Value Added Tax
Value Added Tax (VAT) is a consumption tax, which is included in the price of goods and services and is paid by the final consumer. The standard VAT rate is 21%, but a reduced VAT rate is also set for specific groups of goods and services.
- Who pays VAT?
1. Inland (local) taxable persons:
• registered taxable persons – registered in the SRS VAT payer register
• non-registered taxable persons – not registered in the SRS VAT payer register based on rights specified in the VAT Law
2. Taxable persons from other Member States:
• taxable persons registered in another Member State for tax payment purposes
• non-registered taxable persons of another Member State - taxable persons who are not registered in another Member State and do not have a legal address or residence in another Member State;
3. Taxable persons from a Third Country or Third Territory:
• persons who have been issued a tax identification number for operating a business;
• persons who have NOT been issued a tax identification number for operating a business.
4. Fiscal representatives
5. VAT groups
- How do I register as a VAT payer?
Before performing or receiving VAT-taxable transactions, taxpayers must register with SRS https://www6.vid.gov.lv/PVN.
Submit documents for registration in the SRS VAT register:
• Electronically, using the SRS Electronic Declaration System (EDS)
• By e-mail at vid [at] vid.gov.lv using an electronic signature
• In person at any SRS client service centre (with proper ID)
• At any regional Register of Enterprises office.
- What documents must I submit to register?
Inland (local) taxpayers – application for registration in the SRS VAT payer register Application for registration in the SRS VAT payer register *Taxpayers of another member state, third country or third territory - Application of Taxpayers of another Member State and of a Third Country or Third Territory for Registration in the SRS VAT Payer Register
*if the application is signed by an authorised person, then the written power of attorney must be submitted together with the application.
- What is subject to VAT?
1. Delivery service payments
2. Provision of services for a fee
3. Imported goods
4. Exported goods
5. Purchase of goods in the EU, including transfer of taxpayers’ goods from another EU member state to Latvia to ensure taxpayers’ local businesses
6. The purchase of new vehicles by unregistered taxpayers or non-taxable persons within the EU
7. Occasional deliveries of new vehicles to other EU Member States
8. Receipt of services (Sections 88 and 89 of the VAT Law)
- Application of VAT (including reverse VAT)
The VAT Law defines general and VAT “reverse” payment arrangements for transactions carried out between locally registered taxpayers.
General application of VAT
1. Suppliers/providers of goods or services must issue a VAT receipt to recipients of goods or services indicating:
- Value of goods or services supplied
- VAT rate of 21 %
Suppliers/providers must enter the transaction value and estimated amount of VAT payable to the state in the taxpayer’s VAT return.
2. Recipients of goods/services:
- Pay the supplier the cost of goods/services and the amount of VAT indicated on the receipt
If goods/services purchased are intended to be used for taxable business transactions, the amount of VAT indicated on the invoice must be included in the VAT return as deductible input tax. If goods/services received are not intended to be used for taxable business transactions, the VAT paid must be included in the VAT return as a non-deductible input tax.
Recipients of goods/services may also be exempt from VAT payment but do not have the right to deduct input tax.
Reverse VAT payment procedure
VAT “reverse” payment procedure applies to categories of goods or services specified in the Value Added Tax Law, if the supplier of goods/provider of services and the recipient of goods/services are registered VAT payers and the transaction has been carried out in Latvia.
Reverse VAT procedures apply for supplies and services:
- Timber and related services
- Scrap metal and related services
- Construction industry services
- Mobile phones, laptop computers, tablets, integrated circuit devices and video games consoles
- Cereals and industrial crops
- Untreated precious metals, precious metal alloys and metals clad with precious metals
- Ferrous and non-ferrous semi-finished metals
There are also two specific payment arrangements for VAT:
- VAT Special Regime (MOSS) applicable to electronic communications, broadcasting, and electronically supplied services
- Special tax treatment in goods import transactions - deferral of payment of duty until it is declared in the tax return of the corresponding tax period
- Exclusion from the VAT register
Exclusion from the SRS register of VAT payers takes place:
Upon the initiative of the taxpayer
- A registered taxpayer (except VAT group) applies for exclusion;
- A registered taxpayer, which is a state or local government institution or a municipality, applies for exclusion, stating that it does not intend to receive construction services or to carry out taxable transactions in the future;
- A VAT group applies for exclusion from the SRS VAT payer register and 12 calendar months have elapsed since the date of registration of the VAT group.
A registered taxpayer is automatically excluded from the VAT register when the period for which s/he has previously registered has expired.
Upon the initiative of SRS
SRS excludes a taxpayer from the VAT payer register if any of the circumstances specified in Section 73 of the VAT Law occurs.