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New VAT procedure for supply of electronic goods

Special application scheme for VAT, so-called VAT reverse charge mechanism on transactions on electronic goods i.e., mobile phones, tablets, laptops and integrated circuit devices including microprocessors and central processing units, shall enter into force according to the amendments to the VAT Act as of 1 April 2016.

The regulatory framework of the VAT Act in Latvia has been implemented in accordance with the Directive 2006/112/EC of European Council on 28 November 2006 that includes optional provision that allow Member States to introduce the reverse charge mechanism of relevant goods until 31 December 2018.

The VAT reverse charge mechanism implies that VAT on the supply of goods shall be paid by the consignee into the budget if the supplier of the goods and the consignee are registered in the Latvian VAT Register.

According to amendments of the VAT Act i.e., new Article1431 for the application of the VAT reverse charge procedure for the electronic goods, a payment for purchased goods must be carried out using non-cash settlement. The general VAT procedure shall be applied when paying in cash, by payment card that does not belong to a consignee, a taxable person, or using a gift voucher.

If the supplier of electronic goods is not able to verify that a payment card of the buyer's representative belongs to a registered VAT payer, the seller applies VAT according to general provisions or issues advance invoice applying special VAT procedure for payments that should be made by bank transfer.

The procedure for filling VAT returns and it appendixes for transactions applicable to VAT reverse charge procedure remains unchanged except Part I of appendix VAT 1 that will be supplemented with transaction code "R4" that should be indicated for transactions related to electronic goods.


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