VAT registration in Latvia

Summary

Overall, an entity must register for VAT purposes in Latvia in the following situations:

• If the entity’s taxable supplies in Latvia exceed 50,000 EUR within 12 months
• Its intra-community acquisition value exceeds 10,000 EUR
• The entity is engaged in distance sales (B2C) and the value of goods supplied exceeds 10,000 EUR
• The entity supplies or receives cross-border services, where such services are deemed to be supplied at the place of the recipient of services.

If you are doing business in Latvia, you should evaluate the possible requirements for Latvian VAT number registration in Latvia. Also, if an entity should obtain a VAT number in one of the EU countries (e.g. distance sales), it can choose Latvia. The regulations for VAT in Latvia are determined by the EU VAT Directive which is adopted in Latvia, as well.

If you want to learn more about the benefits of registering a VAT number in Latvia, please click here.

Who is liable for the VAT registration in Latvia

In general, the following persons have to be registered with the State Revenue Service Value Added Tax (VAT) Taxable Persons Register (Article 56):

• individuals (natural persons)
• legal entities
• partnerships
• an authorised individual (natural person) of a group of persons, if the group of persons is operating based on an agreement for the performance of joint economic activity
• a VAT group, indicating the principal undertaking of the VAT group which undertakes the commitments to submit a tax return on behalf of the VAT group and perform other obligations of a registered taxable person
• a fiscal representative

Overall, a taxable person must register as a VAT payer before the transaction(Article 55), provided that it:

• carries out taxable transactions in Latvia, or
• receives the services inland the place of supply of which is deemed inland (under Article 19 (1) of the VAT Act), or
• supplies the services, the place of supply of which is another Member State and to which the recipient of services is responsible for payment of taxes (Article 19 (1) of the VAT Act).

Nevertheless, a taxable person has the right to register with the State Revenue Service VAT payers register for a definite period, which indicates carrying out taxable transactions in the submission for registration according to Article 66 (1) of the VAT Act.

When does a foreign company have to apply for a Latvian VAT number?

Latvian VAT is a part of the EU VAT system, therefore, the VAT registration rules in Latvia are similar to those in other EU countries. Consequently, in Latvia, you are likely to register your VAT number if you are doing VAT-taxable business activities in Latvia.

For foreign companies VAT registration in Latvia is highly expected in the situations below: the company is purchasing, producing and selling the goods in Latvia it is importing goods in Latvia in case of distance selling, i.e. if the foreign entity sells the goods to consumers in Latvia using the internet or catalogues a foreign company holds the stock in warehouses or on consignment stock in Latvia a foreign company provides training/exhibition events with paid tickets. it provides supply, installation and maintenance of equipment in some situations.

If you need assistance with VAT, send us the request by clicking below:

 

The registration threshold for foreign companies is zero, except for distance selling where it is 10 000 euros.

More detailed VAT registration in Latvia requirements for EU taxpayers and third countries are described below.

Specific VAT cases for the EU companies

The EU VAT payer must register for VAT in Latvia if it supplies goods to a non-taxable person and assembles or installs them domestically. Therefore, the EU taxpayer must register a VAT number in advance with the VAT register of the State Revenue Service irrespective of the value of the goods.

However, in case of distance sales of goods, the EU VAT payer must register in the VAT register of the SRS:

• within 30 days when the total value of supplies in the preceding or current calendar year has reached  EUR 10 000;
• before the sales, if the goods are subject to excise duty (alcohol, gasoline, tobacco etc.), the value does not matter.

In addition, the EU VAT payer has the right to register with the VAT register also before reaching the above threshold.

Finally, the EU VAT payer may have a fixed establishment in Latvia.  The “fixed establishment” means sufficient business representation in Latvia using labour and technical resources. Such establishments should also register as VAT payers before commencing the sales. However, please do not confuse “fixed establishment” with “permanent establishment”. The latter defines the corporate income taxpayer, although the permanent establishment itself may trigger registration for VAT.

When the EU companies are allowed to skip the VAT registration?

While falling under the general VAT registration rule, nevertheless an EU VAT payer is entitled not to register with the VAT registry if it:

1. supplies goods or services in respect of which the tax is payable to the State budget by the recipient of the goods or services;
2. carries out only supply transactions in a customs warehouse or free zone with the EU goods being exported and non-EU goods;
3. carries out transactions of supply of non-EU goods or the EU goods subject to export between domestic customs warehouses or free zones to other warehouses or free zones of another EU country;
4. the VAT registration is not necessary also if it carries out a supply of goods from another Member State to a warehouse in Latvia and all the following conditions are met:

• • the EU VAT payer shifts the goods from the other Member State to the inland warehouse for delivery at a later stage (within 12 months), to a VAT payer who is entitled to take ownership of those goods;
  • the EU VAT payer  does not have a place of business and a permanent establishment in Latvia;
  • the consignee of the goods is the VAT payer and the supplier knows the VAT number of the consignee.

There are other specific exemptions available.

