The European Union (EU) VAT Directive is implemented through the “Value Added Tax Law” (hereafter referred to as the “VAT Law”). In Latvia, the VAT is referred to as “Pievienotās vērtības nodoklis” or “PVN”.
As of 1 January 2013, a completely new VAT Law came into force. The new VAT Law was implemented to make the VAT provisions more compliant with the EU VAT Directive, by following the structure and terminology of the EU VAT Directive.
1. Taxable Persons
Contrary to the previous VAT Law when a person was considered a taxable person if it was registered for VAT purposes with the tax authorities, as of 2013 any person who independently carries out in any place any economic activity, whatever it be the purpose or result of that activity, is considered a taxable person. Taxable persons can be either registered or not registered with the tax authorities.
1.1 Registration threshold for domestic taxable persons
If the total value of taxable supplies of goods and services provided has not exceeded EUR 50,000 during the preceding twelve months, no registration is required. Taxable persons can, however, register before reaching this threshold.
The registration is with the Latvian State Revenue Service (SRS). The following documents have to be provided for the registration:
- a registration form;
- if an individual is registering, a copy of his/her passport or some other acceptable identification; and
- if an authorised person performs the registration, a power of attorney.
1.2 Registration threshold for foreign taxable persons
There is no registration threshold for foreign legal entities. In some circumstances registration can be avoided because of the application of the reverse charge mechanism or the appointment of a fiscal representative.
When registering, the following documents must be submitted:
- a registration form;
- the extract of the Commercial Register; and
- if the authorized person performs the registration, a power of attorney.
The registration office depends on the address of the company in Latvia or the address of the business partner in Latvia indicated on the registration form. The list of competent tax offices can be downloaded from the following website: http://www.vid.gov.lv/default.aspx?tabid=12&id=1370&hl=2
The registration forms can be downloaded at the following link:
It takes five working days to register for VAT as of the submission of all the required documents.
1.3 VAT grouping
The conditions for the registration of a Latvian VAT group are: the participants of the VAT group may only be taxable persons, the maximum number of participants in the VAT group is not limited and a taxable person may not be a participant of another VAT group at the same time.
A VAT group may be established if the total value of the taxable supplies of goods and services provided by at least one participant of the VAT group during the preceding twelve calendar months up to the month when an application for the registration of the VAT group is submitted is at least EUR 355,700.
The participants of the VAT group can only be companies registered for VAT purposes in Latvia. Also they must be included in one group of companies (in accordance with the Group of Companies Law) or a branch of a foreign merchant (legal person), provided that the foreign merchant, in accordance with the Group of Companies Law, is a member of the same group of companies in which the other participants of the VAT group are included.
Holding companies receiving only dividend income cannot be included in the VAT group. Foreign companies cannot be included in the VAT group, even if they have a fixed establishment in Latvia. However, if the foreign company registers a branch in Latvia, this branch could be included in the VAT group provided that the above conditions stipulated in the Group of Companies Law are met.
The VAT group members must enter into an agreement. This agreement must be entered by all the members with one of them being appointed as the principal entity, the head company of the VAT group.
VAT grouping is optional. A VAT group is regarded as one taxable person for any supply to or by the VAT group. For VAT purposes, supplies of goods or services between members of a VAT group no longer fall within the scope of VAT. Supplies of goods or services made by third parties to an individual member of a VAT group are deemed to have been made to the VAT group.
The VAT group members use their own VAT registration number for transactions with persons, which are not members of the group. The registration number granted to the VAT group shall be used only for filing the VAT return of the VAT group and for the payment of the VAT. Group members are jointly and severally liable for payment of the group’s VAT.
1.4 Fiscal representative
Latvia has introduced the concept of fiscal representation as of 2011. 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 a non-EU country for tax purposes. Both non-EU persons and EU taxable persons may - but are not obliged - to appoint a fiscal representative when registering for VAT. The requirements for a fiscal representative are:
- It should file one of the following:
- Bank certification that it has deposited enough funds to cover the potential tax debts - at least 20% of the average VAT taxable transactions value reported in the VAT returns of the previous 3 months and no less than EUR 14,220;
- Bank or insurance company guarantee of at least EUR 284,570;
- It should be registered as a taxable person in Latvia for at least 2 years and perform business activities in Latvia uninterrupted since the VAT registration;
- It does not have any outstanding tax debts when submitting the VAT registration application or by decision of
the SRS the term for the payment of tax debts are divided in instalments;
- It does not have a criminal record for fraud, falsification of documents, tax avoidance or criminal activities that could result in a reduction of the taxable amount;
- It files the tax returns and the information requested by the SRS in due terms;
- It is registered as the user of the Electronic Declaration System; and
- It can be contacted at its legal address.
