Energy, Latvia, Legislation, Taxation

The contradictory provision in the Natural Resources Tax Law states that owners of hydropower plants with total capacity of the hydroelectric station installed under 2 megawatts have to pay the natural resources tax. The tax rate is EUR 0.00853 per 100 cubic meters of the water that has flown through the hydrotechnical structure. Another provision contested by the claimants deals with the Cabinet of Ministers regulation on the procedure for calculating the amount of water that flows through a given plant.

The contested provisions came into force on January 1, 2014. Before that, natural resources tax did not apply to small hydropower plants.

The case was opened following complaints lodged by dozens of small hydropower plant owners, which said that the duty to pay the natural resources tax imposed disproportionate limitations on their property rights.

The Constitutional Court found that the said provisions were not only meant to ensure more efficient and responsible use of natural resources, but also to increase budget revenue that, in turn, could be used to finance environmental protection measures. The court also said that the objective of the contested provisions was to protect the wellbeing of society.

The court also said that the principles used to calculate the amount of the natural resources tax were rational and objective.

The Constitutional Court's decision is final and cannot be appealed.