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Value Added Tax (VAT)

Value Added Tax is a consumption tax applied in all European Union member states. Goods and services bought and sold for the use or consumption in European Union territory are covered by tax.
Similarly, import of goods and services from the third countries or the third territories are covered by tax in the same way. In turns, export of goods and services is released from tax.
 Value Added Tax:
•    is a general tax applied to all commercial activities, including production and circulation of goods and provision of services;
•    is a consumption tax as it is finally calculated to the end user;
•    is calculated as percentage from the price of goods or service(s);
•    is collected in instalments as total of separate payments performed by persons involved in the chain of goods or services – tax payers. VAT registered tax-payers are authorized to have reduced the sum paid for goods and services (pre-tax) from the tax sum which they have received as compensation for delivered goods and services;
•    is calculated and paid in the state budget for the determined period – taxation period (in Latvia – one month).
The basic rate in the amount of 21% from the value of goods or services is applied in Latvia.
Value added tax is applied also for import of goods from the third countries or third territories. Today, the tax for import is applied in the same way as the customs duty, e.g., applying customs procedure – release for free circulation.
In the nearest future, it is planned to ease application of tax for import of goods – introducing „special tax regimen in import deals with goods”, that will allow to postpone the tax payment till its provision in VAT declaration of the respective period.
The most important legislative acts which regulate application of VAT are:
•    COUNCIL DIRECTIVE 2009/47/EC of 5 May 2009 amending Directive 2006/112/EC of 28 November 2006 on Total VAT System (published ES OV L 347, 11.12.2006, valid from 1 January 2007) as regards reduced rates of value added tax

•    LR Law on „Value Added Tax” (published in LV No.197, 14.12.2012, valid since 1 January 2013);

•    Provisions No 17 of the Cabinet of Ministers of LR of 3 January  2013 „ Order of Application of Value Added Tax Law Norms and separate demands for VAT payment and administration” (published in LV No 14, 21.01.2013, applicable since 1 January 2013);
•    Provisions No 691 of the Cabinet of Ministers of LR of 6 September 2011 „Regulations on tax debt guarantee for the clearance of goods” (published in LV No.143, 09.09.2011, valid from 10 September 2011).


To unify the application of value added tax in EU member states, European Commission has prepared VAT e-training program for entrepreneurs, officials and other interested in persons that can be uploaded from EC Tax and Customs Union General Directorate Internet home page, here:
http://ec.europa.eu/taxation_customs/common/elearning/vat/index_en.htm.

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