2. Simplification measures
- Consignment and call-off stock
There is a simplification for call-off stock in Latvia. Under this simplification, no VAT registration of the foreign supplier is required if goods are delivered to a taxable person in Latvia and in accordance with an agreement between the two parties, ownership passes to the receiver only when the goods are used or further sold by the receiver.
The simplification is optional.
The Latvian recipient must, however, maintain separate accounting records for the goods held under call- off conditions, so they can be identified until ownership transfers occurs.
When the goods are used or sold by the Latvian recipient, the purchase is an intra-Community acquisition. The supply by the foreign taxable person is, therefore, treated as an intra-Community supply and not as a local sale. It is also required that the Latvian recipient of the consignment stock reports the stock received in its VAT return as an intra- Community acquisition at the moment when the goods are taken out of the stock (title of the goods passes to the consignee).
The time limit under which goods can be stored under the simplification is two years. This implies that once two years have elapsed from the delivery of the goods from another EU Member State, the Latvian recipient is obliged to account for an intra-Community acquisition or the supplier has to register for VAT and account for an intra-Community acquisition in Latvia.
The intra-Community acquisition of goods should be reported when the goods are received either by the customer of the goods in Latvia or by the supplier (then VAT registration is mandatory).
2.2 Simplified triangulation rules
All parties to the triangulation must be registered for VAT in the EU. The triangulation can only be applied if the supplier of the goods, the middleman and the final customer of the goods are VAT registered in different EU countries. However, to apply the simplified triangulation scheme the middleman cannot be VAT registered and established in the country of arrival (i.e., Latvia). Nor the middleman can be VAT registered in the country of dispatch. Although there might be no sense requiring the middleman not to be VAT registered also in the country of dispatch, in fact the Latvian VAT Law fully complies with the wording of Article 141 of the VAT Directive. There are no special requirements, apart from those already specified by the VAT Directive.
2.3 Transfer of business
The transfer of business is not considered a supply of goods or services if the following criteria are met:
- the transferee takes over the rights and liabilities from the transferor of the business; and
- the transferee continues its operations and these operations are not connected to the liquidation of the business or sale of the received assets.
The general rules for transfer of business are provided by the Latvian Commercial Law. It should be noted that according to the Latvian Commercial Law, the transferor and transferee are jointly liable for the liabilities incurred prior to the transfer of the business for five years.
3. Installation supplies
Installation supplies are treated as supplied where they are constructed or installed. In Latvia, there is no formal definition of the term “supply with installation or assembly”. In determining whether the services are related to
immovable property or installation services are provided, the authorities would examine the works actually performed.
The reverse charge applies if a non-established company that is not registered for VAT in Latvia supplies goods with installation in Latvia and the customer is VAT registered in Latvia.
If the goods are supplied to a company or individual that is not VAT registered in Latvia, the supplier must register as a taxable person in Latvia.
4. Distance sales threshold
The distance sales threshold for Latvia is EUR 35,000. If the threshold is not exceeded, foreign taxable persons may opt to register for VAT in Latvia and apply Latvian VAT. There are no specific conditions for the voluntary VAT registration.
A foreign taxable person opting to register must file an application. The option is applicable, i.e. Latvian VAT must be applied as from the date the person is registered for Latvian VAT. No special requirements apply. No time limit applies to the optional VAT registration.
5. Acquisition threshold
The acquisition threshold for non-taxable legal persons, taxable persons engaged in exempt activities and flat-rate farmers from suppliers established in another EU Member State is EUR 10,000.
6. Effective use and enjoyment
Latvia has introduced effective use and enjoyment rules.
In regard to the supply of transportation services of the goods if such service is provided to a registered taxable person or a registered taxable person of third country or third territory, fixed telecommunication services, electronic communications services, lease of movable property and of motor vehicles, the place of supply is the location of the actual use and enjoyment of these services.
