Latvia Implements the New EU SME Scheme
Latvia implements the new EU VAT scheme for small and medium enterprises, in alignment with VAT Directive.
On October 15, 2024, the Latvian Cabinet of Ministers approved a draft bill introducing important amendments to the country's Value Added Tax (VAT) Law. These changes aim to simplify registration requirements for small taxpayers and enhance VAT compliance for businesses with international operations in alignment with European Union Directives.
SME VAT Scheme in Latvia
Under the new provisions, Latvian taxpayers whose total value of goods and services supplied within Latvia during the calendar year does not exceed the EUR 50,000 threshold will not be required to register for VAT. This threshold includes both taxable and non-taxable transactions but excludes fixed assets and intangible investments. If a taxpayer exceeds the threshold by up to an additional EUR 5,000, they have the option to delay registration until the end of the calendar year.
Also, the EUR 50,000 VAT registration threshold would be calculated based on the calendar year instead of the previous 12 months.
Adoption of the New EU SME Scheme in Latvia
Latvia introduces the special procedure for Latvian taxpayers who wish to apply for the SME VAT exemption in other EU Member States. To qualify for this exemption, the taxpayer's total turnover in the EU must not exceed EUR 100,000 annually. Additionally, the value of goods and services supplied in another EU country cannot surpass the exemption threshold set by that country.
In order to claim the exemption, Latvian taxpayers must notify the State Revenue Service through the Electronic Declaration System, providing detailed information about their activities both within Latvia and in other Member States. This notification must include data such as the total value of supplies made in each country, as well as the taxpayer's registration number in the relevant Member State.
Take a look at the new EU SME scheme introduced at EU level. Latvia and other EU countries must implement these changes by 2025.
Once the notification is received, the State Revenue Service will evaluate whether the taxpayer meets the conditions. If approved, the taxpayer will be assigned a special "EX" registration number, which can only be used for the exemption in another EU Member State. If the EUR 100,000 turnover threshold in the EU is exceeded, the taxpayer must notify the State Revenue Service within 15 business days, and the exemption will be revoked.
Taxpayers who apply for the exemption must continue to notify the State Revenue Service of any changes to their status, such as the initiation or cessation of the exemption, and submit quarterly reports detailing their operations in each EU Member State.
These amendments offer greater flexibility to small Latvian taxpayers and those with international operations, while ensuring compliance with EU tax regulations.
Take a look at the draft legislation, which also implements the new place of supply rules for virtual live events.
Learn more about the new place of supply rule in the EU for access to virtual events.
How can Marosa help you?
At Marosa we understand the complexities of staying compliant with ever-changing tax laws. Our team of experts is here to help clients navigate the new VAT regulations, ensure proper registration, and maximize available exemptions. We provide tailored solutions to help businesses meet their tax obligations efficiently, minimizing risks and optimizing their processes. Let us support you in achieving seamless VAT compliance.