Amendments made to the Value Added Tax for 2020
Amendments to the Value Added Tax (VAT) legislation entered into force starting 1 January 2020. The most significant changes affecting Latvia relate to the following:
- The procedure for the delivery of goods to a warehouse in another Member State (call-off stock);
- The application of a 0% VAT rate in a chain transaction; and
- The use of a VAT registration number in cross-border transactions.
New arrangements for the supply of goods to a warehouse in another Member State
New amendments related to call-off stock set out the procedure and conditions under which a supplier is not required to register for VAT purposes in another Member State of the European Union (EU). The call-off stock rules apply to the supply of goods to a warehouse with a single delivery in the country of dispatch and a purchase in the country of destination, both of which must be Member States of the EU and the purchaser of the goods must already be known.
It should be noted that the Latvian VAT Act rules related to call-off stock has been supplemented by some conditions that determine evidence for the application of a 0% VAT rate on intra-EU supplies. Registration in the VAT register is not required if the consignee of the goods has a valid VAT registration number in another Member State.
Changes to the Latvian VAT Act were made to define the conditions of application of the 0% VAT rate in chain transactions. Chain transactions are successive supplies of goods within the EU that are covered by a single transportation. In chain transactions only one link in the chain is eligible for the VAT exemption (0% rate).
Reverse charge in Latvia
As of the entry into force of the VAT amendments, the regulation on the application of the reverse charge procedure for the supply of construction products and consumer electronics and electrical household appliances was abolished as of 1 January 2020. This means that all goods will be subject to a 21% VAT rate starting 1 January 2020 because there was no transition period.
Alise Anda Dzintare