Worldwide VAT, GST and Sales Tax Guide
Transactions between related parties. For a transaction of supply of goods and services between related parties, the taxable value shall be the market value of the supply of goods and services if the transaction value is:
• Less than the market value and the recipient of goods or services has no right to deduct the input tax in full.
• Less than the market value and the supplier of goods or services has no right to deduct the input tax in full, and the supply of goods or services is exempted from VAT.
• More than the market value and the supplier of goods or services has no right to deduct the input tax in full.
C. Who is liable
A taxable person is any natural or legal person or group of such persons bound by agreement, or the representative acting for a group of persons, who performs economic activities and who is registered with the State Revenue Service (SRS) Register of taxable persons. VAT groups and fiscal representatives are also considered to be taxable persons.
The VAT registration threshold for local businesses is turnover subject to VAT greater than EUR50,000 in the calendar year. If a business exceeds the VAT registration threshold, it must register for VAT by the 15th day of the month following the period in which the threshold is exceeded. The business may postpone the VAT registration to the end of calendar year if the exceeded threshold is no more than EUR5000, if this option is utilized, the VAT registration application must be submitted by 30 November or 31 December (if the threshold is exceeded after 30 November) in the calendar year. However, voluntary VAT registration is possible before reaching the VAT registration threshold.
A taxable person in Latvia has a right not to pay VAT for their supplies, which would be due in other EU Member States, if the VAT registration threshold is not breached in other EU Member States and annual turnover for supplies in the EU territory does not exceed EUR100,000. To apply this right, the taxable person must inform the SRS by completing a form.
Mandatory VAT registration is also required prior to supplying services to taxable persons in another EU Member State if the services are deemed to be supplied in that other Member State and the recipients of the services must account for VAT under the reverse-charge mechanism.
For intra-Community acquisitions, nontaxable legal persons, private individuals and taxable person from other EU Member State who perform economic activities but have not triggered the obligation to register for VAT (i.e., non-registered taxable persons), must register for VAT if the value of their intra-Community acquisitions (excluding VAT) in a calendar year is equal to or exceeds EUR10,000. A nontaxable person or taxable person of another EU Member State may opt for a special VAT registration procedure, which allows them not to calculate VAT on top of their further supplies if the supplies do not need exceed EUR50,000 in the calendar year, however, they will not have a right to deduct input VAT and will be liable for VAT due from intraCommunity acquisitions (effective from 1 July 2025).
A state or municipal authority or a municipality that is not registered for VAT with the SRS and that has entered into a contract with a supplier of construction services for the supply of construction services according to the procurement procedure prescribed by the Public Procurement Law, or is involved in a public-private partnership project as a public partner according to the PublicPrivate Partnership Law shall be registered as a taxable person with the SRS before these services are received.
• It is represented by a fiscal representative in relation to the relevant resident transactions.
• It supplies goods or services in Latvia to headquarters of allied forces recognized by the Republic of Latvia.
Exemption from VAT registration for taxable persons of third countries/third territories. A taxable person of third country/third territory is not obliged to register for VAT purposes if:
• It carries out the supply of goods or services for which VAT is paid by the recipient of goods or services.
• It carries out supplies of Community goods already undergoing export customs procedures or non-Community goods in customs warehouses or free zones or at the place of temporary storage.
• It carries out such transactions where non-Community goods or Community goods for which exit customs procedures have been commenced are moved from one resident customs warehouse/free zone/the place of temporary storage to other inland customs warehouse/free zone/ the place of temporary storage or customs warehouse/free zone/the place of temporary storage of other EU Member States.
• It is represented by a fiscal representative (i.e., a registered taxable person) that on the basis of a written contract assumes VAT liabilities, pays tax into the State Budget and represents a taxable person of another Member State or of a third country/territory; the fiscal representative status is only with respect to VAT in relation to the relevant inland transactions.
• It carries out the supply of goods that are dispatched or transported by the taxable person or another person on its behalf from inland to a destination outside the territory of the European Union, except goods that are intended for equipping or supplying pleasure boats, private aircraft or any other means of transport for private use.
• It supplies goods or services inland to headquarters of allied forces recognized by the Republic of Latvia.
Voluntary registration and small businesses. A taxable person can register for VAT voluntarily even if it is not required to register for VAT under the VAT law in Latvia. No explicit restrictions for voluntary VAT registration are laid down in VAT law in Latvia. There are no special VAT registration rules for small businesses.
