Scope and Rates
Value-added tax (VAT) is due on any supply of goods or services (including private use). Supply includes all forms of goods supplied or services rendered.
Provision of representation goods or services to clients is not deemed to be a supply.
Since 1 July 2012 the standard rate of VAT is 21 percent.
Yes. There is a reduced rate of 12 percent for goods and services, including:
- certain medicines
- certain medical goods and equipment
- certain infant products
- mass media products and subscriber fees to these products
- public transport services (excluding taxi)
- heating of dwellings
- hotel services
There is an extensive list of zero rate supplies, including:
- exports of goods and intra-Community supplies
- transportation of export, import, and transit goods
- services that are directly related to goods that are imported from the third countries and are not released for free circulation within European Union (EU) that are rendered within free zone territory or customs warehouse
- supplies of goods and services connected with international transport (ships and aircrafts)
- international transport (ships and aircrafts) supplies
- international passenger traffic
- harbor services provided to ships that provide international transportation services and rescue ships services
- supplies of goods and services under diplomatic and consular arrangements.
The list of exemptions includes:
- transactions in shares and other securities
- banking and financial services excluding hire of safes and encashment
- insurance transactions
- services closely linked to welfare and social security work
- provision of medical care
- education services
- sale of real estate excluding the first sale of new buildings
- rental of domestic apartments
- betting, lotteries, and other forms of gambling
- certain postal services
Note: it is not possible to recover VAT incurred in making exempt supplies.
There are no other local indirect taxes besides VAT and Excise Tax.
If during the last 12 months a business has made taxable supplies in Latvia over the VAT registration threshold (LVL 35,000) it will be required to register and account for Latvian VAT. If it trades below the registration threshold VAT registration is optional. However, if it does not register as a Latvian VAT payer, it is not entitled to recover any input VAT.
If a business provides services to another EU Member State it has to register for VAT before the transaction takes place.
If a business makes taxable supplies in Latvia it must register for VAT directly, or via a local representative and account for Latvian VAT.
If a business is not registered for VAT in Latvia but sells and delivers goods from another EU Member State to customers in Latvia who are not VAT registered (distance sales), where the value of those sales exceeds a threshold of (LVL 24,000), it is required to register and account for VAT in Latvia.
Where a business fails to register on time, it must account for VAT on all taxable transactions during the period it was required to be registered and pay VAT (plus penalties for late payment calculated from date the tax liability arose). In addition, it will be unable to recover any input tax incurred during this period.
An overseas company can be registered in Latvia only if taxable transactions are provided in Latvia.
If a business makes supplies of goods or services in Latvia then it is required to register and account for Latvian VAT. However, it is possible to avoid registering and accounting for Latvian VAT when making certain supplies.
In the following examples the obligation to account for the VAT due can be shifted to the customer provided that it is registered for VAT in Latvia.
If a business is an intermediate supplier to a Latvian buyer of goods which are purchased from a business in a EU Member State other than its own and are delivered from there to Latvia, VAT due can be accounted for by the Latvian customer (see section Invoices).
Where a company stores stock at a customer's premises under their control the customer accounts for VAT on the supply as an acquisition.
Supply and Install
If a business supplies goods and installs or assembles them in Latvia, its customer can account for any VAT due, in effect, as acquisition. It must be registered for VAT in another EU Member State, and not otherwise required to be registered in Latvia.
Reverse Charge Services
These services are covered in more detail in the International Supplies of Goods and Services section.
Bear in mind that these provisions are subject to particular requirements.
An overseas company does not need obligatory to appoint a fiscal representative, however it may appoint the fiscal representative.
VAT grouping is possible in Latvia.
Overseas company cannot be included in a VAT group, however, the branch of the overseas company registered in Latvia can be included in the VAT group.
Most businesses are required to submit VAT returns on a monthly basis.
However, if the total value of taxable transactions in the preceding year is less than LVL 10,000 (EUR 14,000), a company has to submit tax returns once within six month period. If its annual taxable turnover exceeds LVL 10,000 but does not reach LVL 35,000 (EUR 50,000) it has to submit quarterly returns.
If a business has supplied goods or services to another EU Member State, it has to submit VAT returns monthly.
During the first calendar year after VAT registration quarterly returns have to be submitted until the company reaches the threshold of taxable turnover LVL 35,000 or commence supplies of goods/services to other EU countries.
