Tax news in july 2019

Several amendments to the Value Added Tax Law Coming into force in July 2019

• From 1 July the reverse value added tax (VAT) procedure shall not be applied to services related to metal goods any more, and the range of the metal goods applicable with the reverse VAT charge has also been reduced. Annex 7 to the Cabinet Regulation No. 17 “Procedures for Applying the Norms of the Value Added Tax and Individual Requirements for Payment and Administration of Value Added Tax” of 3 January 2013 stipulates the combined nomenclature codes of those ferrous and non-ferrous semi-finished metals deliveries of which shall be subject to the special VAT procedure also following 1 July. Amendments to the VAT Law explain that the reverse VAT charge shall be applicable to construction products and household electrical appliances until 31 December 2019; however, the Ministry of Finance has addressed the European Commission with a request to allow application of the special procedure also after 31 December 2019.

• Several new notions like “voucher”, “single purpose voucher”, and “multiple purpose voucher” have been introduced. “Voucher” is an instrument which is to be accepted as a compensation or partial compensation for delivery of goods or provision of services and which or the documents related to which, including the conditions of using such an instrument, specifies the goods to be delivered or services to be provided or the identity of the potential suppliers or providers. Single purpose voucher differs from a multiple purpose voucher with the fact that in case of a single purpose voucher the VAT rate applicable to the service or delivery of goods is known. A single purpose voucher can be, for example, a public transport season ticket, entrance fee to some entertainment or sports event. While a multiple purpose voucher would be a gift card at a shopping center, pharmacy, health care center, because it is not known at the moment of purchasing the gift card what VAT rate will be applicable to the services or goods purchased by the client. Section 11¹ of the VAT Law lays down the procedure for applying VAT to voucher transactions, Section 37¹ defines the taxable value, and Section 124 identifies the moment when the VAT shall be included in the VAT declaration.

To reduce the administrative burden of companies and promote the involvement of especially small and medium-sized companies in cross-border e-commerce transactions, Section 27 of the VAT Law has been amended specifying that the place of supply of electronic communications, broadcasting and electronically supplied services shall be determined in the service provider’s Member State if the total value of the cross-border service does not exceed 10,000 euro (excluding VAT).  The procedure for issuing of VAT invoice for electronic communications, broadcasting and electronically supplied services has been specified stating that the requirements of the identification country shall apply in such cases.

• From 12 July legal norms enter into force that will extend the rights of the State Revenue Service (SRS) to exclude registered VAT payers from the VAT Register, if the VAT payer has not declared any transaction during the last 6 calendar months at least or if the VAT payer changes all of its officials.

However, the SRS shall send a warning to the VAT payer before deciding on the exclusion of the taxpayer from the VAT Register; in the warning the SRS shall inform the taxpayer on its rights to exclude a registered VAT payer from the SRS VAT Register and invite the registered VAT payer to provide a written explanation of the actual conditions of the current situation. Similarly, the taxpayer will have the right to provide explanation to the SRS and/or to meet the SRS representatives in order to justify its necessity for the VAT payer status, within 20 days following the warning.
On the basis of Paragraph 35 of the Transitional Provisions, by 20 September 2019 the SRS shall only exclude those VAT payers from the SRS VAT Register who have been registered in the SRS VAT Register during 12 calendar months at least and have not identified any transaction in the VAT declarations for the last 12 calendar months by 20 July 2019. To exclude such a VAT payer from the SRS VAT Register, the SRS shall not be obligated to send a warning to the taxpayer regarding its exclusion from the SRS VAT Register.
More strict conditions for receiving permits for a special VAT regime applicable to import transactions have also been laid down.

On 1 January 2021, amendments to the procedure for paying personal income tax will enter into force.

On 21 May 2019, the Saeima adopted amendments to the law On Personal Income Tax. Most significant changes: