Value Added Tax (VAT) Guidelines: Latvia

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published on 20 April 2022

 

 

This country summary is part of the comprehensive Focus on VAT Fellows: International Value Added Tax (VAT) Guidelines »



1. VAT Scope, VAT Rates and VAT Exemptions

A taxable person is any natural, legal person, or a group of such persons, who are bound by an agreement, or performing an economic activity. The same applies for VAT groups and fiscal representatives.
 
The following transactions are subject to VAT:
  • Supply of goods (including within the EU territory, and for export outside of the EU)
  • Provision of services
  • Purchase of goods within the EU
  • Any import of goods
  • Purchase of a new vehicle within the EU by a non-registered tax payer or a non-tax payer 
  • Occasional deliveries of new vehicles, if they are being delivered to a destination outside of Latvia, but within the EU
 
In accordance with the Latvian VAT law, there are the following different rates: 21 percent standard rate, 12 per­cent or 5 percent reduced rate and 0 percent rate. 
 
The supplies exempt without the right to deduct VAT are, for example, postal services, medical services supp­lied to a patient (the list of services is defined by law) or services related to medical services (transportation of patients by specialized vehicles, accommodation and catering in medical institutions during treatment, dia­gnos­tic services ensured in other medical institutions).
 
An inland reverse charge is applicable to the following supply of goods and services:
  • Timber and related services
  • Construction services
  • Scrap (metal) and related services
  • Mobile phones, tablets, notebooks, integrated circuit devices, and game consoles
  • Unprocessed grains
  • Unprocessed precious metals, precious alloys and metals clad with precious metal
  • Metal products and related services, e.g. semi-finished products, wire, bars and rods, iron tubes, non-alloyed steel, stainless steel, copper, aluminium and other kinds of metal products.

 

2. VAT registration and simplifications

The VAT payer of another EU Member State is obliged to register in the VAT Payers’ Register of the State Reve­nue Service if one of the following criteria is met:
  • A taxpayer of another EU Member State supplies goods to a person who is not a taxpayer, or is a non-regis­tered taxpayer, and goods in question are assembled or installed in Latvia 
  • Another EU Member State taxable person performs distance supply of goods to a non-taxable person in Latvia which are subject to excise tax 
  • Another EU Member State taxable person performs distance supply of goods within the territory of the EU, the goods are received in Latvia, and the total value of the supply of goods (without VAT) in the current calendar year reaches or exceeds EUR 10,000
 
The fixed establishment of a VAT payer from another EU Member State, who supplies goods or services domes­tically in Latvia, must be registered in the VAT Payers’ Register of the State Revenue Service before carrying out these transactions.
 
There are certain rights for tax payers from another EU Member State and for third country tax payers who provide an exemption from the registration obligation in the VAT Payers’ Register.
 
Taxpayers have the right to register in the VAT Payers’ Register for a fixed period of time, in order to perform taxable transactions.
 
Taxpayers of another EU Member State who are involved in distance sales transactions and need to be regis­tered in the VAT Payers’ Register, and may enjoy special VAT registration requirements which allow them to register within 30 days from the moment:
  • when the total value of the supplied goods in the preceding or current year has reached or exceeded EUR 10,000
  • before the transaction if goods are subject to excise tax inland.
 
It is possible to voluntarily register in the VAT Payers’ Register, even if no specific conditions for voluntary VAT registration are met. 
 
A fiscal representative is a taxable person who, based on a written agreement, is liable for paying VAT to the tax authorities, and represents a taxable person from another EU Member State or non-EU Member State. Compa­nies from outside the EU can register themselves in the VAT register or appoint a fiscal representative.
 
The fee of Rödl & Partner Latvia for VAT registration could be a lump sum; basically determined by the specific demands of the work in question, and the qualifications of and time spent by respective professionals.
 
The triangulation simplification stipulated by Latvian VAT law can be applied only in cases when the supplier, the intermediary and the recipient of goods are VAT payers, registered in different EU Member States.
 
There is a simplification for consignment stock in Latvia. Another EU Member State’s taxpayer is entitled not to register in the Latvian VAT Payers’ Register, if it dispatches goods from the EU to a warehouse in Latvia and these goods not later than within 12 months after importation are delivered to a VAT payer according to agree­ment, EU Member State’s taxpayer does not have a fixed establishment in Latvia, the receiver of goods is a VAT payer and another EU Member State’s taxpayer registers and declares supply in its Member State in the report on supply of goods and services in the territory of the European Union.
 
