Latvia Tax News: New Value Added Tax Law in force

The Parliament of Republic of Latvia (Saeima) on November 29, 2012 in the final reading adopted Value Added Tax Law, which from January 1, 2013 replaces the Law On Value Added Tax in Latvia, which was in force from 1995, had been amended 34 times and no longer met current needs.

The new law puts into effect clear and transparent tax policy, creates an accurate and with the European Union regulations harmonized tax base by eliminating various interpretations of the laws.

VAT Law establishes tax payers, taxable transactions, taxable value and the place of delivery of goods and providing services, tax rates and tax exemptions.

The Law also establishes requirements for tax payments, tax administration, tax payment policy in the State budget, rules for pretax deduction and tax refund, as well as other provisions for tax implementation inland. Certain responsibility for violation of the VAT Law is established.

The existing regulatory provisions are editorially improved and amended in the VAT Law, the terminology is clarified according to VAT Directive, as well as in the Law are incorporated several provisions of the Rules of Cabinet of Ministers.

The Law also introduces new provisions, e.g. the term "taxpayer" instead of earlier "taxable person", improved the regulation for distance selling transactions and in the new wording is clarified the former term "auxiliaries service". In the Law are also created several new chapters, which include norms, such as for determining the moment of transaction of acquisition and delivery of goods.

From the former regulation is excluded the term "triangular transaction", developed and systematized rules for deduction and correction of pretax, as well as clarified the term "with VAT imposable value", stating that it is a remuneration for delivered goods or provided services, not the market value.

In the Law are developed and consolidated the former provisions relating to the amount of VAT payable to the State budget and persons who pay it.

The new term "low-value gift" is introduced, as well as are established the rights for acquisition of this gift to deduct the pretax.

In order to facilitate the administrative procedures, in the Law are included optional provisions. VAT shall be imposed for transactions of used real property; the adjustment of pretax shall be not performed in cases of destruction or theft of the property, as well in cases of receiving low value gifts performing economic activities.

In individual cases the purchaser or recipient of the service shall be able to issue a VAT invoice himself, as well as the Law simplifies requirements for preparing and sending electronically VAT invoices.

Customs formalities are facilitated and for shipments of imported goods (the value of what does not exceed EUR 22, instead of former EUR 10) custom tax shall not be paid. Therefore the administrative burden of mail recipients is diminished and resources of customs payments control are appropriately used.

The new Law implements the standardized overview of the use of the real property, as well as establishes the opportunity for VAT payer to register in the Tax authority for definite period of time.