VAT registration depends on the taxpayer’s status and the type of business

Individuals and legal entities

The EU VAT payers

 

Third-country taxpayers or permanent establishment

VAT Group

Fiscal representative

Public person

Any person

 

What documents are necessary for VAT registration in Latvia?

To register for the VAT, the company has to fill out  “Application of Taxpayers of another Member State and of a Third Country or Third Territory for Registration in the State Revenue Service’s Value Added Tax Payers Register”.

The following documents are required for the VAT number registration:

• the foreign company’s registration certificate (copy)
• an extract from the respective Commercial Register listing the persons authorized to represent the company
• the foreign company’s VAT (or similar tax) registration certificate (copy)
• the power of attorney (if you authorize someone to do the registration for you). A power of attorney should be signed by a person authorized to act on behalf of the foreign company and should be notarized (or signed with an electronic signature).

Also, the following information is required (as it usually does not show up in the above documents):

The names, positions, personal identification codes or dates of birth, contact addresses and contact telephone numbers of the persons authorized to act on behalf of the foreign company (i.e., board members or other persons with signature rights).

• information on the current bank accounts in the Latvian and foreign banks, which are used for the payments for the transactions to be carried out under Latvian VAT registration number (name of the credit institution, BIC / SWIFT code, account number, currency)
• The share capital of the foreign company (amount, shareholders)
• contact persons in Latvia (name, surname, contact address and contact telephone number).

VAT registration procedure

The tax authority in Latvia assesses the registration application. As a result, the SRS decides whether to include the applicant in the VAT payers registry or not within 15 business days after receiving the application. A person is considered registered with the SRS Register of VAT register upon issuing a registration certificate.

If the SRS  decline the registration, it will promptly send this decision to the applicant within 5 business days. An explanation always accompanies the refusal. Consequently, the applicant, in this case, has the right to amend their registration application by eliminating mistakes or adding additional information and resubmitting it to the SRS, or to appeal it (which happens very rarely in practice).

What are the nuances of the VAT registration for the OSS/IOSS regime

One Stop Shop (OSS) is a union or non-union regime, a special VAT regime for goods and services provided by VAT payers. Import One Stop Shop (IOSS) is a simplified VAT payment regime designed for the distance sale of goods imported from third countries or territories, whose fair value does not exceed 150 EUR.

Why is it advantageous to register for the OSS/IOSS regime? The VAT registration with the special regime (OSS/IOSS) allows taxpayers to report VAT – which is usually required to be paid in multiple European Union (EU) countries – only in one EU country.

The companies engaged in e-commerce, such as trading goods and services online directly to consumers, can use this simplified VAT payment regime, and not register as VAT payers in each member state where their customers are located.

How to stop the VAT registration?

The VAT number ceases to exist upon the exclusion from  the VAT payer register which could be either voluntary, automatic or by the tax authority’s initiative, as follows:

• Voluntary action by the taxpayer:
  • A registered taxpayer (excluding VAT groups) may request exclusion.
  • Public institutions registered taxpayers can apply for exclusion by declaring their intent not to engage in construction services or taxable transactions in the future.
  • A VAT group can apply for exclusion from the SRS VAT payer register after a minimum of 12 calendar months have passed since their initial registration.
• Automatic Exclusion:
  • A registered taxpayer is automatically removed from the VAT register when the previously registered period has lapsed.
• SRS Initiative:
  • The SRS has the authority to exclude a taxpayer from the VAT payer register if any circumstances outlined in Section 73 of the VAT Law materialize (basically, the VAT payer is not observing the VAT compliance rules.

When the VAT number is not sufficient

If your activities extend beyond the pure VAT regulation and create a substantial business presence in Latvia, you may consider opening a company, branch or representative office in Latvia. You will find more information regarding the available business forms in Latvia in the video below or here.

VAT refund to the EU companies

Suppose the foreign company does not carry out the business in Latvia but has incurred some business expenses here. In that case, the VAT refund may be an option instead of the VAT registration.

Accordingly, the foreign taxpayer that has not been engaged in business in the Republic of Latvia submits an electronic application for a VAT refund to Latvia by applying through the electronic platform established by the Member State where the taxpayer conducts business.

The updated Value Added Tax Law, effective from January 1, 2013, stipulates, in alignment with Paragraph 2 of Article 113 of the VAT law and Sections III and IV of the Cabinet of Ministers Regulations No. 1514 dated December 17, 2013, titled “Procedure of Application for the Refund of VAT in other Member State of the European Union and the Procedure of Refunding the Value Added Tax to a Taxable Person Established in other Member State of the European Union” (applicable from January 1, 2014), that the reimbursement of VAT to legal entities of European Union Member States in the Republic of Latvia follows the submission of a refund application in the Member State where the taxpayer operates. This application is then electronically transmitted to the State Revenue Service by the competent tax authority of the other Member State.

Basic VAT Facts in Latvia

 

If you require VAT registration in Latvia or other tax compliance services, please call +371 29274911 or e-mail info@breicis.com.