Why is it important to challenge and appeal the results of an audit conducted by the SRS and verification of data compliance?
The economic growth of the Republic of Latvia is not possible without business development. However, it is not always possible to develop. Unfortunately, there is currently a situation where a public authority that should encourage business is putting a brake on it and is even able to put an end to it.
By law, the State Revenue Service has sufficient rights, which are abused or non qualitative (without certain knowledge of commercial activity), can lead the company to a situation where the company lacks working means to continue, for example, the purchase of the goods and its subsequent sale, lack of money to settle with creditors, etc.
In what way can this happen?
- the SRS is entitled to extend the VAT refund period for a countless period of time, so that the entrepreneur will not be able to receive the planned cash for carrying out the business;
- the SRS is entitled to carry out checks, the resulting amounts of money being recovered in an uncontested manner, without having to take care of the financial situation of the undertaking;
- the SRS is entitled to impose administrative penalties for the smallest formal infringements, which will never affect anything except the host;
- the SRS is entitled to block accounts by means of a bank, to turn recovery to the assets of the company;
- the SRS has the right to refuse to register the company in the VAT register, despite the fact that the cooperation of the economic operator with foreign partners could depend on it;
- so on.
All these rights have been granted with a view to using them correctly. The right means not only fairly, but also by investing in professional knowledge. Unfortunately, it doesn’t always happen. In general, inspections are carried out by inspectors who have never been involved in commercial activity and do not know the nature of it.
The inspections carried out by the SRS are closely and uncertainly related to the correct application of legal norms and the fair interpretation of actual circumstances. Businessmen often face the fact that inspectors do not understand them or do not want to understand them, stating that “justice can be fought in court” and there is usually only one “fairness” – written in the SRS decision. And here, in part, the SRS is right – “you can fight justice”.
So many references to judgments appear in the SRS decisions that it seems not worth going to court if all the arguments in the decision are in favour of the SRS. But it’s not really. The case-law is constantly changing and not necessarily the SRS inspectors follow it, more precisely, starting to follow it after a year or more. As a result, decisions are based on the non-valid reasoning.
How’s the court going on?
At the hearing, it is possible to re-explain its position by confirming it with evidence. Any evidence in the proceedings can be verified, including examining all the arguments mentioned in the SRS decision. There is also an opportunity to refer to current case law in similar cases.
Unlike the SRS, the court cannot disregard the arguments of the operator and the evidence submitted, so the court considers all the evidence in the case, in conjunction with current practices. If the entrepreneur is able to provide an exhaustive and correct explanation, to explain the nature of his or her economic activity, the court will criticise the decision of the SRS, thereby making the business-friendly judgment.
It should be borne in mind that the more active the operator will seek to demonstrate his or her fairness, the more active involvement in all testing processes, the more favourable the results can be achieved.