity, without applying withholding tax.
Through sales of shares within the group, loans and assignments of receivables, the funds reached the ultimate owner of the group - an individual in Cyprus. The tax administration treated the chain as a non-genuine arrangement and assessed withholding tax of EUR 2,250,000.
The tax administration's position
The parent is part of a formal chain of transactions through which the funds reach the owner of the group.
The company's arguments
The parent carries on a genuine economic activity and is the beneficial owner of the dividends, including for the purposes of the tax treaty.
What the court held
The anti-abuse rule is not limited to conduit companies - the parent's economic activity does not in itself rule out abuse.
The whole chain of transactions must be assessed, including transactions in another Member State and over a longer period; matching amounts are an indication, not a presumption.
The tax advantage can arise at any link in the chain; it is enough that one of its participants knew or could have known about the chain.
Outcome
The case will be decided by the Lithuanian Tax Disputes Commission.
Working with a self-employed specialist found to be an employment relationship
A medical institution paid a self-employed nutritionist 40% of what patients paid, but VID found that this was in fact employment and assessed mandatory state social insurance contributions and personal income tax (PIT). The court found economic dependence, integration into the institution's work and use of its equipment, held that an employer's report once filed cannot be cancelled, and dismissed the application.
Facts
A medical institution paid a self-employed nutritionist 40% of the fees paid by patients. VID found that this was in fact an employment relationship and assessed mandatory state social insurance contributions and PIT.
At VID's request, the institution corrected its employer's report, but later asked for the correction to be cancelled; VID refused.
VID's objections
The report cannot be cancelled; one statutory indicator is enough for income to be treated as employment income, and several were found.
The institution's arguments
The contract is a civil-law contract - pay with no guaranteed amounts, the specialist bore financial risk and used her own computer and phone; tax had already been paid on a self-employed basis.
What the court held
Cancelling a report is not provided for; the report for each month can be corrected only once.
One statutory indicator is enough; here the court found economic dependence (pay derived from the institution's patient flow, payments to the institution), integration (administrative duties, the institution's systems, working hours) and use of the institution's equipment.
There is no double taxation - the reassessment covers only the undeclared part.
Outcome
The court dismissed the application, so VID's decisions stand. The judgment can be appealed.
The 0% VAT rate does not apply where the seller knows the supply is not taking place as documented
A company applied the 0% VAT rate to supplies of excise goods to businesses in other EU Member States, but the courts found that in some transactions the buyers were not given the right to dispose of the goods as owners, while other supplies took place entirely in Latvia, and the company knew this. The Senate refused to open cassation proceedings, so the regional court's judgment in VID's favour became final.
Facts
A company applied the 0% VAT rate to supplies of excise goods to businesses in other EU Member States.
The courts found that in some transactions the buyers were not given the right to dispose of the goods as owners, while some supplies took place entirely in Latvia, and the company knew this.
The company's arguments in cassation
The court did not state a specific ground for each group of transactions and required it to prove a negative - that it did not know what its partners were doing.
What the court held
The Senate does not reassess the evidence; disagreeing with the court's findings is not a breach of the law.
The judgment did state a ground for each group of transactions: in one, the buyer was not given the right to dispose of the goods as owner; in the other, the supply took place entirely in Latvia. In both cases the company knew this.
The court did not require proof of a negative - the company had to justify its choice of partners and rebut VID's findings.
Outcome
The Senate refused to open cassation proceedings; the regional court's judgment in VID's favour became final.
VID can bar the disposal of joint property registered to one spouse because of the other spouse's tax debt
To recover one spouse's tax debt (EUR 3,744.60), VID registered a ban on disposing of two cars bought during the marriage and registered in the other spouse's name. The court held that property acquired during a marriage is, in case of doubt, joint property and that a marriage contract concluded later does not lift the ban, and dismissed the complaint.
Facts
To recover one spouse's tax debt (EUR 3,744.60), and having found no other assets of the debtor, VID registered a ban on disposing of two cars bought during the marriage and registered in the other spouse's name.
A marriage contract separating the spouses' property was concluded only after the ban had been registered.
VID's objections
This is a security measure in the enforcement proceedings against the debtor spouse; any dispute over who owns the property must be resolved in the civil courts.
The car owner's arguments
He is not the debtor, no decision has been taken concerning his property, and VID has not determined the debtor spouse's share in the cars.
What the court held
Property acquired during a marriage is, in case of doubt, joint property, and enforcement can be directed at the debtor's share without first dividing the joint property.
A marriage contract concluded later is not a ground for removing the ban.
The ban is proportionate - the debt exceeds the value of the cars, and their use is not restricted.
Outcome
The court dismissed the complaint; the decision is final.