7. Bad debt relief
It is possible to recover the VAT paid to the state on bad debts from unrelated parties, when the debt for one customer is less than EUR 426.86 without VAT. In order to reclaim the VAT, the following conditions should be met:
- a VAT invoice has been issued for the sale of goods or services;
- the debt has been incurred during the last three years;
- the VAT on the transaction has been reported on the VAT return of the corresponding taxation period;
- the sum of bad debts has been written off from the provisions for the bad debts or included directly in the losses;
- the supplier and the customer are not related parties;
- the supply of goods and/or services to this customer has been interrupted for at least six months and has not been resumed;
- the taxable person has not sold the debt;
- the taxable person can prove that actions to recover the debt have been taken; and
- the supplier of the goods or services has sent a notification on the VAT recovery from the state to the debtor by 1 March of the next year.
Amounts exceeding EUR 426.86 may also qualify for VAT recovery, if all the previous and one of the following conditions are met:
- a confirmation is received from a court bailiff, that the debt collection is impossible;
- for a debtor that is an individual, the bankruptcy procedure has been started (50% recovery allowed) or finished (100% recovery allowed); or
- for a debtor that is a legal person, the insolvency procedure has been completed.
Following the usual procedure, it is possible to claim the VAT once a year - in the March declaration of the following year. If the debtor goes bankrupt or insolvent - the VAT can be claimed in the same month. The VAT relief applies to the debts incurred (invoice payment deadline) within the last 3 years.
VAT relief can be claimed through submitting the VAT return and stating the detailed list of unpaid invoices on the return appendices (information: customer’s name, VAT number, invoice date and number, value of the goods/services, VAT value). No additional proof is required.
8. Cash discounts
Assume that the supplier sends the following invoice: “Supply of goods EUR 1,000
21% VAT EUR 210
Total to be paid EUR 1,210
If payment is received by us within the next 14 days, you can subtract 2% of the invoice as a cash discount” Payment is indeed received within 14 days.
If invoice states the transaction and VAT amount with the discount, namely, the amounts taking into account the 2% cash discount, no separate credit invoice is necessary.
If however, the amounts are not shown on the invoice, the supplier has to send a credit invoice for the 2% discount. Thus the overpaid VAT can be recovered and input VAT adjusted accordingly.
9. Special rules
9.1. Import followed by an intra-Community supply
0% VAT on the importation of goods into Latvia if it is followed by an intra-Community supply within 30 days is effective in Latvia.
Conditions have to be met in order to apply the exemption such as a person to whom goods will further be delivered in the EU and its VAT registration number should be shown on the delivery/import documents.
9.2 Postponed accounting on import
There is a special importation regime for the importation of goods in Latvia. In order to apply the postponed accounting for imported goods, a taxable person must submit an application to the tax authorities. With this licence, importers avoid payment of VAT at the time of importation. Instead, the importer will have to pay the VAT due in its Latvian VAT return. If the importer is entitled to deduct VAT, the VAT paid can be reclaimed at the same VAT return.
A licence to apply a special VAT regime for imported goods will be issued to a taxable person:
- who is registered for business activities in Latvia;
- who is registered for Electronic Declaration System (EDS) with the tax authorities;
- who has no tax arrears for previous tax periods on the date on which the application is submitted or who pays any such tax arrears within five business days from the date on which the application is submitted;
- whose officers with signatory rights have no convictions for economic crimes; and
- who previous 12 calendar months within specified time limits submitted the informative returns or additional information necessary for determining the amounts of VAT payable to the state or the amounts of overpaid VAT.
9.3 VAT warehouse
There is no concept of VAT warehouses introduced in the Latvian VAT law.
9.4 Bonded (customs) warehouse
It is possible to put the goods in a bonded warehouse regime if the goods are not yet imported in Latvia or if the goods would be further exported or for cargo consolidation (e.g. when the goods are stored while the ship or railways or other vehicle is being loaded fully before actual export out of EU).
The supplies of following goods are subject to 0% VAT if performed in customs warehouses:
- received from non-EU countries and not released for free circulation inland; and
- received from other EU countries and for which the export procedure is started in other EU countries.
The parties responsible for payment of the goods are:
- the holder of the customs warehouse;
- the owner of the goods; and
- the party providing guarantee for the tax authorities.
