Investigators uncover fictitious labor lease and tax evasion scheme at construction companies

RIGA - While investigating a criminal case against a Latvian construction company, the Tax and Customs Police (NMP) discovered that the company, using firms registered in Poland, had evaded a large amount of payroll taxes, the NMP informed LETA.

Meanwhile, workers involved in the construction projects were led to believe that they had been hired by a Polish company, where taxes were being paid on their behalf, but in reality, the taxes were not paid in either country.

During the pre-trial investigation, NMP investigators established that a member of the Latvian construction company's board had violated wage regulations between May 1, 2021, and February 28, 2022. The evasion of payroll taxes was carried out with the support of a board member of two Poland-registered companies, who was a Latvian citizen.

Through coordinated actions and acting as part of a group of individuals with the aim of evading tax payments, the board member of the Latvian construction company, together with a board member of the Poland-registered company, concealed around EUR 47,700 paid out in wages to employees from May 1, 2021, to February 28, 2022, the NMP reported.

As a result of these actions, the company avoided paying a total of EUR 26,200 in personal income tax and mandatory state social insurance contributions.

After gathering and securing evidence during the investigation, in July the NMP referred the criminal case to the Tax and Customs Prosecutor's Office to initiate criminal proceedings against two company managers: the board member of the Latvian company for violating wage regulations and evading taxes on a large scale, as well as the board member of the Polish company, who is also a Latvian citizen, for aiding and abetting the non-payment of labor taxes by the Latvian company.

The NMP has initiated and is investigating several criminal cases related to this type of tax evasion.