Following information was received by JSC “Liepajas metalurgs” from the Chairman of the Board of LSEZ JSC “Liepajas osta LM” Mr. Peteris Iesalnieks, which will be communicated to press.

On 22 November 2011 the State Revenue Service (hereinafter referred to as the SRS) made a decision, that LSEZ JSC Liepajas osta LM (hereinafter referred to as the Liepajas osta LM) must pay into the budget additional VAT amounting to approximately 20 mio. LVL for the period from 1 July 2007 till 31 December 2009 (including the calculated overdue amount and penalty amount).

Liepajas osta LM considered this decision to be unsubstantial and therefore filed a petition in court on reversal of the decision as well as on suspending its validity. 

Administrative regional court by its decision of 31 January 2011 has suspended the validity of the decision made by the SRS, considering, that this decision is prima facie illegitimate and may cause a substantial damage and to Liepajas osta LM.

Liepajas osta LM considers the decision of the SRS to be unreasonable as it concerns the release for free circulation of such goods, which have never be owned by Liepajas osta LM. Liepajas osta LM has acted as the direct representative (authorised representative) on behalf of its customers: owners of the goods. These goods are not provided for being released for free circulation and left within the Republic of Latvia, therefore the State of Latvia could not reckon with the gain of taxes from the activities with such goods. The major part of the goods was released for free circulation within the European Community and shipped to other member countries of the EC.

Liepajas osta LM believes, that the SRS has committed inaccuracies and infringements in making the mentioned decision. For example, the SRS has performed a repeated VAT audit on the same time period, which is a gross breach of the normative acts. Further, though by the beginning of the second audit it was decided to perform the assessment of customs duties, taxes and charges, in fact, the VAT was assessed, and it does not fall within the range of customs taxes and charges as acknowledged by the European Court of Justice. 

The dispute is focused on application of Paragraph 33 of the Law on Value Added Tax. Liepajas osta LM considers that the given provision of law has been applied correctly. Namely, the major part of the goods, released for free circulation in the EC, has been delivered to other member states, and the mentioned provision of law does not envisage that the goods are to be delivered exactly to the same person and precisely to the same legal address within the EC, which has been stated in the customs declaration. Such opinion has been expressed also by the Ministry of Finances.

In turn, regarding the part of the goods, which were not delivered to other member states of the EC, Liepajas osta LM, after it had received instructions from its customers - owners of the goods for carrying out other activities with their goods than the original intent, wished to amend the customs declarations, however, the State Revenue Service did not accept it and did not provide any clarifications for a prolonged time period, why the above mentioned activities could not be performed.

During the court session the State Revenue Service also acknowledged, that the SRS institution has made mistakes, therefore Liepajas osta LM reasonably believes that the court, when examining the case on its merits, will settle this misunderstanding.

LSEZ JSC “Liepajas osta LM” in performing its economic activities, regularly pays the taxes and actively works on attracting the investments for development of the port.

During the last three years the investments amount to 6.1 Mio. LVL; the planned investments in 2011 make 5.5 Mio. LVL, in 2012 – 1.7 Mio. LVL, and in 2013 – 9.1 Mio. LVL.

LSEZ JSC “Liepajas osta LM” is one of the largest tax payers into the budget of the city. The company employs 300 persons.

         Agrita Pakule
         Assistan of the Chief Economist
         T.: 63455926; pakule@metalurgs.lv