With the amendments to the law, it is planned to revise the existing relief, which allows SMEs, in compliance with a certain threshold, not to register in the VAT payer register of the State Revenue Service (SRS) and not to pay VAT.
Currently, SMEs can apply exemption from paying VAT up to a certain threshold only in their country. On the other hand, after the amendments to the law, SMEs that carry out transactions subject to VAT also in other European Union (EU) member states will be entitled to apply the VAT exemption of the relevant EU member state to small businesses, as determined by the specific EU member state.
As a prerequisite for the exercise of such rights, the SME’s turnover will not exceed the exemption threshold of the relevant EU member state and the total turnover in the EU, which is set at EUR 100,000. This arrangement will be applicable to VAT payers from other EU member states who carry out VAT taxable transactions domestically, as well as domestic VAT payers will be able to use the SME exemption in other EU member states.
FM informs that the VAT registration threshold from next year will be calculated not for the previous 12 months, as until now, but for the calendar year.
The types of transactions that make up the threshold for VAT registration will also be clarified. In addition to transactions subject to VAT, the value of the VAT registration threshold will also include non-VAT transactions with real estate and financial and insurance services. In addition, if the VAT registration threshold is reached in one calendar year, the SME will have to become a registered VAT payer and pay VAT in the following year. It will also be applied to those SMEs whose VAT registration threshold calculated in accordance with the amendments to the law has been exceeded in 2024. Thus, the amendments to the law provide for transitional provisions that determine the conduct of VAT payers in the event that, according to the new regulations, the VAT registration threshold is exceeded in 2024.
The amendments to the law will also introduce a transitional period for those VAT payers whose turnover in the calendar year exceeds the VAT registration threshold, from which they must register in the SRS VAT payer register and start paying VAT. SMEs will be able to continue not paying VAT until the end of the calendar year, if their turnover does not exceed the VAT registration threshold of EUR 50,000 in the relevant year by more than 10%, namely EUR 5,000. In such a case, VAT payers will have to register in the Register of VAT Payers of the SRS and pay VAT on transactions subject to VAT only from the next calendar year. However, if the turnover of an SME exceeds EUR 55,000 during a calendar year, it will be obliged to register in the VAT register of the SRS and pay VAT from the moment of exceeding the mentioned value.
The draft law also includes other amendments that have been developed in cooperation with the SRS, line ministries and the non-governmental sector. They are aimed at revising the application of the 0% VAT rate in transactions with diplomatic and consular missions registered in Latvia, clarifying the definition of the purchase of goods in the EU territory, clarifying the place of provision of services for cultural and sports events, improving the legal framework in the field of VAT in accordance with EU requirements and harmonizing it with the legal framework of other sectors .
Such amendments to the law are provided for by the requirements of the EU directive.
It is planned that the norms of the law should enter into force from January 1, 2025.
2024-10-08 12:38:13