To facilitate the application of value added tax (VAT) to small businesses offering services on foreign platforms, on Thursday, 12 December, the Saeima adopted amendments to the Value Added Tax Law in the final reading.

Until now, entrepreneurs wishing to periodically offer guest accommodation services faced restriction in using foreign platforms to offer such services. They had to register as VAT payers and undergo a number of other administrative procedures. This constituted a significant administrative burden for small businesses, whose annual turnover mostly falls below the €50,000 threshold for VAT registration.   

To support small businesses, the Saeima has amended the Law providing a special procedure for registering with the State Revenue Service as a value added tax payer for businesses that wish to receive services abroad, inter alia through booking.com, but do not need to register as VAT payers under the general procedure. The business will be issued a VAT registration number with a special reference, which can be used exclusively for the payment of VAT on services received from VAT taxable persons in other European Union (EU) member states or third countries and territories.

These companies will not have to pay VAT on their domestic VAT transactions unless they register on the VAT register of the State Revenue Service under the general procedure. The amendments also stipulate that VAT payers registered under the special scheme will not be able to deduct input tax on goods purchased and services received for the purposes of their economic activity.

The amendments furthermore stipulate that VAT taxable persons registered under the special scheme will not be required to submit a VAT return for tax periods. Value added tax on services received in another EU member state, third country or territory, as well as on the purchase of goods, will have to be paid by submitting a VAT payment notification. VAT taxable persons registered under the special scheme will not be required to issue a VAT invoice for the transactions they enter into.

The special scheme will apply from 1 July 2025.

The VAT Law has also been amended to transpose the requirements of the EU Directive on simplifying the VAT application process for small and medium enterprises, revising the application of the zero-rate in transactions with diplomatic and consular representations registered in Latvia, clarifying the definition of the purchase of goods in the EU, clarifying the place of supply of services for cultural and sports events, and improving the VAT legal framework in line with EU requirements.

Saeima Press Service