Binding ruling of the State revenue service

A binding ruling is a written document issued by the State Revenue Service (SRS) of Latvia, from which a taxpayer (natural or legal person) can find out the SRS’s opinion on applying tax and customs legislation in a specific situation. It is especially recommended to receive the State Revenue Service (SRS) ruling in cases where, when planning a transaction, there are doubts about the application of taxes.

How to request a binding ruling?

In order to receive the ruling, an application must be prepared and submitted to the SRS. In accordance with Article 98 of the Law on Administrative Procedure of Latvia, the application should contain:

•  information about the applicant as well as a detailed description of the facts (a set of facts describing the specific situation about which the applicant wishes to receive information),
• the copies of transaction-related documents (for example, a contract, copies of invoices etc), 
• the question arising from these facts, 
• an explanation of why such a ruling is necessary (often it is indicated that the ruling is necessary for the correct application of tax legislation) and, 
• if the applicant wishes, also the applicant's legal considerations (arguments).

The application for receiving the ruling can be prepared by the taxpayer themselves or by another person on behalf of the taxpayer. Although the inclusion of legal considerations in the application is not mandatory, in the case the taxpayer wants to receive the desired answer to his questions, it is recommended to include the legal considerations in the application as widely as possible in order to increase the possibility of achieving the desired result. In such a case, it would be useful to ask for professional tax consultants’ assistance in the preparation of the application for binding ruling.

Legal consequences of the binding ruling

According to the Latvian Law on Administrative Procedure, the ruling is legally binding on the SRS but not on the applicant. Therefore, the taxpayer is not obliged to act as indicated in the inquiry. However, if the applicant has acted in accordance with the binding rule issued to them by SRS, the administrative act issued later by the SRS, which refers to the case for which this binding rule was provided, cannot be unfavorable for the taxpayer, even if the State Revenue Service later determines, that the issues binding ruling was not correct. That is when the SRS has initially when issuing the binding rule assessed the facts indicated in the application incorrectly and has provided an incorrect legal assessment of these facts.

Useful to check:

• Tax advisory services
• Transfer Pricing services