Group registration. A group registration for VAT purposes is possible in Latvia. Legal entities that are closely connected (through capital or management) may choose to register as a VAT group. A VAT group is treated as a single taxable person, where members of a VAT group are not regarded as independent taxable persons. Only persons established in Latvia may be part of a VAT group. As a result, any establishments (seat or fixed establishment) of such persons outside Latvia may not be part of a VAT group. The group members share a single VAT number and submit a single VAT return.
The following are the rules for the registration of VAT groups:
• The value of taxable transactions of at least one member of the VAT group in the preceding 12 months was EUR350,000).
• Each member of the VAT group must be separately registered for VAT.
• A member of a VAT group cannot be a member of another VAT group.
• VAT group members can be capital companies belonging to the same group of companies as well as Latvian branches of foreign legal entities, provided that, under the Law on Groups of Companies, the foreign legal entity belongs to the group of companies comprising other members of the VAT group.
• The members establishing the VAT group must enter into a valid contract.
• The members of the VAT group must be reachable at their legal addresses.
• The group members are jointly and severally liable for VAT group tax liabilities.
The minimum time period required for the duration of a VAT group is 12 months (unless the conditions for group registration cease to be satisfied).
Holding companies. Latvian VAT law does not contain specific rules regarding holding company inclusion in the VAT group. However, members of a VAT group must be established in Latvia. In practice, a pure holding company (i.e., a nontaxable person) can be part of a VAT group in Latvia. This, of course, can impact the input tax deduction of the VAT group as a whole and limiting the percentage the group can recover.
Cost-sharing exemption. The VAT cost-sharing exemption (in accordance with VAT Directive 2006/112/EEC Article 132(1)f has been implemented in Latvia. This provides an option to exempt services that the cost-sharing group supplies to its members, providing certain conditions are met, which are laid out in Latvian VAT law.
Fixed establishment. The term “fixed establishment” should be understood as explained by Council Implementing Regulation 282/2011/EU and as implemented in the VAT law. A fixed establishment is any establishment characterized by a sufficient degree of permanence and a suitable structure in terms of technical and personnel resources that enable it to provide and receive services.
The local rules do not provide additional criteria or guidance on fixed establishments; thus, every review should be evaluated on case-by-case basis.
Non-established businesses. A “non-established business” is a business that does not have a permanent establishment in Latvia. A non-established business must register for VAT if it makes supplies of goods or services for which it is liable to pay VAT in Latvia. If a non-established business performs intra-Community acquisitions of goods in Latvia or supplies of services and if it fails to register for VAT, in certain cases, the liability to account for reverse-charge VAT transfers to the recipient of the goods or services in Latvia (provided the recipient is a VATregistered person). An entity registered for VAT in another EU Member State is not required to register for supplies made to taxable persons established in Latvia if the reverse charge applies (i.e., the recipient of the service must account for the VAT on behalf of the supplier). The reverse charge does not apply to supplies made to private persons.
To register for VAT, a non-established business must submit the following documents to the SRS:
• A completed application form provided for in the Cabinet Regulations
• A copy of the registration certificate
• Confirmation of the address of the business in Latvia, if such an address exists
The documents can be submitted via the following methods:
• Paper form by submitting them in person to the office of the SRS
• Online via the Electronic Declaration System (EDS) of the SRS (if the taxable person has an account there)
• Sending the necessary documents to the SRS by mail (subject to rules of secure electronic signatures); the person who submits the application must be either a person who has signature rights in the company or the applicant’s authorized person. The person who submits the application must also present a passport or ID card as proof of identity.
Tax representatives. VAT fiscal representatives (called tax representatives in some countries) are taxable persons who, based on a written contract, remit to the tax authorities the VAT due by a nonresident taxable person whom they represent, and fulfill on their behalf the administrative obligations relating to the following transactions:
• The importation of goods and the subsequent intra-Community supply of the imported goods
• The importation of goods and the subsequent domestic supply of the imported goods
• The receipt of goods in Latvia that are to be exported and that are stored under warehousing arrangements, and the subsequent exportation of those goods
• The intra-Community acquisition of goods that are to be exported and are stored under warehousing arrangements, and the subsequent exportation of those goods
VAT fiscal representatives must present a power of attorney and are responsible for payment of the VAT liabilities of the nonresident taxable person whom they represent. They must file monthly VAT returns in electronic format.