Annual returns have been submitted only by the taxpayers which provide non-taxable transactions and have to amend amount of deducted input tax.
European Sales List (Recapitulative Statements)
If a business supplies goods which are shipped from Latvia to VAT registered businesses in other EU Member States and wishes to zero rate the supply (see section International Supplies of Goods and Services), it is required to complete Recapitulative Statements.
If it performs services to VAT registered businesses in other EU Member states and does not apply VAT in Latvia, it has to include these services into the sales lists.
Recapitulative Statements are completed on a monthly basis.
Intrastat Supplementary Declarations
VAT registered businesses with a value of dispatches or arrivals to or from other EU Member States, which exceed a threshold (for year 2012 Acquisitions thresholds - EUR 142,287 (assimilation threshold) and EUR 2,276,595 (specific threshold); Dispatches thresholds - EUR 142,287 (assimilation threshold) EUR 3,414,892 (specific threshold) must complete supplementary declarations each month.
Penalties for non-compliance are not yet determined.
Preparation of Intrastat can be delegated; however the owner of the company is responsible for ensuring that all the information disclosed in the Intrastat return is complete and accurate.
Summary of Input VAT Disclosed in VAT Return
Information on all goods and services acquired for business purposes during taxation period must be included in the Summary of Input VAT. This summary has to be submitted to the State Revenue Service together with VAT return.
Summary of output VAT Disclosed in VAT return
Information on goods and services supplied within Latvia must be included in the Summary of output VAT. This report also must be submitted to the State Revenue Service together with VAT return.
Latvian National Bank’s exchange rate applicable on the date when goods are received.
Yes. If a company is established in another EU Member State then it should make a claim under Directive 2008/9/EEC refund. A non-EU business should recover the VAT under the 13th Directive.
Under both of these provisions there are strict time limits for making claims.
Access the Directive 2008/9/EEC and 13th Directive claim forms on the Latvian tax authority's web site: http://www.vid.gov.lv/default.aspx?tabid=8&id=1401&hl=2.
Yes. If companies are established in a third country that does not grant refund to Latvian businesses they are not able to recover VAT paid in Latvia.
Yes. There are certain items that businesses cannot recover VAT on. For example:
- Exempt supplies: where VAT relates to both taxable and exempt supplies, an apportionment is needed.
- Non-business (including private) activities: where VAT relates to business and non-business activities, an apportionment is required.
- Business entertainment: VAT is not generally recoverable on business entertainment costs. Sixty percent of the VAT incurred in respect of representation expenses is irrecoverable.
- Purchases falling within the Tour Operators' Margin Scheme. The VAT on goods and services which fall under this scheme cannot be reclaimed by the tour operators.
- Goods sold under one of the margin schemes for second hand goods. There are a number of schemes which provide for VAT to be accounted for on the goods' sales margin, but do not allow VAT recovery on the purchase of those goods.
- 20 percent of VAT incurred in respect of passenger cars and related expenses is irrecoverable.
International Supplies of Goods and Services
If a company sells goods to a customer who is registered for VAT in another EU Member State and the sale involves the removal of those goods from Latvia (either by the supplier or its customer) to that Member State, then it may apply 0 percent VAT as an intra-EU dispatch. It must obtain the customer's VAT number and quote it on your invoice. It should also obtain evidence of the goods' removal from Latvia.
If a company sells goods to a customer who is not registered for VAT in another EU Member State, it will have to charge Latvian VAT. If its sales exceed a certain threshold for that Member State it may have to register in the Member State under what is known as the Distance Selling Scheme.
If a company exports goods to a customer outside of the EU then it may apply 0 percent VAT but, it should make sure that in all cases it keeps proof of dispatch/delivery to support your zero rating.
If a company supplies services to a business customer in another EU Member State or outside of the EU generally it may not apply Latvian VAT.
A company has to apply Latvian VAT if it provides services to a non-business customer.
When goods are imported into Latvia from outside the EU, import VAT and customs duty may be due. This has to be paid or secured before the goods will be released from customs' control.
The importing company may not pay import VAT before the goods are imported, but include calculated import VAT and deductible input tax in its VAT return if it has received special permit from the State Revenue Service.