In case of tax debt, the authorities would approach all of these parties. Generally, the order of approaching them depends on the type of customs warehouse and the agreements between the owner of the goods and the warehouse.
10. Reverse charges
- Reverse charge mechanism - B2B services
Cross-border services supplied to a person that is engaged in an economic activity will be, as a general rule, subject to a reverse charge (Article 44 and 196 of the EU VAT Directive). In addition, services supplied to legal entities (non- taxable persons) are subject to a reverse charge if they are registered for VAT in Latvia.
10.2 Reverse charge mechanism - non-resident suppliers
Reverse charge applies for supply of cultural, artistic, sporting, scientific, educational, entertainment and other services of similar nature (Article 53 of the VAT Directive) and services connected with immovable property (Article 47 of the VAT Directive) the place of supply of which is Latvia. To apply the reverse charge rules it is required that the supplier is a taxable person not established in Latvia, whereas the receiver is a taxable person registered for VAT purposes in Latvia.
10.3 Reverse charge mechanism - supply of natural gas, electricity, heating and cooling
The supply of natural gas, electricity, heating and cooling supplied to a “taxable dealer” in Latvia will be subject to a reverse charge. The place of supply will be the place where their economic activities are performed, their fixed establishment or their place of permanent residence if they have none of the preceding. This will also apply to the above goods being supplied to a taxable person whose use of them is trivial or insignificant.
If the above circumstances do not apply, the place of supply will be the place where the goods are actually consumed.
10.4 Reverse charge mechanism - specific domestic rules
Latvia has introduced a local reverse charge to the supply of certain types of timber products, woods, construction services, sale of scrap metal, and as of April 1, 2016 to sale of mobile telephones, computers, tablets, microprocessors and central processing units. The customer must always apply the reverse charge and must register for VAT if not yet registered in Latvia.
11. VAT rates and exemptions
- Standard rate
The standard rate in Latvia is 21%.
11.2 Reduced rate
The reduced rate in Latvia is 12% and applies for instance to:
- certain medications;
- certain medical equipment;
- hotel accommodation;
- specialised products for children;
- regular transportation services of passengers and their luggage provided in the domestic territory;
- educational literature and original literature;
- newspapers, magazines and other periodicals;
- supplies of heating wood to people for consumption in households;
- supplies of thermal energy to people for consumption in households.
11.3 Exemption with a right to deduction (zero rate)
Latvia has introduced zero rates for the following supplies:
- exports and intra-Community supplies of goods;
- services related to export or import or transit through free zones or customs warehouses;
- goods supplied to travellers resident outside the EU under retail export schemes or through tax-free shops;
- services in the framework of inward processing on behalf of principals resident outside the EU;
- seagoing vessels and aircrafts;
- supplies to diplomatic and consular offices, international organisations, EU institutions and NATO;
- monetary gold to central banks;
- goods under customs control or VAT warehousing arrangements;
- international passenger transport by seagoing vessels and airplane;
- provisioning of seagoing vessels, with the exception of vessels for inshore fishing; and
- services to goods under customs control;
- passenger transport operations on international routes, also to passenger transport operations to other Member States, if a passenger crosses the State border of Latvia, as well as to the luggage transport operations which the passenger carries with him and to his vehicle transport operations with which he is travelling;
- intermediary services which are supplied by the intermediary by selling tickets for the passenger transport
operations on international routes..
In order to prove zero rating in case of intra-Community supplies, the supplier must have transport documents which provide irrefutable evidence that the goods in question were transported to another Member State. The invoice must include a reference that the supply is exempt and a reference to the legal basis of exemption (e.g. “VAT exempt intra- Community supply, Article 138 of EU VAT Directive 2006/112”) and the VAT identification number of both the supplier and the customer.
An export supply must be accompanied by evidence confirming that the goods left Latvia. Suitable evidence includes the stamped customs exportation documentation. In case the export declaration cannot be provided, combination of two of the documents listed below is accepted:
- proof of the transportation of the goods (e.g. CMR);
- agreements concluded with the receivers of the goods; or
- documents proving the payment for the goods.
