What penalties would apply for late payment of Corporate Income Tax?

Corrections of mistakes

If a taxpayer realises that a mistake has been made and submits a correction to a previously submitted CIT returns, in case of underpayment, there will be no penalty, however, late payment interest will be charged.

The amount to be paid for late payment of corporate income tax consists of:

• interest applying refinancing rate quoted by the Bank of Latvia;
• delay fine at the rate of 0.05% per day.

These are imposed on the overdue principal of the debt for each day of delay. Late payment interest is limited to the amount of the original principal.

Corrections are only allowed in the returns for the previous three consecutive years.

If the taxpayer has not submitted the corporate income tax return by the deadline specified, a penalty is incurred depending on the length of delay:

• up to 15 days – 0.1 % of the tax amount due, but not exceeding LVL 50;
• 16 to 30 days – 0.5 % of the tax amount due, but not exceeding LVL 200;
• more than 30 days – 1 % of the tax amount due, but not exceeding LVL 500.

If a company has excluded taxable items from the corporate income tax computation and this is later discovered during a State Revenue Service tax audit, a liability for the entire amount due as well as 100% penalty will arise. There is no distinction between intentional failure to pay the tax due, misinterpretation of legislation or simply mistakes. However, the State Revenue Service has discretionary rights to reduce the penalties by up to 70% of the original amount once in three years.

If the tax base has been incorrectly reduced in three consecutive years, the taxpayer will have to pay the entire amount due and a 200% penalty.

If the taxpayer does not pay the tax due together with the calculated penalties within three months and the deadline for the payment of tax is not prolonged, the State Revenue Service has the right to start the process of declaring the taxpayer insolvent in court.