For taxable persons established outside the EU, they no longer have to appoint a fiscal representative to register for VAT purposes, and they can register in their own names. However, they may still opt to appoint a fiscal representative.
Note that Latvian VAT rulings do not differentiate global and individual representatives and only one type of representative is available – fiscal representative.
Reverse charge. The “reverse-charge” provision applies generally to supplies of goods and services made by non-established businesses to taxable persons and other nontaxable legal persons established in Latvia, provided that VAT is due on these supplies. Under the reverse-charge provision, the taxable person or legal person that receives the supply must account for the VAT due. If the reverse charge applies, the non-established supplier may not account for VAT in Latvia. The reverse charge does not apply to supplies made to private persons.
Domestic reverse charge. Timber products and related services. Domestic supplies of timber products and related services are subject to the reverse-charge mechanism if the supplier and customer are registered taxable persons.
Scrap materials and related services. Domestic supplies of specified scrap materials and related services are subject to the reverse-charge mechanism if the supplier and customer are registered taxable persons and the customer is licensed to purchase scrap materials in Latvia or, lacking such a license, has obtained a permit for performing A- or B-category polluting activities or for collecting, handling, sorting or storing waste. Scrap materials include certain ferrous and nonferrous scrap, car wrecks, electrical and electronic waste, and batteries.
Construction products, services and construction-related services. Domestic supplies of construction services (such as construction of new buildings or reconstruction of a part or the whole of existing buildings) and construction-related services are subject to the reverse-charge mechanism if the supplier and customer are registered taxable persons. Separate domestic supply of construction products is not subject to the reverse-charge mechanism.
Mobile phones, tablets, laptops, integrated circuits, game consoles. Domestic supplies of mobile phones, computer hardware, integrated circuits and game consoles are subject to the reversecharge mechanism if the supplier and customer are taxable persons.
Grain crops and industrial crops. Domestic supplies of grain and industrial crops are subject to the reverse-charge mechanism if the supplier and customer are registered taxable persons.
Precious metals, semi-finished products of precious metals. Domestic supplies of precious metals, precious metal alloys and precious clad metal are subject to the reverse-charge mechanism if the supplier and customer are registered taxable persons.
Plated metals, scrap and waste. Domestic supplies of semi-finished goods of precious metal, plated metal, scrap and waste are subject to the reverse-charge mechanism if the supplier and customer are registered taxable persons.
Metal products, semifinished metal products and related services. Domestic supplies of metal products, semifinished metal products and related services are subject to the reverse-charge mechanism if the supplier and customer are registered taxable persons.
Digital economy. Specific VAT rules apply to cross-border supplies of goods and services sold via the internet (e-commerce) in all EU Member States with effect from 1 July 2021. These new rules apply to all direct sales to nontaxable persons (in practice, these are mostly private individuals),
but we refer to these rules as e-commerce VAT rules because most of these transactions are conducted via the internet. In general, the place of supply is in the country of consumption, i.e., where the goods are shipped to or where the buyer of the goods or services resides, subject to any “use and enjoyment” provisions that may override this rule (see the Section B. Effective use and enjoyment subsection above). Therefore:
• For supplies of services made by a nonresident supplier to a business customer (B2B), the business customer is responsible for accounting for the VAT due, using the reverse charge.
• For supplies of goods made by a nonresident supplier to a business customer (B2B), where the goods are transported from another EU Member State, the business purchasing the goods is responsible for accounting for the VAT due, as an intra-Community acquisition. If the goods come from outside the EU, the purchaser may have to report an importation of goods.
• For supplies of goods or services made by a nonresident supplier to a final consumer (B2C), the supplier is generally responsible for charging and accounting for the VAT due at the rate applicable in the customer’s country (unless the supplier’s sales fall beneath the distance selling threshold of EUR10,000 with effect from 1 July 2021). This VAT can be reported using a single VAT registration, using a One-Stop Shop (OSS) mechanism.
In Latvia, in the case of supplies facilitated by an electronic interface, there are two subsequent deemed supplies: the first from the underlying supplier to the electronic interface, and the second from the electronic interface to the customer. In this case, the transport of the supply is assigned to the deemed supply by the electronic interface, and it must apply the distance sales rules. The underlying supplier in this case is not required to charge VAT to the electronic interface, since its supply is either out of scope of EU VAT or a zero-VAT rate is applicable. Place of supply rules for distance sales apply to the supply made by the electronic interface to the customer (B2C).
For more details about intra-EU distance sales, see the EU chapter.
