On 18 August, the Department of Administrative Cases of the Supreme Court suspended proceedings in the case on dispute with the State Revenue Service regarding personal income tax calculated to the applicant from payments received by him from the Rural Support Service as support payments.  In opinion of the Supreme Court, there are doubts regarding interpretation of the Article 29 (1) of the Council Regulation (EC) No.73/2009, because the foregoing Regulation does not stipulate that any tax deductions could be performed from support payments made; however, it may be concluded from the national provisions that support payments are recognized as income liable to personal income tax. Because of existence of such doubts, the Supreme Court decided to send reference for preliminary ruling to the Court of Justice of the European Union. Proceedings are suspended in the case until the moment, when the Court of Justice of the European Union will adopt the preliminary ruling.

The State Revenue Service performed simple personal income tax audit to the applicant for years 2011 and 2012. As a result of the audit, by the decision of the State Revenue Service, personal income tax, overdue charge and fine was calculated to be paid additionally by the applicant.  It was pointed out in justification of the decision that the applicant had received support payments from the Rural Support Service in 2011 and 2012. In opinion of the institution, the legislator did not particularly stipulate that support payment paid to the tax payer is not liable to taxes. Therefore, comprehensive principle regarding personal income tax, namely, that all income is liable to personal income tax, is applicable.

The applicant filed an application to the Administrative district court, asking to abolish the decision of the State Revenue Service and to recover moral harm and personal damage.

By the judgement of the Administrative district court of 6 May 2015, the application was partly satisfied – the decision of the State Revenue Service was abolished, and the rest of the claims set in the application were dismissed. In its judgement, the first instance court recognised that legal provisions of the European Union, inter alia, Article 29 (1) of the Regulation No.73/2009 stipulate that support payments must be made in full, and no deductions should be withheld from them. 

The State Revenue Service filed an appellate complaint against the part of the judgement of the Administrative district court, which satisfied the application. The applicant filed an appellate complaint against the part of the judgement, which dismissed the application. The appellate complaint also includes the request to suspend operation of the decision of the State Revenue Service. 

By decision of the Administrative regional court of 15 June 2015, the applicant’s request regarding suspension of operation of the administrative act was dismissed. The Administrative regional court recognised that the State Revenue Service prima facie justifiably determined the personal income tax to the applicant for payments received from the Rural Support Service.  

The applicant filed an ancillary complaint against the decision of the regional court to the Supreme Court, pointing out that the court had not observed provisions of the Regulation No.73/2009, which stipulate that no deductions are withheld from support payments. In opinion of the applicant, Latvian domestic legal provisions are applicable as far as they are not in conflict with international legal provisions and law of the European Union.

Information prepared by Baiba Kataja, the Press secretary of the Supreme Court
Telephone: 67020396; e-mail: baiba.kataja@at.gov.lv