Covid-19 support: a common owner who is an individual does not in itself make companies linked
VID refused a company Covid-19 support of EUR 47,903.95 on the ground that, once the companies in which the parent's owner holds shares were added, the group was a large undertaking in difficulty. The court held that an individual makes companies linked only if he or she actually intervenes in their management, which VID had not proved, and ordered VID to grant the support.
Facts
VID refused the company Covid-19 support of EUR 47,903.95 because, once the companies in which the parent company's owner holds shares were added, the group was a large undertaking in difficulty.
The company itself, together with its subsidiary and its parent, met the criteria for a small enterprise.
VID's objections
A link can also arise indirectly, through an intermediary; the group must be assessed as a whole.
The company's arguments
Enterprises connected only through an individual are linked only if they operate in the same or an adjacent market.
What the court held
An individual is an "undertaking" only if he or she actually intervenes in the management of the companies; a controlling stake alone is not enough (CJEU case C-870/24 Outletico).
VID did not prove actual control, and the holding activity is not in the same market as the real estate business.
Support can be granted even after the scheme has closed if it was applied for in time but unlawfully refused.
The company is a small enterprise, so the "undertaking in difficulty" test does not apply to it.
Outcome
The court ordered VID to grant the support. The judgment can be appealed.
The origin of cash savings must be proved even where the transactions took place more than ten years ago
VID found that an individual's declared cash savings were unsubstantiated and assessed personal income tax (PIT) on hidden income. He explained the savings by sales of cars and a flat in Azerbaijan in 2009-2012, a gift from his brother and his son's repayment of a loan, but the regional court held that the passage of time does not release a person from having to explain and prove such transactions credibly, and dismissed the application.
Facts
VID found that an individual's declared cash savings were unsubstantiated and assessed PIT on hidden income, with penalties and late-payment interest.
He explained the savings by sales of cars and a flat in Azerbaijan in 2009-2012, a gift from his brother and his son's repayment of a loan.
VID's objections
No information was provided during the audit; the data from the foreign authority and the relatives' statements are contradictory.
The applicant's arguments
Documents cannot be expected after ten years; the buyers' statements confirm the transactions, and it has not been shown that they are false.
What the court held
A person must be able to credibly explain and prove the transactions they rely on - the long time that has passed does not release them from this.
Uniform statements with no detail are not credible, and it was not proved that the money was still held in 2020.
Evidence submitted only in court, without a valid reason, cannot replace the audit.
Outcome
The regional court dismissed the application. The judgment can be appealed.
VID job cuts: officials can be assessed on their appraisals for the two previous years
Following a budget cut, VID abolished posts and assessed staff on the average of their 2023 and 2024 performance appraisals; a senior tax inspector came 26th out of 29 and was dismissed. The court held that the principle of equal treatment had been observed and the unchallenged 2023 appraisal had rightly been taken into account, and dismissed the application.
Facts
Following a budget cut, VID abolished posts and assessed staff on the average of their 2023 and 2024 performance appraisals.
A senior tax inspector came 26th out of 29 and was dismissed on the abolition of her post.
The authorities' objections
A single methodology was applied to everyone; fixed-term vacancies were offered.
The official's arguments
The 2023 appraisal was obtained in a different post, while her current 2025 appraisal is "very good"; the difference from her colleague is negligible.
What the court held
The principle of equal treatment was observed - posts of the same level were compared on all known criteria.
The unchallenged 2023 appraisal was rightly taken into account; the 2025 appraisal could not be relied on.
There were no permanent vacancies; temporary vacancies were offered.
Outcome
The court dismissed the application. The judgment can be appealed.
Moving cigarettes while bypassing the transit procedure: the loss covers not only excise duty but also import duty and VAT
A consignment of cigarettes brought in under transit was taken out of the Free Port of Riga and moved, with different documents, to the Saldus district, bypassing the customs office of destination; the defendants were ordered to pay EUR 1,217,774.79 for the loss caused. The Senate refused to open cassation proceedings, so the regional court's finding that the loss includes not only excise duty but also import duty and VAT stands.
Facts
After a container of cigarettes brought in under transit had left the Free Port of Riga, its seals were removed and the cargo was moved with different documents to the Saldus district, bypassing the customs office of destination.
The defendants were convicted of moving goods subject to customs clearance without the permission of the customs authorities, and ordered to pay the EUR 1,217,774.79 loss claimed by VID.
The defence's arguments in cassation
It was not proved that the cigarettes were subject to customs clearance and came from Vietnam, so the legal classification and the amount of the loss are wrong.
What the court held
The Senate does not reassess the evidence; the objections concerning the cargo and its origin are factual.
Taking into account the amended charge and the cigarettes' Vietnamese origin, the regional court included import duty and VAT in the loss, not just excise duty; the Senate treated the objections to this as factual.
Outcome
The Senate refused to open cassation proceedings; the decision is final.