VAT rates in Latvia: Key information

Value Added Tax (VAT) in Latvia is a crucial element of the tax system that impacts both businesses and consumers. The country has four different VAT rates, including standard, reduced, and zero rates for specific types of transactions. This article will explore the details of VAT rates, registration rules, filing obligations, and VAT refund procedures in Latvia.

VAT rates in Latvia

Latvia has four different VAT rates, each with specific applications tailored to the type of goods and services:

1. Standard rate (21%)
The standard VAT rate in Latvia is 21% and applies to most goods and services that are not covered by other reduced rates. This is the most commonly used rate and covers a wide range of products and services.

2. First reduced rate (12%)
The 12% rate applies to products and services such as:

• Medicines and medical products, including those specialized for people with disabilities.
• Newspapers, magazines, and printed books.
• Baby food.
• Hotel services.
• District heating.

3. Second reduced rate (5%)
The 5% reduced VAT rate is mainly used for locally produced food, particularly vegetables and fruits.

4. Zero rate (0%)
The zero VAT rate covers services related to intra-community and international transport. This means that the transportation of goods and passengers between EU countries and beyond is exempt from VAT, facilitating trade and mobility within the European single market.

The current VAT rates in other European countries can be found here.

VAT registration in Latvia

VAT registration in Latvia is required for businesses from other countries that:

• Import or export goods to or from Latvia.
• Buy and sell goods within Latvia.
• Provide services or sell goods from Latvia to private recipients in other EU countries.
• Store goods in Latvia.

For businesses from outside the EU, VAT registration requires appointing a tax representative in Latvia. VAT registration can be done online, by email, in person at the tax office, or at the regional Business Register Office. Required documents include an application for registration, a copy of the company’s articles of association, proof of registration in the commercial register, and evidence of business activities in Latvia.

VAT declarations

VAT returns in Latvia must be submitted by the 20th day of the month following the reporting period. New taxpayers are required to submit monthly returns for the first six months. Quarterly returns can be filed if annual turnover does not exceed EUR 45,000. An annual VAT return is only required in specific cases, such as for financial services or annual corrections.

Reverse charge mechanism

In Latvia, the reverse charge mechanism is applied to intra-community transactions and certain domestic transactions, such as the supply of construction goods and property-related services. The aim of this mechanism is to simplify reporting and prevent VAT fraud.

VAT refunds in Latvia

VAT refunds in Latvia are available for businesses that make purchases related to their economic activities. This requires submitting electronic refund applications after filing VAT returns. The standard processing time for refunds is 30 days, although it may be extended if additional inquiries are made by the tax authorities.

Penalties for non-compliance

In Latvia, as in many other countries, penalties are imposed for violations of VAT regulations to ensure proper compliance with tax obligations. Here is a description of the various penalties:

• Penalty for late VAT registration

Businesses that fail to register for VAT within the required time may face a fine ranging from EUR 50 to EUR 350. This penalty is designed to encourage timely tax registration.

• Penalty for late VAT payment

In case of delayed VAT payment, the taxpayer may be subject to a penalty of up to 30% of the unpaid amount. Additionally, interest for late payment is charged at 0.05% of the unpaid amount for each day of delay.

Intrastat thresholds in Latvia

In Latvia, Intrastat thresholds are set as follows: for import value, the basic threshold is EUR 350,000, and the detailed threshold is EUR 5 million. For export value, the basic threshold is EUR 200,000, and the detailed threshold is EUR 7 million. Intrastat declarations must be submitted monthly by the 10th day of the month following the reporting period. If the deadline falls on a weekend or public holiday, it is moved to the next working day. If thresholds are exceeded in a given month, businesses are required to start submitting Intrastat declarations from the month in which these limits were exceeded.

If you want to learn more, check out our article: New Intrastat Thresholds in Latvia in 2024.

Summary

Understanding VAT rates, registration rules, filing obligations, and VAT refund procedures is crucial for any business operating in Latvia or working with Latvian partners. Complying with tax regulations and timely filing of returns can help avoid issues with tax authorities and financial penalties. Businesses, especially those operating outside the EU, should also consider working with a tax representative to effectively manage all VAT-related obligations in Latvia.