Latvia: Personal liability of management board members for company tax liabilities and `lost` accounting documents
As of 1 January 2015 the State Revenue Service (tax authority) can bring a personal recovery claim against board members for company tax debts. The personal liability of board members for company tax debts now supplements the company`s own liability for debts, including tax debts.
However, a tax claim against a board member can only be raised if all the following five criteria are met:
- Unpaid tax exceeds EUR 18 000.
- The debtor company has been notified of enforcement of the debt.
- The company has disposed of assets to a person related to a board member (e.g. spouse, close relatives, controlled companies) after a debt has occurred.
- It has been established that recovery from the company is impossible.
- The company has failed to apply for insolvency.
Liability concerns those who were board members when the debt arose, whether they continue to perform management tasks or not. Joint liability applies if the company has several board members.
After a warning from the tax authority, board members have a right to defend themselves from personal liability. However, defence action must be immediate (deadlines vary from 15 days to one month, depending on measures available in the particular situation).
A similar personal liability clause is expected to apply as of 1 March 2015 where a board member of an insolvent company is not passing company accounts documentation to the insolvency administrator. In particular, if documents reflecting accounting information for the last three years are not transferred from the company to the insolvency administrator (or if a substantial part of the accountancy information is missing) then a management board member can be held personally liable for all of the insolvent company’s debts.
A claim against a board member may be brought either by the insolvency administrator who has not received the documents, or subsequently by unsatisfied creditors.
Amendments to the Law on Taxes and Fees (2014)
Amendments to the Insolvency Law (2014)