Effective 1 July 2021, an e-commerce supplier may have a choice of how to account for VAT on its B2C supplies.
Local VAT registration. A nonresident supplier may choose to register for VAT in each Member State and account for VAT on all supplies made and recover input tax in accordance with local rules (see the Non-established businesses subsection above). In Latvia, non-EU businesses are not required to appoint a fiscal representative for accounting for the VAT due on these transactions.
For detail on the application process in Latvia, refer to the Registration procedures below.
One-Stop Shop. Effective 1 July 2021, a supplier can choose to account for the VAT due under the EU One-Stop Shop (OSS), which can be used for intra-EU cross-border supplies of goods and all cross-border supplies of services made to final consumers in the EU. Unlike the previous Mini One-Stop-Shop (MOSS) scheme that applied until 30 June 2021, the OSS is not limited to cross-border supplies of electronic services, telecommunication services and broadcasting services.
The OSS is an electronic portal that allows businesses to:
• Register for VAT electronically in a single Member State for all intra-EU distance sales of goods and for B2C supplies of services
• Declare and pay VAT due on all supplies of goods and services in a single electronic quarterly return.
The OSS can be used by businesses established in the EU and outside the EU. If a supplier or a deemed supplier decides to register for the OSS, it must declare and pay VAT for all supplies (goods as well as services) that fall under the OSS.
In Latvia, reporting for VAT due under the OSS registration must be done electronically via a website, eds.vid.gov.lv (also known as the Electronical Declaration System), which is accessible by filing the registration form.
• If the documents are signed by an authorized person, the application must be submitted with a written power of attorney (preferably notarized)
The SRS of Latvia for VAT registration purposes may also request follow-up questions, which is a standard practice. Typical follow-up questions include the general description of intended business activity and how the business activity will be ensured in terms of employees, vehicles, accounting and premises (storage, office). However, the information necessary for the VAT registration may depend on whether the company is registered locally or not.
The registration documents may be submitted electronically through Electronic Declaration System if an authorized person already has established access to the system. The documents could also be delivered either in person or delivered by mail or currier to the SRS of Latvia.
Taxable persons are given a VAT identification number (13 digits), beginning with a two-digit country code (LV). VAT identification numbers are important in controlling the correct remittance of VAT to the tax authorities within the European Union.
Applicants submit the registration application form, which contains information on company/ person, its authorized persons and business activities along with supplementary documentation (e.g., register of companies extract, passport/ID card copy(s) of signatory person(s), applicable power of attorneys). The decision on registration is taken by tax authorities within five business days from receipt of required information and documents.
Generally, there is an option to submit any documents (including VAT registration and deregistration documents) to the tax authorities via email; however, such documents shall be verified by the sender using the “secure electronic signature,” a form of advanced electronic signature that may be acquired from respective authorities in Latvia. However, this option is not commonly used and generally the VAT registration documents are submitted as hard copies.
Additionally, taxable persons registered in Latvia are obliged to use the EDS of the tax authorities, which is subject to an additional registration procedure.
From 1 January 2025, a taxable person in Latvia that has a right not to pay VAT for their supplies that would be due in other EU Member States, must inform the SRS by completing a form in the Latvian e-filing system (Electronical Declaration System). The SRS must inform the person within 35 days if the registration is completed or denied. If the registration is successful, the SRS will assign a registration number with code “EX,” which can be used only for the application of VAT exemption for supplies in other EU Member States.
Deregistration. The SRS has the right to exclude a person from the register of taxable persons if:
• The taxable person applies for removal from the VAT register.
• The taxable person has been liquidated or reorganized.
• The economic activity of the taxable person is suspended.
• The taxable person does not submit a VAT return within one month of the submission deadline, or they provide false information in a VAT return and do not correct this, following a written request to do so from the tax administration.
• The taxable person cannot be reached at their legal address or the declared place of residence (or if the address does not exist).
• A VAT group no longer complies with the registration conditions.
The SRS has the right to suspend a taxable person’s registration number if possible fraudulent activities are identified.
In addition, the SRS has the right to exclude a person from the register of taxable persons if either of the following conditions exists:
• The taxable person is a risk person.
• The taxable person has not had economic activity for three months.
Deposits and prepayments. VAT paid on goods supplied or services provided is to be paid into the State Budget during the filing period in which the goods were dispatched or the services provided, and the tax invoice issued (except for intra-Community supply of services) or an advance payment made (except for intra-Community supply of goods) in accordance with the tax invoice. This means if an advance payment or a prepayment is received before the supply is performed, VAT is due at the end of the filing period in which the advanced consideration is received.
