SRS Reminds Taxpayers to Declare Foreign-Sourced Income
SRS Introduces New Informational Warning in EDS Regarding Foreign-Sourced Income
The State Revenue Service (SRS) has introduced a new informational warning in its Electronic Declaration System (EDS) aimed at proactively reminding taxpayers that if they earned income abroad in previous years, they may also have an obligation this year to complete Annex D2 of their annual income tax return.
What data is automatically included in the tax return?
The annual tax return must include all income earned during the calendar year, both in Latvia and abroad. However, the SRS can only automatically populate information that is already available in state information systems.
This includes:
data received from Latvian income payers regarding amounts paid to individuals;
information from private pension funds and insurance companies;
information provided by the State Social Insurance Agency;
information on eligible expenses for education and medical services.
As a result, when the EDS generates a pre-filled tax return using information available to the SRS, the taxpayer is responsible for verifying that the information is complete and accurate. If necessary, the taxpayer must correct or supplement the information, as only the taxpayer has full knowledge of all income received. Only after this review does the taxpayer confirm the accuracy of the information contained in the return.
What does the warning mean for taxpayers?
When reviewing a tax return, the SRS does not always immediately have information about income earned abroad, as data from foreign tax authorities may be received at a later stage. Therefore, the initial review of the tax return is based solely on information available in Latvian state information systems and on data provided by the taxpayer.
In the past, this sometimes resulted in situations where:
foreign-sourced income was not declared;
the tax return contained inaccuracies;
an unjustified tax refund was received; or
taxes were not paid on time.
To help prevent such situations, the new warning has been introduced.
The warning does not indicate that the individual definitely received foreign income during the current year. It is not based on information received from foreign tax authorities and does not display any data available to the SRS.
Its purpose is purely informational. It reminds taxpayers that:
if they earned income abroad in previous years,
there is a possibility that they may also have foreign income this year that must be declared by completing Annex D2.
The warning is intended to help taxpayers review their situation in a timely manner, avoid errors when completing their tax return, and prevent potential issues later on.
Foreign-sourced income
Income earned abroad must be declared even if tax has already been paid on that income in the foreign country.
When declaring such income, the taxpayer must indicate:
the amount of income received; and
the amount of tax withheld abroad, if any.
The most common types of foreign-sourced income include:
employment income and wages;
pensions;
dividends;
income received under service contracts.
SRS recommendations
The SRS encourages taxpayers to:
review the information in the Annual Income Tax Return section of the SRS website before completing the return;
carefully verify all information automatically displayed in EDS and correct or supplement it if necessary;
consult the guidance materials designed to assist in preparing and submitting the required information to the SRS;
declare all foreign-sourced income in full and attach supporting documentation where applicable;
consult the information available in the Latvian Residents Abroad section of the SRS website if questions arise;
provide explanations regarding bank account transactions or foreign income only if such information has been specifically requested by the SRS.
Information provided by the State Revenue Service (VID).