Attention! Single tax account!

From January 1, 2021, all taxes administered by the SRS will have a new – unified tax account – which will replace the previous numerous tax payment accounts. Its account number is already known – LV33TREL1060000300000 -, but it will be active only from January 1, 2021.

What taxes must be paid into a single account?

Almost all taxes and fees administered by the State Revenue Service will have to be paid into the single account: Personal Income Tax (PIT); Corporate Income Tax (CIT); Value Added Tax (VAT), State Social Insurance Contributions (SSC); Electricity, Excise, Natural Resources, Lottery and Gambling, Micro-Enterprise Tax; Patent Fee; Business Risk State Fee; and other fees.

Customs duty will have to be paid into the single tax account from 2023.

Real estate tax will not need to be paid into this account, as it will still be administered by municipalities. Taxes administered by the CSDD, such as vehicle operation tax, will not need to be paid.

What will change compared to the current procedure?:

The deadlines for submitting tax returns are changing.

The employer's report must be submitted by the 17th for everyone, it was by a different date announced by the SRS.

All other reports must be submitted by the 20th. The deadline for some reports does not change, such as VAT, CIT, etc., but it should be noted that some do change.

Tax payment deadlines and procedures are changing.

The deadline for paying all taxes from 01.01.2021 will be the 23rd. From next year, all taxes will have to be transferred in one payment to the new single tax account. The purpose of the payment can be indicated as “tax payment”. The newly created SRS internal Payment Administration Information System (MAIS) will divide the amount of taxes paid by tax type. It will no longer be possible to choose which tax to pay.

The single payment deadline will not apply to the payment deadline specified in decisions taken as a result of tax control measures. The deadlines specified in tax extension decisions will also remain in effect.

The tax accounting procedure at the SRS is changing.

The SRS system MAIS will recognize and distribute the amount of taxes paid according to the built-in algorithm by tax type according to the priorities set out in Cabinet Regulation No. 661.

First, the system will determine the priority or the amount should be divided among taxes according to the FIFO (First in, first out) method or according to certain identifiers embedded in the Cabinet of Ministers regulations for the payment of special fees. This means that the system will first pay the oldest tax liabilities that have come into effect, ranking them by the payment effective date. The tax payment deadline also occurs if the declaration has not been submitted or will be submitted late.

Then the system will sort tax liabilities in the following order: principal amounts calculated in declarations, calculated late fees, payments determined by the SRS decision, and fines.

In the next step, tax payments will be arranged in a row by tax in the order specified by the Cabinet of Ministers' regulations: Social Security Tax, Personal Income Tax, Enterprise Risk Fee, etc.

There will no longer be a proportional division procedure, but a sequential one – first the principal amount, then the late payment fee, then the penalty fee. (for example: first VAT 2018, then VAT late payment fee, then VAT penalty fee, only then the Social Security for 20121.). If any tax obligations have already been paid in the system, this will not be changed, this affects issues when clarifications of declarations are submitted.

Changes in the EDS (Electronic Declaration System) of taxpayers.

After paying taxes under such a system, the question may arise: How will the taxpayer know what taxes and in what amount are paid?

It should be remembered that this will only be visible in the taxpayer's EDS system. The SRS believes that this will most likely only be possible on the 25th of each month. The visual appearance of each taxpayer's EDS and the information that can be seen there will change significantly. It is planned to inform about both the total amount of tax payments and view the status of each tax payment. Tax payments will also be possible through the EDS system.

The employer's report will need to show the PIT amounts for the previous month.

By January 17, 2021, the Employer's Report for December 2020 will have to be submitted once under a special procedure. It will have to declare both the PIT paid in December and the PIT paid in January. From now on, the Employer's Report will have to show the personal income tax on the wages paid in the previous month. It will no longer be the case, as was the case under the current legislation, that the PIT calculated from the wages paid two months ago is shown in the report.

Positive aspects of VNK.

Until now, there were more than 90 different tax accounts in force in Latvia, now there will be only one. This will significantly ease the administrative burden.

It will be possible to pay all taxes with one payment, which will save money on transfers and time searching for the right accounts.

There will be no situations where there is an overpayment in one tax and a debt in another at the same time. The taxpayer will not have to write many letters about covering the debt of one tax with an overpayment of another. Under the old system, PIT overpayments for one month regularly occurred, because they had to be paid immediately after the salary was paid, but had to be declared only a month later. Now that will not be the case.

Will allow taxpayers to plan their cash flow more easily.

There will no longer be errors when a tax was inadvertently credited to the wrong tax account.

The SRS emphasizes that the positive benefit is also that the taxpayer and the SRS tax inspector will have uniform information and a similar view of each tax payment history.

VNK problems.

The taxpayer will no longer be able to choose which tax to pay first and which to leave unpaid. The MAIS system will divide them according to an algorithm. This could be important in cases where there is a dispute with the SRS about taxes. Late fees and penalties will also be automatically canceled, according to the oldest deadlines.

From an accounting point of view, it is likely that an additional accounting stub account should be introduced into the company's accounting, which records the tax paid up to the 23rd. It is only after the 25th that it can be divided into taxes according to the information in the SRS EDS system. This will need to be done either manually, or the SRS will offer XML files.

Unclear issues with VAT. Example: The company submits the Employer's Report by 17.02.2021, where the tax is calculated with a payment deadline of 23.02.2021. By 20.02.2021, the company submits a VAT return with an overpayment. The company hopes that the overpayment will automatically cancel the SSI and PIT taxes. But according to the new procedure, the SRS must check and make a decision on the overpayment of the VAT return within a month. Only after the decision on the refund is made, namely 20.03.2021, this money is released for other taxes or for refund to the company's account (?). But in the meantime, on 23.02.2021, the deadline for the SSI and PIT tax from 17.02.2021 has come and gone and the calculation of late payment fines begins. Now, on 20.03.2021, after the decision to accept the VAT refund, the entrepreneur must pay not only the amount of SSSI and PIT, but also the calculated late payment fee.

There are still unresolved issues regarding the timing of tax calculations and their inclusion in reports if wages are paid later than the 20th. For example, in the case of dismissal or leave. The methodology recommended by the SRS will follow.

Available information about the operation of the Single Payment Account.

The operation of this account is determined by Article 23 of the Law of the Republic of Latvia “On Taxes and Duties”.¹. on the basis of Article 30 of the Cabinet of Ministers' Regulations "Procedures for paying taxes, fees, other state-determined payments and payments related to them and directing them to cover liabilities", adopted on October 30, 2018, which enter into force on January 1, 2021. These regulations will also soon have amendments that arose from consultations with industry experts.

The State Revenue Service actively communicates information on this and constantly organizes video seminars on this topic, which are available on the global network. For example: https://www.youtube.com/watch?v=ypn_lljC5J8&feature=youtu.beA question and answer video section will also be created.

A large information section has been created on the SRS website, where all materials created by the SRS regarding the operation of this account are available. https://www.vid.gov.lv/lv/vienotais-nodoklu-konts.

The SRS promises that individual consultations are also available, since it is impossible to describe all individual cases, and consultations are available in the EDS “Correspondence with the SRS”. The SRS advisory phone number is available: 67120000. You can also communicate on this topic with the SRS virtual consultant TOMA. Extensive materials are also planned for the mass media, radio, television and financial portals, e.g. ifinanses, Bilances, LVportāls.