Real estate related services

1 January 2017 the rules determining application of the value added tax (VAT) for real estate related services have entered into force. The said rules are defined in the European Union (EU) Council Implementing Regulation No. 1042/2013 thus amending Regulation No.282/ 2011 with regard a place of service delivery. The regulation in Latvian is available at the following link: http://publications.europa.eu/lv/publication-detail/-/publication/842df1fb-3e0c-11e3-a247-01aa75ed71a1/language-lv.The Regulation directly applies and explains relevant application of the provision of VAT Directive. The legal provisions included will not be re-written in VAT Act of Republic of Latvia. Thus, taxpayers should be aware of the existence the said regulation and related provisions.

The Regulation provides a real estate definition that is binding for VAT application purposes of VAT tax payers in Latvia and other EU Member States. As well, it provides a list of services which are deemed to be related to real estate and services not being considered as such.

In addition, the extensive clarification for application of the said regulation is prepared by EU Commission Taxation and Customs Union Directorate General [1]. A translated version of it in Latvian is published in the web site of the State Revenue Service (SRS) at the following link: https://www.vid.gov.lv/sites/default/files/veidlapas_un_iesniegumi/pievienotas_vertibas_nodoklis/ek_pvn_ni_vadlinijas.pdf.

New reverse for VAT payment procedure

As of 1 January 2017, the reverse procedure for VAT payment related to raw precious metals, precious metal alloys and metal clad with precious metal supplies is introduced in the VAT Act. The list of goods covered by the new procedure can be found in Article 143.3 of the VAT Act.

New deduction limit of input tax

Followingly, taxable persons will not be entitled to input tax deduction also on a purchase of truck, leases and import, having a weight of less than 3000 kg registered as a cargo van which have more than three seats (including the driver's seat) if its value without VAT exceeds 50 000 EUR. As of 2017 such cars are also regarded as representative vehicles in view of the Law "On Corporate Income Tax". The limitation is extended to car maintenance costs, including repairs and fuel. The exceptions when taxpayers are exempt of the said restrictions are referred in Part 3 of the Article 100 of VAT Act.

Tax period and VAT reporting modifications

The law excludes a provision of half-yearly tax period thus there are only two tax periods i.e., a calendar month and quarter as of beginning of year 2017. The quarterly tax period applies to state and local authorities or municipalities that are registered as VAT payers for obtaining construction services.

Whereas, agricultural product processors are waived to submit SRS a separate report for the fiscal year in relation to agricultural production quantity and value received by each farmer. In order to reduce the administrative burden, a number of VAT return supplements are reduced, refusing from the report on "Value of the goods delivered broken down by free ports and special economic zones."


[1] http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/where-tax_en#new_notes. Explanatory notes on EU VAT place of supply rules on services in relation to immovable property enter into force in 2017.