Continuous supplies of services. If a local supply of services is performed without interruption over a long period of time, the tax shall become payable/declarable at the time payment for the service is received or the relevant filing period ends, but not less frequently than once in every six-month period.
Where an intra-Community supply of services is performed without interruption over a period of time that exceeds one year, and during this period no tax invoices are issued and no payments made, the tax becomes payable/declarable at the end of each year until the moment when the supply of services is fully completed.
Where an intra-Community acquisition of services is performed without interruption over a period of time that exceeds one year, and during this period no tax invoices are received and no payments are made, the transaction becomes declarable at the end of each year until the moment when the purchase of services is fully completed.
Goods sent on approval for sale or return. There are no special time of supply rules in Latvia for supplies of goods that are sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).
Note that for the supply of goods where the ownership is not transferred (e.g., supplied for treatment, evaluation, processing or repair [i.e., temporary use]), in general are treated as out of scope for VAT purposes, on the basis that they are afterwards returned to the supplier within 24 months. If these goods are not dispatched back after the supply of the abovementioned services, it shall be deemed that the supply has taken place in the tax period in which the supply of such goods to any other person has taken place.
Reverse-charge services. Generally, the reverse-charge VAT is also applicable to the purchase of services from other EU and non-EU taxable persons, as well as on intra-Community acquisitions of goods. Additionally, the local reverse-charge mechanism applies to the transactions subject to the domestic reverse charge.
Leased assets. The leasing or hiring of movable goods, including means of transport, is a supply of services in so far as the lease qualifies as an operational lease. According to the VAT law, a financial lease (i.e., a lease of movable goods where at the end of the lease period the ownership of the movable goods is transferred to the lessee) is considered as a supply of goods.
Imported goods. Import VAT becomes due when goods are released for free circulation.
VAT on imports that is paid to the State Budget may be deducted as input tax on VAT returns filed for the period in which the goods are released for free circulation, that is, when the import VAT has been paid into the State Budget.
Under the Latvian VAT law, the principle of postponed accounting rules (declaration of VAT by way of reverse-charge mechanism) can be applied to the importation if the following conditions are satisfied:
• The importer of the goods is a taxable person; it performs the import of goods within the framework of its business activities, and it has obtained the special authorization/permit from the tax authorities.
• The importer of the goods is a fiscal representative representing a taxable person of another EU or non-EU country and it has obtained the special authorization/permit from the tax authorities.
• Parking
• Mobile phones
• Advertising
• Books
• Taxi services
Partial exemption. Input tax directly related to performing VAT-exempt supplies is not recoverable. If a taxable person established in Latvia makes both exempt supplies and taxable supplies, it may not deduct input tax in full. This situation is referred to as “partial exemption.”
The amount of input tax that may be deducted by a partially exempt business is calculated based on the percentage of taxable supplies to total supplies made each month. The monthly calculation is adjusted annually.
The percentage of deductible input taxes to be rounded up to the next whole number (e.g., 19.2% is rounded up to 20%).
If a taxable person makes both taxable and exempt supplies and if the value of its taxable supplies is greater than 95% of the total value of its supplies in the period, the taxable person may deduct input tax in full (without applying the partial exemption calculation) monthly. A taxable person that is in this position must adjust its input tax deduction on an annual basis.
Partially exempt taxable persons must apply separate VAT accounting to allocate input tax to taxable and exempt supplies. The use of a pro rata calculation is allowed only in cases where separate accounting cannot be used. The calculation of pro rata is at the discretion of the taxable person and must reflect the economic reality of the transactions conducted by the taxable person. The taxable person is not obliged to notify the SRS of the pro rata calculation used; however, they must have supporting evidence upholding the calculated pro rata, which can be used if the SRS would perform tax review activities (e.g., a tax audit) with respect to the pro rata calculation.
Approval from the tax authorities is not required to use the partial exemption standard method or special methods in Latvia. However, it is possible to voluntarily align with the tax authorities the application of the partial exemption standard or special methods or separate accounting, thus giving credibility that the tax authorities wouldn’t challenge the applied method of choice.
Capital goods. Capital goods are items of capital expenditure that are used in a business over several years.