11.4. Exemptions without right to deduction
The following supplies are exempt without right to deduction:
- insurance and re-insurance services;
- financial services;
- sale of real estate, except unused real estate and building land – option to tax applies if the supplier and customer are both taxable persons;
- rent of premises to private individuals1;
- maintenance of dwelling houses (will be excluded as of July 1, 2016);
- investment funds’ management;
- gambling and lotteries;
- services between the members of cost sharing associations;
1 Lease of premises to legal persons is subject to 21% Latvian VAT
- medical services supplied to a patient (a list of the exempt services is defined);
- services related to medical services (transportation of the patient with specialized vehicles, accommodation and catering in medical institutions during treatment, diagnostic services occurring in other medical institutions);
- postal services;
- supply of human organs, milk and blood;
- dental services and services of dental technicians;
- social services;
- educational services supplied by state approved educational institutions and kindergartens;
- supplies of goods and services by public benefit organizations (special registration is required) for the purpose of defending children’s and young persons’ rights;
- cultural services supplied by theatres and circuses, museums, libraries, also concerts, events for children; and
- supply of gold and cash to the Bank of Latvia.
12. Recovery of input VAT
- Non-deductible input VAT
The following is not deductible:
- VAT incurred in regard to an exempt transaction;
- VAT incurred for non-business expenses;
- 60% of the input VAT incurred in regard to representation expenses;
- 50% of the input VAT that a taxable person has paid on the purchase of a car used for his business purposes, its repairs, maintenance and fuel; and
- VAT on the purchase, lease, repair, maintenance and fuel for a car if the value exceeds EUR 50,000.
12.2 Excess input VAT
The VAT is refunded automatically within thirty days after submission of the VAT return if the following criteria are met:
- supplies subject to the reduced or zero rate or transactions with a place of supply outside Latvia are at least 90% of the total transactions;
- the overpaid VAT is at least EUR 1,422.87 and transactions subject to the reduced or zero rate or transactions with a place of supply outside Latvia are at least 20% of the total transactions;
- the VAT overpayment is incurred for the purchase of fixed assets and exceeds EUR 142.29;
- the VAT overpayment exceeds EUR 1,422.87 and has incurred for goods and services for ensuing transactions subject to a local reverse charge; or
- the VAT overpayment exceeds EUR 11,382.97
Please note that the refund period will be longer if the tax authorities start a tax audit or other control procedures. If none of the above conditions are met, at the end of the taxation year, the VAT overpayment is refunded within ten days after acceptance of the last VAT return for the year.
12.3 Capital goods - adjustment periods
- Immovable property 10 years.
- Movable property 5 years (if the value without VAT exceeds EUR 71,143.59). Latvia does not have an adjustment period for services.
12.4 VAT refund for foreigners
- VAT refund to EU taxable persons
The claim should be filed electronically with the tax authorities of the country where the taxable person is established. The minimum limit for claims that are made for a calendar year or the remainder of a calendar year is EUR 50. The
minimum interim limit for claims that are made for less than a calendar year but at least 3 months is EUR 400.
The minimum period for claiming a refund is three months, except the last months of the calendar year – then claims for a shorter time period are accepted. Maximum period is one calendar year.
The claim should be filed by 30 September of the next year. Claims filed after the deadline are not accepted. When considering the refund claims, Latvian tax authorities often request invoice copies for the expenses and additional explanations. Sometimes the authorities request originals. The time limit for a decision of a refund is 4 months. If additional information is requested, the refund decision is issued within 6 months after filing the claim. If additional information is requested for the second time, the time limit for the decision is 8 months.
The refunded amounts are transferred within 10 days but no later than 6 or 8 months from filing the claim (depending on the number of additional information explanation requests). If the tax authorities’ decision is negative, the appeal should be filed within one month after the receipt of the decision. The date of sending the decision via electronic systems is considered the date of receipt.
The VAT incurred for the following expenses is not refunded:
- expenses related to real estate including the acquisition of unused real estate;
- expenses for goods and services received for personal use – catering and use of cars; and
- expenses incurred by a tour operator acting under the tour operators margin scheme for its services included in a tour package.
Detailed information can be found on the official Latvian tax authorities’ website: http://www.vid.gov.lv/default.aspx?tabid=8&id=4445&hl=2
12.4.2 VAT refund to non-EU taxable persons
VAT is only refunded to non-EU taxable persons in case a reciprocity agreement exists. Currently, Latvia has concluded reciprocity agreements with Switzerland, Iceland, Monaco and Norway.
Electronic filing for these applications is not possible, as original supporting documents must be filed to the Latvian tax authorities.
