On 1 January 2021 new tax laws, including new VAT rules and amendments to the existing tax laws entered into force in Latvia. The most important changes include the introduction of a unified tax account for all regular domestic taxes, new payment deadlines, extended temporary reduction of VAT rates for certain fruit, berries, vegetables and COVID-19 vaccines and new VAT rules for e-commerce.
New tax payment deadline and payment details
In order to ease administration for Latvian companies, since 1 January 2021, all tax payments, including VAT, must be paid to a new unified tax account of the Latvian tax authorities (State Revenue Service, SRS). According to the new Latvian VAT rules, the payment deadline for all regular domestic taxes administered by the SRS is the 23rd day of the month. It means that since 1 January 2021, the new payment deadline also for VAT (which is calculated by submitting regular VAT returns) is the 23rd day of the month following the reporting period (it was previously the 20th day of the following month). When submitting a VAT payment notification (e.g. for purchasing a new means of transport from another EU country or for VAT payable to the budget after deregistration from the Latvian VAT register), VAT must be paid within three working days.
Regarding the tax payments administered by the Latvian customs authorities (import duty, import VAT and excise duty), the existing budget accounts still have to be used. The respective payments to the unified tax account will have to be made only as of 2023.
Input VAT refunds
According to the new VAT rules also a new overpayment refund procedure has to be applied. In the event of an excess of input VAT over output VAT, a refund of VAT must be made by the tax authorities to a taxpayer within 30 days after filing a VAT return. Only in certain cases do the tax authorities have the right to delay the refund of the overpaid VAT. (For example in cases of tax audit or request for additional information).
Reduced VAT rates
The period of application of the reduced VAT rate of 5% for the supply of certain types of fresh fruit, berries and vegetables, including washed, peeled and packaged types, uncooked or otherwise prepared (for example, frozen, salted, dried) is extended until 31 December 2023. Previously, it was set until 31 December 2020.
Pursuant to the new Latvian VAT rules, since 1 January 2021, a reduced rate of 0% VAT applies to the supply of the COVID-19 vaccine, registered in accordance with pharmaceutical regulations and in vitro tests recognised in the European Union and to the supply of services closely related to that vaccine and tests. The provision will be valid until 31 December 2022.
New VAT rules on e-commerce
Latvia has implemented new VAT rules of e-commerce, in accordance with the amendments to Directive 2006/112/EC and will start to apply them as of 1 July 2021. The new rules also include that import VAT will be due on all low-value goods imported into Latvia from non-EU countries (currently, the importation of goods for personal use with a value not exceeding EUR 22 is exempt from VAT).
If you would like to know more about the new VAT rules in Latvia, please visit the homepage of Sorainen, the exclusive partner of WTS Global in Latvia.