If a company buys in certain services from outside Latvia, it will be required to apply the reverse charge. This is intended to take away any VAT advantage of buying those services from outside Latvia.
Under the reverse charge the recipient is required to account for a national amount of VAT as output tax on its VAT return covering the period in which it received service or made the advance payment and it recovers this VAT as input tax on the same return.
If it is able to recover all of your VAT the reverse charge has no cost effect and is a VAT compliance matter only. However, if the company is partly exempt there is likely to be a VAT cost depending on the level of recovery allowed under the partial exemption method.
A tax invoice should contain the following data:
- the date of issue of the document
- the number of the invoice
- the VAT identification number of the supplier of the goods or provider of services
- the VAT identification number of the recipient of the goods or services
- the full name and legal address of the supplier of the goods or provider of services (the name, surname, and the identification number and the place of permanent residence of the natural person)
- the full name and legal address of the recipient of the goods or services (for a natural person: given name, surname, the identification number, and the place of permanent residence)
- the date of supply of the goods or the provision of the services
- the designation and the amount of the goods, or the type and the volume of the services
- the price of the goods or the remuneration for the services provided (the unit price exclusively of tax)
- any discounts or rebates, if they are not included in the unit price
- the VAT rate and the calculated tax
- where zero percent VAT is applied, or where the customer is liable to pay the tax reference to the appropriate provision of the Law on VAT or reference to the appropriate provision of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax.
- where intra-Community supply of a new means of transport is involved, reference to the appropriate provision of the Law on Value-Added Tax
- where the special scheme for tourist agencies is applied, reference to the appropriate provision of the Law on Value Added Tax or reference to the appropriate provision of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
- where any other special scheme is applied, reference to the appropriate provision of the Law on Value Added Tax or reference to the appropriate provision of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
- where the authorized person is liable for VAT, the VAT identification number, full name, and legal address of the authorized person (for a natural person: given name, surname, the identification number, and the place of permanent residence)
- where the fiscal representative is liable for VAT, the VAT identification number, full name, and legal address of the fiscal representative (for a natural person: given name, surname, the identification number, and the place of permanent residence)
- simplified invoices exist where the transaction in question is less than LVL 100.
Yes. Invoices can be issued electronically if the parties agree in advance the terms of exchanging and approving electronic invoices. Electronically issued invoices may be stored electronically if the storage systems are sufficient to prevent possible information loss or the risk that the information may become inaccessible.
No, since there are no specific regulations for self-billing in Latvia.
Yes, a foreign currency can be used, only amount of VAT should be shown in Latvian LVL.
Transfers of Business
Yes there is a relief from VAT for the sale of a business as a going concern.
Options to Tax
No. The Latvian legislation does not provide any option to tax transactions.
Head Office and Branch transactions
If the head office and branch are both located in Latvia and have the same VAT registration number then transactions between them are not treated as a supply for Latvian VAT purposes.
If the head office and branch are VAT payers in different countries, transactions between them are treated as intra-Community supplies. In order to avoid application of VAT advance ruling from the State Revenue Service would be advisable.
Businesses are able to relief for bad debts which have arisen after 1 January 2009.
There is no general anti-avoidance provision under Latvian law.
Where an error is discovered by the tax authorities they can impose a penalty of 20 percent or 30 percent of the unpaid tax, together with late payment. If however, the company voluntarily discloses the error to the tax authorities the penalty may be mitigated or waived altogether. Late payment cannot exceed the unpaid (primary) tax.
If taxable person has not applied VAT (reverse charge) on acquisition of goods or received services from other EU Member States or import of goods (if VAT is not paid before the goods are imported), a penalty of 10 percent of the undeclared tax can be imposed.
For late payment, a penalty of 0.05 percent per day is calculated.
How often do tax audits take place?
It depends on the State Revenue Service.
Are there audits done electronically in your country (e-audit)? If so, what system is in use?
Is it possible to apply for formal or informal advance rulings from the (indirect) tax authority?
Yes, a written request should be submitted to the tax authority in order to receive an advance ruling.
Are rulings and decisions issued by the tax authorities publicly available in your country?
No, the rulings and decisions are addressed only to the applicant.
No, generally the Latvian VAT law is in accordance with EU VAT Directive.
No, there are no specific indirect tax incentives available in Latvia. Application of reduced rates are described in section “Scope and Rates”