A case initiated regarding the procedure for refund of overpaid value added tax
On 25 April 2017, the 3rd panel of the Constitutional Court initiated the case “On compliance of Part 123 and Part 125 of Section 12 of the Law “On Value Added Tax” (in the wording that was in force from 1 January 2010 until 31 December 2012), insofar as they restrict the right to have tax overpayment refunded within a reasonable term, with the first, second and third sentence of Article 105 of the Constitution of the Republic of Latvia”.
Norms Contested
Part 123 of Section 12 of the Law “On Value Added Tax” (in the wording that was in force from 1 January 2010 until 31 December 2012): “The State Revenue Service, carrying out tax administration measures, shall, within 30 days following the receipt of the tax declaration for the taxation period, transfer the approved overpaid amount of tax to the subsequent taxation period until the end of the taxation year, covering the amount of tax payable into the State budget in subsequent taxation periods. (..)”
Part 125 of Section 12 of the Law “On Value Added Tax” (in the wording that was in force from 1 January 2010 until 31 December 2012): “If after the redirection of the overpaid amount of tax referred to in Paragraph 124 of this Section the taxable person still has an overpaid amount of tax, this amount shall be transferred to the subsequent taxation periods as specified in Paragraph 123 of this Section.”
Norms of Higher Legal Force
First, second and third sentence of Article 105 of the Constitution: “Everyone has the right to own property. Property shall not be used contrary to the interests of the public. Property rights may be restricted only in accordance with law.”
The Facts of the Case
The case has been initiated with regard to an application by the Administrative Cases Department of the Supreme Court (hereinafter – the court). The court is examining, under cassation procedure, a case regarding the Administrative District Court’s decision to dismiss the application by SIA “LatInterMeh” (the applicant), in which the applicant requested that a decision of the State Revenue Service be recognised as unlawful. By this decision, part of the value added tax overpaid by the applicant had been, in accordance with the law, transferred to the subsequent taxation period until the end of the taxation year.
In the court’s opinion, the contested norms, insofar as they restrict the applicant’s right as a taxpayer to have value added tax overpayment refunded within a reasonable term, infringe on the fundamental rights enshrined in Article 105 of the Constitution and do not comply with the principle of proportionality and with the principle of tax neutrality.
The court holds that the economic burden, which is imposed on the taxpayer by the law for a long period and without any compensation, deprives the taxpayer of the possibility to get back and dispose of their financial means. This, in the court’s view, may have a negative impact on the taxpayer’s ability to carry out economic activity.
Legal proceedings
The Constitutional Court has requested the Saeima to submit by 30 June 2017 to the Constitutional Court a written reply, presenting the facts of the case and legal substantiation.
The term for preparing the case is 25 September 2017. The Court shall decide on the type of procedure and the date for hearing the case after the case has been prepared.
Open in PDF: 2017-12-01_PR_par_ierosinasanu_en
Linked case: 2017-12-01