Latvia has introduced OSS and IOSS for distance sale of goods and services to non-taxable individuals. Non-Union scheme can be used by non-EU established taxpayer, who is not performing economic activity in the EU and renders services of any kind to a person who is not a taxpayer and whose declared place of residence is in the Member State of consumption. In order to use mentioned scheme, the taxpayer of the third country has to submit an application in the electronic declaration system of the Tax authority. 
 
Union scheme is applicable to the supply of any kind of services; intra-Community distance sales of goods as well as supply of goods by electronic interfaces facilitating those supplies. 
 
New import regime was introduced for distance sale of goods imported from the third countries or third territories. 

 

3. Declaration requirements and penalty regime

VAT returns should be submitted electronically using the Electronic Declaration System (EDS). The submission deadline is 20 days after the end of the taxation period (i.e. 20th day of the following month). 

 

Most taxable persons are obliged to submit VAT returns on a monthly basis. The VAT return period is monthly, if one of following conditions is fulfilled:
  • The total value of the transactions in the previous taxation year exceeds EUR 40,000
  • A taxable person performs EU supply of goods or services taxable in another EU Member State, according to Art. 44 EU VAT Directive 2006/112/EC a transaction with a zero VAT rate application
  • A taxable person performs EU supply and has to submit European Sales Listings
 
The taxation period is 1 month for the first 6 months after registration in the VAT Payers’ Register.  A quarterly taxation period can be applied, when at least one of the previously mentioned preconditions is not met. 
 
If VAT is not paid on time, a late payment fee of 0.05 percent for each late payment day will be applied. Late payment fees are calculated until they reach 40 percent of the total amount of a tax debt.
 
If VAT is undeclared, or the amount of the refund is increased, a penalty up to 30 percent can be imposed. If a VAT invoice is being issued or received illegally, a fine in amount of 100 percent of the illegally received tax amount can be imposed. 
 

4. VAT recovery

For persons who are registered VAT payers in Latvia, an input VAT deduction is generally possible within the regular VAT declaration procedure; for example, on a monthly basis.
 
It is possible to recover Latvian VAT under the 8th EU VAT Directive. The claim must be submitted by a tax payer, who is registered as a tax payer in another EU Member State (not in Latvia), and has not performed any economic activity in Latvia, has not performed domestically (in Latvia) taxable transactions, and was not registered in the Latvian VAT Payers’ Register.
 
A VAT refund application may be also submitted by a taxpayer’s authorized representative. In accordance with Regulations of the Cabinet of Ministers No. 1514, the application must be filed no later than 30 September of the calendar year following the refund period. If the deadline has not been met, the application is disregarded, and the tax is not refunded.
 
In accordance with Regulations of the Cabinet of Ministers No. 1507, it is possible to make a claim under the 13th EU VAT Directive, if a third-country registered tax payer meets the following criteria:
  • during the period when the tax refund is being claimed, a third country registered taxpayer had no domestic economic activity, no permanent establishment, and no permanent residence in Latvia
  • a third country registered tax payer did not deliver goods or provide any services in Latvia, excluding supply of goods and related services, to which VAT is not applicable 
  • the same restrictions are applicable for input VAT deductions as for registered VAT payers of other EU Member States.

 

5. Invoicing

It is possible to issue an invoice in a language other than Latvian. However, the tax authorities may require a translation. In cases where the amount stated on the invoice for a domestic transaction is less than EUR 150, issue of a simplified invoice is possible.
 
Electronically issued invoices are allowed if a receiver accepts this kind of invoice, and must contain the same information required for a paper invoice. The authenticity of a signature may be accepted, either with an elec­tronically verified signature, or with another form of signature which is accepted by both parties. 
 
In order to apply self-billing, parties should sign an agreement defining invoicing procedures; it is also possible to add a separate paragraph in the agreement on the supply of goods and services.

 

6. Others

It is possible to form a VAT group under Latvian Law, yet VAT grouping is optional. A VAT Group who has a mem­ber that is a foreign merchant not permitted in Latvia.

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