On 17 May, the Department of Administrative Cases of the Supreme Court stayed proceedings in the case, in which it should be resolved whether 0% VAT tax rate is applicable to transport service related to transit of goods (Section 7(1)(2) of the Value Added Tax Law), if actual forwarder had not had a licence to perform international carriage.  The Supreme Court decided to refer to the Court of Justice for a preliminary ruling, because those may be important in adjudication of a case. Proceedings in the case have been stayed, until the Court of Justice of the European Union adopts a judgement due to referral for preliminary ruling.  

The State Revenue Service carried out an audit of the value-added tax of individual merchant “L.Č.” for the period from January 2008 until December 2010, and calculated value-added tax, penalty and delay fee to be paid additionally to the state budget. In the decision of the State Revenue Service of 21 September 2011, this calculation was upheld. The decision is justified with the fact that the applicant had no right to apply 0% value-added tax rate in accordance with Section 7(1)(2) of the Value Added Tax Law (services related to transit of goods). The decision stipulates that services provided by the applicant may be considered neither as expedition, nor transport expedition services, because there is no legal relation between the merchant and a shipper, or a consignee; the applicant may not also be considered as a carrier for the purpose of the Law on Carriage by Road, because it has to right to carry cargo due to lack of licence.  

The applicant appealed against foregoing decision of the State Revenue Service before the administrative court.

By decision of 11 December 2012, the Administrative district court rejected the application.

Having examined the case under appellate procedure, the Administrative regional court rejected the claim filed by the applicant, individual merchant "L.Č.", regarding the abolishment of the decision of the State Revenue Service in the part regarding calculation of additional payment of value-added tax to be paid by the applicant. The applicant filed a cassation complaint, indicating that he provided such transport service, which met all prerequisites mentioned in the law, to apply 0% value-added tax rate.

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