In March 2015 the Latvian State Revenue Service (SRS) has published VAT guidelines “For determining the place of supply of real estate related services”.
SRS instructions do not include references to the legislation on the basis of which the guidance has been prepared. However, it is clear from the content of the instructions that SRS prepared them on the basis of EU Council Regulation No. 1042/2013. In respect of the services, whether or not related to real estate, the Regulation will be valid only from 1 January 2017.
The place of supply of services should be determined on the basis of the VAT Law. The Article 25 of the Law provides that the place of supply of services connected with immovable property is the place where the property is located, referring to some services which are considered to be related to real estate.
Unfortunately, the list of the services that from the point of view of SRS are related to real estate, is significantly expanded in comparison with the Article 25 of the Law and current tax practice. For instance, legal services rendered in connection with the transfer of ownership, purchase contract preparation and similar services are related to real estate, in SRS opinion.
Although SRS guidelines are not legally binding for taxpayers, the SRS auditors use them and follow them when checking the accuracy of tax calculation. In case of doubt and to avoid disputes with the SRS tax auditors, we recommend to submit to the tax administration a request for binding ruling.
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