The claim should be filed in a paper format, filled out in Latvian or English. The applicant should either send the application by post or file it personally at the following address:
State Revenue Service Tax Department
Non-resident tax data credibility verification division Talejas iela 1, Riga, LV–1978, Latvija
The claim can be signed by the authorized signatories of the company or authorized persons (original power of attorney is required).
The minimum limit for claims made for a calendar year or the reminder of a calendar year is EUR 50.
The interim minimum limit for claims made for less than a calendar year but at least 3 months is EUR 400. Maximum period for making a claim is one calendar year.
Minimum period for making a claim is three months, except if the claim is made for the last months of the calendar year – then claims for a shorter time period are accepted.
The deadline for making the claim is 30 September of the next year. Claims filed after the deadline are not accepted. The following supporting documents are required:
- original invoices for which the VAT refund is claimed;
- original importation documents if the refund is claimed for import of goods;
- payment documents (bank orders of payment, cash receipts);
- VAT registration certificate original, valid for 12 months from the date of issue; and
- original power of attorney if the claim is filed by an authorized person.
The tax authorities will decide on the refund within 4 months. If the tax authorities request additional information, then the deadline for the decision can be extended for up to 8 months. The refund is processed within 10 working days after the decision is taken but no later than within 4 months from receipt of the claim (or 8 months if additional information has been requested).
The appeal of the tax authorities’ decision should be filed within one month after the receipt of the decision. VAT is not refunded for the following expenses:
- for the goods or services related to real estate located in Latvia;
- for goods or services received for personal use (car expenses, catering, entertainment); and
- for goods or services supplied to a tour operator applying the tour operators margin scheme.
The tax authorities have published information about VAT refund procedures to companies established in non-EU countries at the following website: https://www.vid.gov.lv/default.aspx?tabid=8&id=6248&hl=1 (available in Latvian only)
13.1. Invoice content
A VAT invoice has to contain the following information:
- date when the invoice was issued;
- sequential numbering of the invoice, which provides a unique identification of the invoice;
- name (natural person - given name, surname, personal identity number) and legal address (natural person declared place of residence) of the supplier of the goods or provider of the services;
- VAT registration number of the supplier of the goods or provider of the services;
- name (natural person - given name, surname, personal identity number) and legal address (natural person declared place of residence) of the customer;
- VAT registration number of the customer if the customer is liable for the VAT;
- date of the supply of the goods or date of the provision of the service if such differs from the date of issue of the invoice, or the date when a payment has been received in advance if such date is known and it differs from the issue date of the invoice;
- description, amount (volume) and unit of measurement of the goods supplied or services provided;
- price (value of one unit without VAT) of the goods supplied or services provided;
- discounts applied if they are not deducted from the value of one unit;
- VAT rate applied;
- calculated amount of VAT payable in EUR;
- the total of the transaction without VAT;
- in case of self-billing a corresponding reference “pašaprēķins” is required;
- the information necessary to determine whether there is a new means of transport; and
- special wording or reference to the VAT law or the directive, if 0% VAT, reverse charge, or an
- other special regime applies, for instance:
- intra-Community supply – preču piegāde Eiropas Savienībā;
- export supply - eksports;
- margin scheme - second-hand goods - peļņas daļas režīms lietotām precēm;
- margin scheme - works of art - peļņas daļas režīms mākslas darbiem;
- margin scheme - collector’s items and antiques - peļņas daļas režīms kolekciju priekšmetiem un senlietām;
- tour operator margin scheme - peļņas daļas režīms ceļojumu aģentūrām.
13.2 Time limits for invoices
For local supplies, an invoice should be issued within fifteen days after the supply or receipt of the advance payment. For continuous local services, an invoice should be issued at least every six months. For EU supplies of goods and services taxable according to Article 44 of Directive 2006/112/EC, the invoices should be issued by the fifteenth day of the month following the supply. For continuous services taxed according to Article 44 of Directive 2006/112/EC, the invoice should be issued at least at the end of each calendar year.
As of 1 January 2014, the national currency in Latvia is EUR. It is allowed to issue invoices in any currency. However, it is required that the VAT amount is stated in EUR.
13.4 Conversion and exchange rate
Foreign currencies should be converted to EUR using the official exchange rate by the European Central Bank on the date of the issue of the invoice.
