A construction company in Jurmala owed VID EUR 94,000 after a field audit in 2024 — a combination of undeclared employee wages, CIT adjustments, and accumulated interest. The owner assumed the business was finished. Instead, VID approved a 36-month payment schedule at approximately EUR 2,800 per month, allowing the company to continue operating, retain its employees, and fully resolve the debt by mid-2027. The company is still operating today.

This outcome is not exceptional. It is the system working as designed. Latvia's tax law explicitly provides for debt restructuring because collecting EUR 94,000 over three years is better for the state budget than forcing a company into insolvency and collecting nothing.

But the process has rules, deadlines, and traps. Getting it wrong — or waiting too long to apply — can eliminate your restructuring options entirely.

Who Qualifies for Tax Debt Restructuring

VID evaluates restructuring applications based on several criteria, none of which are published as bright-line rules. In practice, approval depends on demonstrating that:

The business is viable. VID will not approve a payment plan for a company that cannot generate enough cash flow to cover both current tax obligations and the restructured debt payments. You need to show (typically through projected financial statements) that the business can sustain the monthly payments.

The debt is acknowledged. This is not a dispute mechanism. If you contest the tax assessment, the path is an appeal, not a restructuring application. Restructuring presupposes that you accept the debt and seek manageable payment terms.

Current obligations are being met. VID generally requires that the applicant is current on all tax filings and current-period tax payments at the time of application. Requesting restructuring while still filing late or underpaying current taxes signals that the underlying compliance problem has not been fixed.

The request is timely. Applying before VID begins enforcement measures (bank account freezes, asset seizures) significantly improves your chances. Once enforcement has started, VID has less incentive to negotiate — they are already recovering the money.

The Application Process

Step 1: Calculate your total exposure. Compile the full debt: base tax, penalties, and accrued interest through the expected application date. Interest continues to accrue at 0.05% per day until paid, so the number is a moving target. On EUR 50,000 of principal, you accumulate EUR 25 per day — EUR 750 per month.

Step 2: Prepare a financial plan. VID expects to see how you will service the debt while maintaining current operations. At minimum, prepare:

Projected income statement for the restructuring period
Cash flow forecast showing monthly payment capacity
Current balance sheet
Explanation of what caused the debt and what has changed

Step 3: Determine the proposed schedule. Standard restructuring periods range from 6 to 36 months. For obligations exceeding approximately EUR 50,000, VID may consider schedules up to 5 years. The longer the period, the more interest accrues — so there is a balance between affordable monthly payments and total cost.

Example: EUR 60,000 debt restructured over 24 months.

Monthly payment (principal only): EUR 2,500
Interest continues at 0.05%/day on outstanding balance
Total interest over 24 months: approximately EUR 10,950
Total cost: approximately EUR 70,950

The same debt over 36 months:

Monthly payment: EUR 1,667
Total interest: approximately EUR 16,425
Total cost: approximately EUR 76,425

That extra year costs roughly EUR 5,475 in additional interest. Sometimes it is worth it for cash flow stability; sometimes it is not.

Step 4: Submit the application. Applications go to VID in writing (paper or electronic via EDS). Include all supporting documentation, the proposed payment schedule, and any mitigating circumstances.

Step 5: Wait for VID's decision. VID typically responds within 30 days, though complex cases can take longer. VID may approve your proposed schedule, propose modifications, or reject the application. Rejections can be appealed through the standard administrative process.

What Happens During the Restructuring Period

Once approved, the restructuring agreement functions as a binding contract with specific conditions.

Monthly payments must be made on time. Missing a single payment can void the entire agreement, making the full remaining balance due immediately. VID is not flexible on this point. Set up automatic bank transfers and build a buffer.

Current tax obligations must be paid in full and on time. You are expected to remain fully compliant with all current-period taxes while paying down the historical debt. This is the most common failure point — companies stretch their cash flow between the restructuring payments and current obligations, and eventually one of them slips.

Interest continues accruing. The restructuring freezes penalties (no new penalty assessments during the restructuring period), but late payment interest keeps running on the outstanding balance. This is why paying ahead of schedule, when cash flow permits, makes financial sense.

VID monitors your compliance. Expect VID to review your filings more closely during the restructuring period. Any new compliance issues can trigger a review of the restructuring agreement.

Alternatives to Formal Restructuring

Not every tax debt requires a formal restructuring application. Depending on the size and nature of the obligation, other paths may be more appropriate.

Informal payment within 30 days. If VID issues a tax assessment and you pay within 30 days (including interest), many penalties are automatically reduced. This is the fastest resolution path for manageable amounts.

Offset against overpayments. If you have overpaid taxes in one category, those credits can be offset against debts in another. We have seen cases where a company owed EUR 12,000 in CIT but had an unreclaimed PVN overpayment of EUR 8,000 — reducing the actual cash need to EUR 4,000 plus interest.

Insolvency proceedings. For truly unsustainable debt levels, the Legal Protection Process (Tiesiskas aizsardzibas process, or TAP) provides court-supervised restructuring. This is a more drastic step — it is public, affects credit ratings, and involves court oversight — but it can reduce the total obligation and provide longer payment terms than VID's administrative restructuring.

The Consequences of Not Restructuring

Without a restructuring agreement or full payment, VID has extensive enforcement powers.

Bank account freezes. VID can order any Latvian bank to freeze your accounts and redirect incoming payments toward the tax debt. This happens without court approval and with minimal notice.

Asset seizures. VID can place liens on company assets, real estate, and vehicles. In extreme cases, it can initiate forced sale of assets.

Publication on the debtor list. Companies with tax debts exceeding EUR 150 that are more than 60 days overdue appear on VID's public tax debtor register. This is visible to anyone — clients, suppliers, banks — and can devastate business relationships.

Personal liability for board members. In certain circumstances, VID can pursue personal liability against company directors for unpaid tax obligations, particularly if the debt arose from intentional actions or gross negligence.

Prohibition on public procurement. Companies with tax debts are excluded from government contracts — a serious constraint for construction, IT, and consulting firms that depend on public sector work.

The restructuring process exists precisely to avoid these outcomes. Using it proactively, before enforcement begins, keeps all options open.

Struggling With Tax Debt? Let's Find a Path Forward.

CORVUS Accounting & Tax has negotiated tax debt restructuring agreements with VID for businesses ranging from small sole proprietors to companies with six-figure obligations. The earlier you act, the more options you have.

Tax Debt in Latvia: Restructuring and Payment Plans