In Latvia, the capital goods adjustment applies to the following assets for the number of years indicated:
• Immovable property: 10 years
• Fixed assets that have a purchase or producing value (expenditure incurred to produce a fixed asset) exceeding EUR70,000 excluding VAT: Five years
The amount of input tax recovered depends on the taxable person’s partial exemption recovery position in the VAT year of construction, production or acquisition. However, the amount of input tax recovered for capital goods must be adjusted over time if the taxable person’s partial exemption recovery percentage changes during the adjustment period.
During the construction, production or purchase phase for real estate or a fixed asset, the input tax is deducted according to the normal rules. The adjustment is applied each year following the year of construction, production or acquisition to a fraction of the total input tax (1/10 for immovable property and 1/5 for the fixed assets). The adjustment may result in either an increase or decrease of deductible input tax, depending on whether the ratio of taxable supplies made by the business has increased or decreased since the year in which the capital goods were acquired. An adjustment is not made if the proportion does not change during the tax year.
• The documents must be submitted to the SRS by 30 September of the period following the requested refund period if the request is for a period of one year, or within three months from the end of the request period if the request is for a period less than one year. In practice, the VAT could be refunded within a four-month period from the date of submission of the documents. This period may be prolonged if the tax authorities ask for additional information. In such case, the SRS will decide on a tax refund within a period of four months from the date of receipt of all relevant documents and information additionally required and submitted by the respective taxable person. The approved amount of tax shall be refunded within 10 working days after the SRS has decided to refund the tax completely or partially, but no later than within four months after receipt of the application. No interest is paid upon refund.
Late payment interest. In an event where an EU or non-EU, non-established business has made a request to refund overpaid VAT (as outlined above) and the payment has not been transferred within the deadline, then the following late payment interest applies:
• Three-fifths of 0.05% times the principal debt for each day the payment has been delayed.
• If there is a confirmed decision from the highest tax authority or the court on the refund and the refund is not transferred within 15 days – from the 16th day the late payment interest is 0.05% times the principal debt for each day the payment has been delayed.
H. Invoicing
VAT invoices. A taxable person must generally provide a VAT invoice for all taxable supplies made and for exports within 15 days after the supply has been made or advance payment has been received.
Credit notes. A VAT credit note may be used to reduce the VAT charged and claimed on a supply. The document must be clearly marked “credit note,” and it should refer to the original invoice. It is recommended that a credit note also indicate the reason for the correction and any new items arising from it.
Electronic invoicing. Structured electronic invoicing in Latvia will gradually become mandatory for certain transactions starting from 2025.
Scope of electronic invoicing. Electronic invoicing applies to government and companies registered in Latvia, including natural persons carrying out economic activity. From 1 January 2025, electronic invoicing is mandatory for transactions between government and business (B2G, G2B and G2G), but from 1 January 2026, e-invoices must be used for all transactions between companies registered in Latvia (B2B). From 1 January 2026, the provision of data about electronic invoices to the SRS will be mandatory.
There is no threshold beyond which taxable persons are required to adopt electronic invoicing in Latvia. The structured electronic invoice file format must be in XML (extensible markup language), which must comply with PEPPOL BIS Billing 3.0 specifications. XML structure is defined also in local rules.
For the EU VAT in the Digital Age (ViDA) proposals, refer to the EU chapter.
Simplified VAT invoices. A registered taxable person has the right to issue a simplified tax invoice in the following cases:
• For an inland transaction the value of which (excluding tax) is less than EUR150
• If it uses a document that amends the initial tax invoice or especially and clearly indicates to it, indicating the date of issue of the initial tax invoice and identification number, as well as the particular data to be amended, in the additional simplified tax invoice
A cashier’s check or another document may be used as a simplified tax invoice when the requirements above are not met, only when it is accompanied by a source document in which the date
and number of the cashier’s check or another document and the information required for a normal tax invoice is indicated.
In addition, a cashier’s check or another document, which does not meet the requirements outlined above, may also be used as a simplified tax invoice if it is issued for a transaction where the value of which (excluding tax) is less than EUR30.
Self-billing. Self-billing is allowed in Latvia. A recipient of goods or services is entitled to issue a tax invoice for themselves on behalf and interests of the supplier of goods or services for the goods or services supplied to them by a registered taxable person or a taxable person of another Member State, if there is a prior agreement between the parties and if the supplier of goods or services applies the mutual recognition procedure of invoices to each invoice.
