Guide to VAT Rates for Freelancers in Latvia

If you provide freelance services in Latvia, you may be required to charge VAT to your customers and pay VAT to the Latvian government. The State Revenue Service is the formal authority responsible for VAT management and other tax-related activities in Latvia. 

In short, if you are a freelancer conducting taxable business activity within Latvian territory, you be liable for VAT once your sales revenue exceeds the annual threshold of EUR 40,000. The standard VAT rate in Latvia is 21%, but the government also levies reduced rates of 12% and 5%, which are charged based on the category of products you supply. While Latvia has its VAT registration protocols, they are based on the European Union’s VAT directives. EU VAT directives can sometimes override local Latvian legislation.

Understanding everything about VAT can get confusing, so we’ve come up with a guide that explains the nitty-gritty of VAT registration for freelancers in Latvia. Let’s get started!

VAT rates in Latvia

The State Revenue Service has published three distinct VAT rates in Latvia. Based on the type of goods and service you produce, you should charge a specific rate to your customers and include that information in your invoices.

  • The Standard Rate of 21% - All products or services, unless they are covered by reduced rates or tax exemption.
  • The Reduced Rate of 12% - 12% applies to pharmaceutical products, medical products for disabled people, domestic passenger transport, food products for infants, printed books, newspapers, and periodicals, hotel accommodation, district heating, etc.
  • The Reduced Rate of 5% - 5% VAT is issued as a part of an agricultural discount. This applies to a range of locally produced vegetables and fruit.
  • No VAT (0%) - Intracommunity and international transport are exempt from VAT.  However, be sure to include tax-exempt records in your VAT returns as well.

Threshold income to register for VAT as a freelancer

If the total value of taxable goods and services you sell over a year exceeds EUR 40,000, you are liable to register for VAT in Latvia. In contrast, freelancers making intra-EU distance sales of goods are responsible for VAT registration once your turnover exceeds EUR 10,000.

The economic activities that qualify for VAT registration include:

  1. Delivery service payments
  2. Services for a fee
  3. Imported goods
  4. Exported goods
  5. Purchase of goods in the EU
  6. Purchase of new vehicles by non-taxable people
  7. Receipt of services.

In addition to these conditions, you should regularly check the State Revenue Service (SRS) website for other scenarios when you must register for VAT.

How to register for VAT in Latvia as a freelancer

As a freelancer in Latvia, you simply have to submit an application for registration provided in the SRS VAT payer register. If your solopreneurship is based in a different EU country or a non-EU country, you should fill out the Application of Taxpayers of another Member State and of a Third Country or Third Territory form in the SRS VAT Payer Register. For the latter, if your legal representative files the application, a written power of attorney must be submitted along with the application.

Before applying for VAT registration, you should register with SRS. After doing so, your application and supporting documents can be submitted, either through:

  1. SRS electronic declaration system - Online
  2. Emailing using an electronic signature
  3. By hand at any SRS client service center. (You should take your identification document with you)
  4. Any Regional Register of Enterprises office.

After applying, the SRS will issue you a VAT number within 15 working days. Once you are registered for VAT, it is your responsibility to report and pay VAT to the Latvian government on time.

Financial obligations of VAT registered freelancers in Latvia

Registering for VAT is only the first step towards being VAT compliant in Latvia. Once you’ve successfully registered, you are required to:

  • Keep track of all purchases and transactions.
  • Maintain a running total, including recent transactions in their VAT account.
  • You have to pay the difference between the VAT charged by you and VAT you were charged. 
  • If the VAT amount you have paid exceeds the amount you have charged, SRS will pay the excess amount back to you.
  • Make sure all the VAT invoices are accurate and properly formatted to display the following details:
  1. The client’s and seller’s VAT identification number
  2. Description of the goods sold
  3. Total amount subjected to VAT
  4. The VAT rate, VAT amount due, and VAT included the total amount

To pay VAT as a freelancer in Latvia, you can opt for one of two payment arrangements:

  1. VAT Special Regime (Mini One Stop Service): VAT MOSS applies to electronic communications, broadcasting, and digital services. It creates a quick and easy platform to submit returns if you conduct business in multiple EU countries. This creates a one-stop portal for freelancers to file and pay VAT only from one country. You need to maintain your financial records for 6-10 years if you use the VAT MOSS service.
  2. Your import of goods can fall under special tax treatment, which means you can choose to defer the VAT payment until it is declared in the tax return of the corresponding tax term.

When to report VAT in Latvia as a freelancer

You have to report VAT monthly, on the 20th day of the month following the reporting period.

How to maintain financial records as a freelancer

You need to maintain the following financial records, either digitally or physically, in a clear, readable and complete format: 

  • Copies of received and sent invoices, business books, cash register tally rolls, receipts, and vouchers
  • Agreements on self-billing
  • Bank statements
  • The self-billing vendors' names, addresses, and VAT numbers
  • Credit and debit notes 
  • Records of imports and exports.

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