Judgment in the case on procedure for repayment of value added tax has been adopted
The Constitutional Court has adopted a decision in the case No. 2010-02-01 “On Compliance of Item 10 of Section 16 of the Law on Taxes and Fees with Article 1 and Article 105 of the Satversme (Constitution) of the Republic of Latvia”.
Article 1 of the Satversme provides that Latvia is an independent democratic republic, whilst Article 105 of the Satversme guarantees the right to own property.
The contested norm provides that it is allowed to request repayment of overpaid tax amounts or to forward the sum for covering current tax payments within a period of three years after the payment time period specified by law for the particular tax.
The applicant – SIA “Industriālais termināls” – indicated that, according to a decision of the State Revenue Service, it has been denied repayment of the VAT because the repayment period of three years has expired. The applicant indicates that it has overpaid the TVA at the time when the term of three years has not yet been introduced, and previously taxpayers had the right to request repayment of overpaid amounts of tax for an indefinite period of time.
The Constitutional Court recognized the provision establishing a certain term for repayment of the TVA as admissible. Therefore the Court concluded that the contested norm, insofar as it applies to tax overpayments accumulated after the fate of coming into force of the contested norm, i.e. 1 July 2003, complies with Article 1 and Article 105 of the Satversme of the Republic of Latvia.
The main dispute raised because of the fact that the applicant could not understand in due time that the contested norm applies to such TVA overpayments that were accumulated before coming into force of the contested norm and that it had the right to request repayment of the overpaid pretax also before executing of a transaction liable to VAT. It followed from the previous practice of the SRS that the overpaid VAT pretax cannot be requested to be repaid before the transaction liable to the VAT is executed.
The Constitutional Court concluded that, by introducing the contested norm into the 2003 Law, the legislator has failed to establish a clear regulatory framework for the transitional period for a taxpayer to be able to understand his or her rights and to be able to exercise them.
Consequently, the Court ruled that the contested norm, insofar as it applies to overpaid tax amounts of SIA “Industriālais terminālis” accumulated before the fate of coming into force of this norm, does not comply with Article 1 and Article 105 of the Satversme and shall be null and void as from the date of adoption thereof.
The judgment of the Constitutional Court is final and is not subject to appeal. The judgment shall come into force on the date of publishing it in the newspaper “Latvijas Vēstnesis”.
Linked case: 2010-02-01