Tax news January 2020

VAT Law

On 1 January 2020, amendments to the VAT Law become effective.

Delivery of goods to a warehouse in the EU Member State.

Value Added Tax Law (hereinafter — VAT Law) has been supplemented with Section 8¹  Delivery of goods to a warehouse in another Member States that includes conditions that the VAT payer has to comply with not to have to register in another Member State if conducting transportation of goods to a warehouse in another EU Member State and performing further deliveries later. The conditions are as follows:

·       Before transportation of goods is started the recipient of goods and VAT registration number have to be known;

·       A registered taxpayer who sends or transports goods from Latvia to another Member State does not have any place of business or other permanent structure established in the other Member State;

·       Transportation of goods have to be registered with a special register and delivery of the goods has to be declared in a report on deliveries of goods and services provided in the territory of the European Union.

The new provision also means that the supplier of goods is not obliged to register with the VAT payers’ register of the other EU Member State to be able to declare purchase of goods in the territory of the European Union. If these conditions apply, a taxpayer from another EU Member State is also not obliged to register as a VAT payer in Latvia.

If the condition in regard to deliveries of goods to a warehouse in another Member State does not apply (for example, the goods will not be transported from the warehouse within 12 months), the transaction will be requalified as a delivery of goods in the territory of the EU, therefore the supplier of goods has to register with the VAT payers’ register of the other Member State and declare purchase of goods in the territory of the EU and further delivery of goods.

Chain Transactions

Pursuant to Directive 2018/1910, chain transactions refer to successive supplies of the same goods which are subject to a single intra-Community transportation between two Member States. Consequently, transportation of goods is applicable to only one delivery within the chain of transactions and the VAT rate of 0 % to a delivery of goods in the territory of the EU can be applied only to one part of the chain.

Pursuant to the general provision, the VAT rate of 0 % is applicable only to the delivery of goods performed by the intermediary of the chain of transactions. When the intermediary of the chain of transactions has notified the supplier of goods of its VAT registration number in the Member State from which goods are sent or transported, the VAT rate of 0 % is applicable to the delivery of goods performed by the intermediary of the chain of transactions.

Considering the above, the VAT Law has been supplemented with Section 43¹ on applicability of 0 % rate in a chain of transactions.

Conditions to apply the VAT rate of 0 % 

The VAT rate of 0 % will not be applied to delivery of goods in the territory of the EU, if the supplier of goods has not submitted a report on deliveries of goods and services provided in the territory of the EU, or in the report, accurate information on the respective transaction has not been provided.

The conditions and period for submission of report on deliveries of goods and services provided have been specified. Monthly report shall be submitted if one of three criteria applies: delivery of goods has been performed, service has been provided or delivery of goods has been performed to a warehouse in another EU Member State.

Pursuant to conclusions drawn in Case No. C-401/05 of the European Court of Justice, the rights of taxpayer to apply release of VAT to such transactions as services provided by the dental technicians and dental hygienists, as well as deliveries of dentures performed by dentists and medical services. Namely, before it was stipulated that VAT is applied to these transactions if those are provided to patients. Amendments provide that VAT release is applicable regardless of the status of the recipient of goods or services.

Law On Taxes and Duties

On 13 January 2020, amendments to the Law On Taxes and Duties became effective whereby the regulatory framework of the   Latvian Code of Administrative Violations was overtaken in regard to violations in the sphere of taxes and the law was supplemented with Chapter XVI stipulating sanctions for the following violations:

Moreover, a new administrative violation has been specified: performing prohibited transactions, if taxpayer’s economic activities have been suspended.

 The law will become effective on 1 July 2020 along with amendments to the Latvian Code of Administrative Violations (as of 1 July 2020 Law of Administrative Responsibility).