Not - declared salaries risk

From July 1, 2015, taxpayers, who have been identified by Latvian tax administration’s (SRS) computerized system of risk analysis as payers of not- declared salaries (so - called “envelope” salaries), receive a warning message in SRS’s electronic declaration system (EDS).

If the taxpayer has received the warning in EDS about the inclusion of the taxpayer in the risk group "Envelopes salary risk”,  it means that SRS invite the taxpayer to make sure the data submitted to SRS correspond to actual business activity and to submit (if necessary) adjustments of Employer's Report.[1] SRS’s system of risk analysis will assess adjustments made to the Employers report. If the risk from SRS point of view is prevented, the taxpayer will be excluded from the list of risky taxpayers. If the risk is not eliminated, the SRS will continue to monitor the taxpayer and will take appropriate control measures, including thematic reviews and tax audits.

SRS does not disclose criteria according to which a risk is identified. However, SRS indicates indirectly that each taxpayer should assess whether labour resources declared by the taxpayer corresponds to its economic activity. In addition, the taxpayer has to be certain that its employees’ salaries are not lower an average salaries or the average hourly rates in the relevant Latvian region. The taxpayer has to be able to justify the difference (if any).

The taxpayer, who believes that he does not have the not - declared salary risk, may submit an explanation to the SRS or to take into account the warning and provide all the explanations and evidence during thematic review or tax audits.

Risk of late tax reporting

Certain taxpayers have already received a warning for regular delays of tax reporting. SRS will send such warnings to taxpayers who submitted VAT returns and other tax reports more than three times during this year. Reception of the warning means that the taxpayer is included in the group of risky  taxpayers and can be punished administratively, if the taxpayer will continue to violate the tax reporting deadlines. 

More details about the warning in Latvian can be found in the SRS website, please see below the attached link:

https://www.vid.gov.lv/default.aspx?tabid=8&id=7422&hl=1

1] Report on the state social insurance contributions from employees' income, personal income tax and business risk state duty

Contacts of Advisory unit

If you have any questions or need more detailed information, please contact:

Ina Spridzāne (ina.spridzane@leinonen.lv, tel. 67358635) or Kristine Erele (kristine.erele@leinonen.lv tel. 67358600).

If you are interested in the news of tax, employment and other business-related legislation in Estonia and Lithuania, please visit http://leinonen.ee/news/news-2015 and http://leinonen.lt/news/news-2015.