Proof of exports and intra-Community supplies. The zero-rate applies to exports of goods and intra-Community supplies of goods. Export and intra-Community supplies of goods must be accompanied by evidence confirming that the goods have left the territory of Latvia. Suitable evidence includes the stamped customs exportation documentation or international transportation documents such as the CMR or bill of lading.
No special documentation applies in Latvia for evidencing the application of the Quick Fixes. Normal intra-Community documentation rules apply.
Foreign currency invoices. If an invoice is issued in a currency other than the domestic currency, which is the euro (EUR), the amount of VAT must be converted to EUR if the place of supply is Latvia. The conversion must use the official exchange rate quoted by the European Central Bank on the date of the supply or on the date when the advanced payment has been received.
Supplies to nontaxable persons. Invoices for supplies to nontaxable persons may be issued upon request of the customer. However, if no invoice is issued, a supplementary internal document shall be issued for accounting and reporting purposes.
Distance selling. For intra-Community distance sales made B2C, a full VAT invoice must be issued. However, if the supplier operates the OSS regime, then no full VAT invoice is required unless requested.
Records. In accounting registers, all entries shall be made based on supporting documents (or source documents) that confirm the existence of an economic transaction of the undertaking. In Latvia, examples of which records must be held for VAT purposes include the following supporting documents:
• Outgoing and incoming invoices
• Agreements
• Transportation documentation
• Customs declarations
• Accounting registers
Source documents, accounting registers, inventory lists and other accounting organization documents of the undertaking shall be systematically arranged and stored in the archives of the undertaking.
In Latvia, VAT books and records can be held outside of the country. This is only allowed where they are stored by electronic means and full online access to the data concerned is guaranteed to SRS representatives.
Record retention period. An entrepreneur must store duplicates of the invoices issued and invoices received for a period of five years, except with respect to invoices relating to immovable property. Regarding the latter, invoices shall be stored for a period of 10 years.
Electronic archiving. Electronic archiving is allowed in Latvia. Duplicates of the invoices and other relevant documents must be stored in Latvia, except when they are stored by electronic means and full online access to the data concerned is guaranteed to SRS representatives.
The undertaking has the right to convert original documents, which are in paper form, into an electronic form. The document converted into electronic form for its storage in the electronic environment shall have the same legal force as the original document. The undertaking has the right to destroy the original document only if the undertaking complies with the following provisions for the storage of a document converted into electronic form for its storage in the electronic environment:
• The portrayal and conformity of the content of the original document are ensured throughout the data storage period.
• It is possible to ensure that the content is provided in readable form on a computer and, if necessary, its derivatives can be created in paper format.
• The converted document is protected against unauthorized access, amendments, alterations or destruction.
• The conversion process and the process for the destruction of the original document are documented in accordance with the procedures specified by the undertaking.
I. Returns and payment
Periodic returns. In general, VAT returns may be filed monthly or quarterly, depending on the amount of taxable supplies made by the taxable person and the transaction types. A VAT return must be filed by the 20th day of the month following the end of the tax period via the EDS.
VAT returns must be filed monthly (such tax period is retained for six calendar months after VAT registration) if the amount of taxable transactions performed by a taxable person during the year before the tax year or during the tax year exceeds EUR50,000 or if the taxable person supplies goods or services within the EU.
VAT returns must be filed quarterly if, during the year before the tax year, the amount of taxable transactions of the taxable person did not exceed EUR50,000, and if the taxable person did not perform intra-Community supplies of goods or supply services that had a place of supply in other EU Member States.
Periodic payments. The VAT due must be transferred no later than 23 days after the end of the tax period to a specifically indicated State Budget single tax account. The tax period can be either a month or a quarter. Payments are made directly through the internet bank online to the single tax account of the SRS of the Republic of Latvia (for the State Budget) who is the receiver of the payment.
Electronic filing. Electronic filing is mandatory in Latvia for all taxable persons. Tax returns must be filed via the Electronic Declaration System (EDS). The EDS is an e-filing system of the SRS where taxable persons prepare and submit periodic VAT returns and their appendices. It is also used by the SRS to communicate with taxable persons, e.g., to request additional information and supporting documents with respect to reported transactions with a right to deduct VAT.
Taxable persons registered in Latvia are obliged to use the EDS of the SRS. Generally, when registering for VAT purposes in Latvia, the taxable person is automatically registered in EDS. However, to define the list of users that will be granted rights to work on behalf of the taxable person in EDS, a separate document has to be submitted.
Payments on account. Payments on account are not required in Latvia.
