VAT – Value Added Tax is a consumption tax, which is included in the price of goods and services and is actually paid by the final consumer. The standard VAT rate in Latvia is 21%, but a reduced VAT rate is also set for specific groups of goods and services. A company, whether established in another EU Member State or in a non-EU country, becomes liable to register for VAT in Latvia under the Latvian VAT Law if certain conditions are met. Here we outline the most common scenarios.
For Latvian companies the obligation for VAT registration is triggered when the total value of taxable supplies and certain exempt transactions exceeds 50000 EUR within a 12-month period. However, a one-off transaction that is not carried out as part of the company’s economic activity may be treated as an exception and does not create a VAT registration requirement.
In the case of non-domestic businesses, VAT registration in Latvia is required where taxable supplies of goods or services are carried out in Latvia. This includes situations where:
- The place of supply of goods or services is in Latvia;
- Goods are installed or assembled in Latvia;
- Goods are stored in Latvia for subsequent sale (for example, in a warehouse, fulfilment centre, or as consignment stock);
- Goods are imported into Latvia for business purposes.
VAT registration also is required:
- Where a company carries out intra-EU distance sales of goods exceeding the 10000 EUR annual threshold (applicable in EU-wide).
- Where the value of intra-EU acquisitions of goods exceeds 10000 EUR per calendar year.
In addition, a company should register for VAT when it receives electronic services from suppliers established in other EU Member States or in third countries, such as digital advertising or platform services provided by companies like Facebook or Instagram. Here it is important to note that since 2025 small local and EU businesses can apply for a special optional VAT regime. VAT will only have to be paid on received services or purchased goods and input tax cannot be deducted. The most important criteria for this scenario are:
- the total value of goods supplied, and services provided, i.e. turnover, within the territory of the Republic of Latvia in a calendar year has not exceeded 50000 EUR;
- no services are provided to taxpayers registered in other European Union Member States.
VAT registration is mandatory in Latvia even if your turnover is below the threshold if you receive services from a foreign taxable company (EU or non-EU) and the place of supply is Latvia.
Furthermore, if a supplier from a third country provides goods that are assembled or installed in Latvia to a person who is not VAT registered, the supplier must register in the Latvian VAT register before performing the transaction, irrespective of the value of the goods.
In conclusion, VAT registration obligations in Latvia may arise in a variety of situations, both for domestic and non-domestic businesses. The rules are technical and depend on the nature of the transaction, the place of supply, and applicable thresholds. We encourage businesses carefully monitor their activities to ensure timely registration. If you would like to discuss your specific situation or require assistance with VAT registration in Latvia, our tax team is ready to support you.
