Have you rented out property online? - Pay taxes for three years! - A surprise from the SRS 0 213

Latvians have long known that our fiscal authorities do not bother themselves with proper communication with the public. But now it turns out that even if SRS employees gave their advice for specific situations, it does not mean that they will not change their minds later and demand taxes retroactively, as reported by Grani.lv.

This is exactly what has happened with entrepreneurs renting out their properties through popular platforms like AirBnb and Booking. Previously, they were told one thing by the SRS, but now they are being told something completely different. Three years ago, tax officials claimed that hotel services in summer houses by the sea or in rural areas were subject to 12% VAT, and entrepreneurs duly paid this tax. Now it suddenly turns out that if the owners of the houses found their clients not directly, but through international platforms, they must pay 21% VAT.

Isn't this absurd? How else are entrepreneurs supposed to find their guests — stand in the Town Hall Square and shout offers through a megaphone? Or through a local classifieds website? Maybe they should write their phone number on fences? What changes if they make this offer to the whole world while providing a service in Latvia? Why is it not taken into account that they have already had to pay a certain percentage to online platforms for each guest? And finally, the main question — why didn't the SRS clarify this earlier?

However, SRS officials are unwilling to accept any arguments and demand that entrepreneurs immediately pay the accumulated tax debt. As one landlord, Richard, told Latvian Radio, the SRS is demanding he pay over 4,000 euros, plus about 1,000 for a delay of which he was unaware. "I consulted with the SRS multiple times, and I was told that I did not need to pay VAT. I only learned otherwise from social media," he is now outraged.

"Yes, there is dissatisfaction with the current order," reluctantly agreed Ilze Jankova, head of the SRS Tax Department. However, the rule that those providing "cross-border services" must register as VAT payers has existed since 2010.

So the main question is — why did you, tax officials, remain silent before?

At the same time, there are countless stories about how SRS employees do not provide correct consultations, being unable themselves to assess the existing regulations. For example, National Alliance MP Arturs Butans recounted that a friend of his was sent to three different officials: "There is no order on the SRS website on how to register, whether the tax will be applied retroactively, and so on." According to the MP, there is an "absolute absence" of normal communication between ordinary citizens and the fiscal authorities. If people had known about the taxes in advance, they would have registered an LLC and written off expenses, for example, for heating and phone.

Meanwhile, this summer, Latvia had 1,663 hospitality sector enterprises, guest houses, or apartments that had contracts with AirBnb and Booking platforms. Of these, only 251 (a mere 15%) were registered with the SRS as VAT payers. What does this mean? That all the others are in trouble. Now they have to pay the full 21% tax for three years: wherever they want, they can look for the money.

If this is not strangling small and medium-sized businesses, then what is?

Unfortunately, Finance Ministry representative Solvita Amare-Pilka could only mumble that the current regulation is contradictory and that repeated tax collection is unacceptable. This was said at a meeting of the parliamentary subcommittee on combating the shadow economy. And, of course, such an acknowledgment changed nothing.

For the sake of fairness, it should be added that since July 1 of this year, a special tax regulation introduced by the Saeima for those renting out their property through platforms has come into effect. The new order, according to the head of the parliamentary subcommittee Linda Matisone, is "very good and simple," as well as "very beneficial for small businesses."

But what to do with those from whom the SRS is now demanding taxes for the last three years is unclear. So far, Matisone has only promised to approach the Finance Ministry with a request to find a way out of the situation. It is interesting how long they will search for it? After all, the penalty continues to accrue: 0.05% of the debt for each overdue day.