Special schemes. Small businesses. The voluntary special regime for small businesses is applicable to a taxable person who complies with at least one of the following criteria:
• Taxable transactions in the previous tax year have not exceeded EUR100,000.
– Are usually sold at a price that does not exceed by more than 80% the open market value of the gold contained therein
According to the primary rule, local and intra-Community supplies of gold in the above forms are exempt from VAT. Imports and intra-Community acquisitions of investment gold are also exempt from VAT. In addition, the exemption applies to intermediary services supplied by agents.
The following suppliers of investment gold may opt for taxation according to the general VAT rules:
• A manufacturer of investment gold or a person modifying gold into investment gold
• A taxable person who supplies investment gold for industrial purposes in the course of their normal business
• An intermediary in the supply of investment gold, provided that the supplier has also opted to tax their supply
An option to tax must be made by notifying the tax authorities in advance in writing.
A supplier who does not opt for taxation but, rather, uses the exemption for the supply of investment gold can still deduct input tax on the following:
• The acquisition of investment gold that was supplied by a taxable supplier (in Latvia and other Member States) who exercised an option to tax
• The acquisition of gold other than investment gold from taxable suppliers (in Latvia and other Member States), on the assumption that the supplier changes the gold into investment gold
• Services received for changing the shape, weight or content of investment or other gold
A taxable person who produces investment gold or changes gold into investment gold can deduct VAT in connection with the local acquisition, the import or the intra-Community acquisition of goods or services that have a connection with the production or the modification of that gold.
The reverse-charge mechanism is applicable if the option for taxation is applied.
Regarding a taxable person who performs transactions with investment gold, the documents that are associated with such transactions must be retained for five years after the end of the calendar year in which the transaction occurred.
Cash accounting. Latvia operates a voluntary cash accounting scheme. To use cash accounting, a taxable person’s transactions (threshold) are generally not more than an annual turnover of EUR100,000. A threshold of up to EUR500,000 is applicable to taxable persons in specified industries, e.g., some types of farmers.
Additionally, the supply of residential house maintenance and management services is subject to the voluntary cash accounting scheme if the total value of transactions for a taxable person in the previous tax period is between EUR100,000 and EUR2 million.
Annual returns. Taxable persons must submit an annual VAT return in Latvia, in the following circumstances:
• The proportion of taxable and nontaxable transactions for the taxation year has changed and it is not provided otherwise by the VAT law.
• Any tax due or input tax deducted is adjusted according to the requirements listed in the VAT law.
• Financial services are performed/supplied.
• A deposit system is applied to reusable packaging according to the packaging regulation.
This must be submitted prior to 1 May of the following year. Also, the respective tax amount must be paid prior to 1 May of the following year.
Supplementary filings. Intrastat. A taxable person that trades with other EU countries must complete statistical reports, known as Intrastat, if the value of either its sales or purchases of goods
A failure to account for output tax on assets to which postponed accounting applies gives rise to a penalty of 10% of the VAT due.
Failure to account for output tax on reverse-charge services received from abroad, on intra-Community acquisitions or on certain intra-Community services, incurs a penalty of 10% of the VAT due.
The penalty for a repeated tax infringement shall be double the amount of the fine.
If a person fails to provide necessary information to the tax authorities, a penalty of no more than EUR700 is imposed on a natural person or a board member, with or without depriving the board member of the right to hold certain positions in the company.
For providing false information, a penalty of no more than EUR700 is imposed on a natural person or a board member, with or without depriving the board member of the right to hold certain positions in the company.
For refusal to allow tax officers to enter premises where they have a legal right to enter, natural and legal persons face a penalty up to EUR14,000. There is no specific penalty here in respect of personal/director’s liability. However, personal/director’s liability may occur due to a failure to provide necessary information to the tax authorities or providing false information to the authorities.
Personal liability for company officers. Members of the board of directors face a penalty of between EUR140 and EUR2,000 and may be deprived of the right to take certain positions in commercial companies for a period of up to (or without) three years, if they have been found guilty of evading paying tax or concealing or falsely reducing amounts or objects liable to tax.
If an audit leads to a substantial underpaid tax assessment, tax authorities can request the amount to be collected directly from board members effective in the period when the tax debt incurred.
Statute of limitations. The statute of limitations in Latvia is three years. Assessments of underpaid or over-recovered VAT may be made by the tax authorities within three years of the prevailing statutory VAT payment term.