Self-billing is introduced in the Latvian VAT law as of 1 January 2013. In order to apply the self-billing option, the parties should have a written agreement on the invoicing procedures (it may be enclosed also as a separate paragraph in the agreement on the supply of goods and services).
13.6 Storage of invoices
Original invoices need to be stored for five years. Invoices relating to immovable property and the accounting records for these properties need to be kept for a period of ten years. The invoices must be stored in their original form (i.e. paper invoices in paper form and electronic invoices in electronic form).
13.7 Electronic invoicing
Invoices can be issued electronically and must contain the same information which is required in case of a paper invoice. Both parties involved in the transaction must agree in writing as to the form of an acceptable electronic signature that will be used to authenticate the invoice (it may be included in the agreement on the supply of goods and services).
14. VAT compliance
- VAT return period
The VAT return period is quarterly. If the taxable person performs EU supplies of goods or supplies services taxable in other EU Member States according to Article 44 of the Directive 2006/112/EC or if the total value of the transactions exceeded EUR 50,000 within the last twelve months, monthly VAT returns should be filed.
Where the transactions of the previous year did not exceed EUR 14,228.72 and the person does not supply goods or services within the EU, the return period is 6 month of the calendar year.
If a taxable person performs EU supplies and has to submit European sales listings, a monthly filing is always required. VAT returns should be submitted electronically via Electronic Declaration System (EDS).
14.2 Filing of a VAT return and payment
The VAT due is payable by the twentieth day of the month following the VAT return period (e.g. the VAT for the second quarter of 2014 has to be paid to the VAT authorities by 20 July 2014). The VAT returns are due on the same date.
The VAT return and EU sales listing forms can be found at the following website: https://www.vid.gov.lv/default.aspx?tabid=8&id=178&hl=1
Please note that the tax authorities only accept the returns filed via Electronic Declaration System (EDS).
14.3 European sales listing
The European sales listing must be submitted with the taxable persons monthly VAT return as an attachment to the return (Attachment 3 “PVN 2”) and contains the total amount of intra-Community supplies of services or goods to each
customer located in another EU Member State. No transaction threshold applies to the filing of the European sales listing.
14.4 National recapitulative statement
There is a form of national recapitulative statement in Latvia. With the taxable person’s monthly or quarterly VAT- declaration, an attachment to the declaration (Attachment 2 “PVN 1”) must be filed. It must detail each transaction over EUR 1,430 that is the supply or receipt of goods or services to or from an entity located in Latvia.
14.5 Tax assessment period
The tax assessment period in Latvia is three years after the tax becomes payable.
- Default penalties for late registration
In case VAT registration is not made in due time, the administrative fine of EUR 210 – EUR 350 applies.
15.2 Penalties for not filing a VAT return or a European sales listing in time
For failing to file a VAT return or a European sales listing within the required time or with incomplete documents, a fine of up to EUR 700 can be imposed on individuals and legal persons, depending on the period of delay. For not filing the required documents at all, a fine of EUR 700 can be imposed.
15.3 Penalties for not paying VAT on time to the VAT authorities
If the VAT is not paid on time, penalties in the amount of 10%, 30% or 50% of the VAT payable depending on the VAT amount not paid, can be applied. Late payment penalties of 18.25% per year on the VAT amount due also apply for each day of the delay.
15.4 Penalties on VAT assessments when VAT is not reported correctly
If the VAT is not paid up to the correct amount, the VAT authorities can also impose a penalty of 10%, 30% or 50% of the VAT payable depending on the VAT amount not paid.
In Latvia, separate monthly Intrastat returns must be submitted to the Central Statistical Bureau of Latvia.
16.1 Intrastat threshold
The Intrastat threshold for arrivals is EUR 180 000, and for dispatches the threshold is EUR 130,000. Detailed returns are required if the special thresholds are exceeded, EUR 2,500,000 for the arrivals and EUR 4,000,000 for dispatches.
16.2 Intrastat data to be reported
The information which needs to be reported for both the arrival and the dispatches statistics is:
- Member State of origin/destination;
- country of origin;
- nature of the transaction;
- mode of transport;
- 8-digit commodity code of the goods;
- net weight of the goods;
- invoice value of the goods in EUR;
- statistical value;
- delivery terms; and
- supplementary units.
Company: Sorainen Latvia