Real estate:

  • The definition of unused real estate also includes a part of land, thus putting an end to the discussion whether the value of land and a building might be split.
  • The definition of construction land has been supplemented to provide that a land plot cannot be considered as construction land if a construction permit was issued after 31 December 2009 and the purpose of use is changed with no intention to perform construction. 
  • In sale transactions of combined real estate, when determining the VAT-able value the proportion of the used and unused parts of the property will be taken into account. VAT applies only to the unused part of real estate. The method of calculating the proportion of the unused part of the property is not specified, eg, whether the property value or the area should be used as the allocation key. The annotation to the VAT Act amendments provides that the result obtained should be logical, substantiated and proportionate.
  • Real estate will not have to be registered with the SRS if:
    • more than 99% of the property is used for taxable transactions; or
    • it is used for provision of regulated public utilities; or
    • it cannot be disposed of.

Vehicles:

  • VAT is non-deductible for purchase, import and maintenance of representative passenger vehicles, so that the definition of representative vehicles is linked with the definition for CIT purposes (over EUR 50,000 excluding VAT).
  • VAT is deductible for vehicles (including representative vehicles) plus maintenance for which routes are recorded in compliance with the requirements of the Companies’ passenger vehicle tax law, ie using the global positioning system (GPS) and reported to the Road Traffic Safety Directorate.
  • Taxpayers are entitled to claim previously restricted input VAT for passenger vehicles if the vehicles are used for business purposes.

VAT exemptions set in the VAT Directive have been introduced:

  • for services provided by a group of independent group of persons to its members (cost sharing associations) involved in exempt transactions;
  • for product supplies where input VAT was not deducted, as these supplies are made for purposes other than taxable transactions. This includes supplies of luxury goods.

Other:

  • VAT will be adjusted by losses that exceed the planned amount of losses according to CIT regulations.
  • The proportion of VAT-able and exempt transactions is rounded upwards to a full per cent.
  • A taxpayer is entitled to deduct input VAT on invoices from housing managers with utility service providers’ invoicing details.
  • The limitations on low-value gifts do not apply to advertising or representation expenses.
  • Third-country persons will have their rights restored to register in Latvia as VAT payers even without a fiscal representative.