Global Daily Tax News, Latvia Legislates For VAT Registration Rule Changes, (Oct 11, 2024)

Latvia's Finance Ministry has drafted legislation to implement changes being implemented across the European Union to the VAT exemption scheme for small businesses from January 1, 2025.

Under EU law, member states may provide that supplies may be made free from value-added tax by a small business providing its annual turnover does not exceed a given threshold. As well as not being required to charge value-added tax on their supplies, small businesses may be exempted from certain or all VAT obligations relating to identification, invoicing, accounting, or returns. A major drawback of the exemption, however, is that, almost always, businesses may not claim back any value-added tax on their inputs.

Changes are being implemented across the EU to enable companies doing business across EU borders to benefit from the small business scheme in multiple states. Non-resident businesses doing business in Latvia will be able to benefit from the scheme, for instance, if their supplies fall below the Latvian monetary threshold and their EU-wide turnover does not exceed EUR100,000.

Latvia's Finance Ministry said, alongside the changes, Latvian VAT registration rules will change. Instead of Latvia's threshold being satisfied when a business's turnover exceeds EUR50,000 in the previous 12 months, businesses must calculate whether their turnover exceeded the threshold each calendar year. Businesses whose turnover during the year exceeds EUR55,000 will be required to register immediately, rather than from the next calendar year.

In addition, when calculating turnover, taxpayers will need to include not only turnover from transactions liable to VAT but also turnover from transactions not liable to VAT including transactions involving real estate, and turnover from financial and insurance services, the Ministry said.