Publicēts: 19.10.2021.
Atjaunināts: 21.08.2025.

The Value Added Tax Law sets out the general rules for the VAT application and the reverse charge mechanism for transactions carried out within the territory of Latvia (inland) when the supplier of goods or services and the recipient of goods or services are registered taxable persons.

The differences in the application of VAT rules to the supply of goods or services carried out inland, when the supplier of goods or services and the recipient of goods or services are registered taxable persons, assuming that the transaction value is 1000 EUR and the supply is a subject of VAT rate of 21%, are shown in the schemes.

State budget

1. The supplier of goods or services:

  • issues a VAT invoice to the recipient of goods or services in which the following details and information are indicated:
    • the value of supplied goods or services EUR 1000;
    • VAT amount of EUR 210, calculated on the transaction value indicated on the VAT invoice, applying the appropriate VAT rate (i.e., EUR 1000 x 21%);
    • includes in VAT return the transaction value of EUR 1000 and the calculated VAT amount of EUR 210 as VAT payable to the State budget.

2. The recipient of goods or services:

  • pays the remuneration and the VAT amount of EUR 1210 (i.e., EUR 1000 + EUR 210) indicated in the VAT invoice to the supplier of goods or services;
  • if the received goods or services are intended for the provision of transactions subject to VAT of the recipient of goods or services, the VAT amount of EUR 210 indicated in the VAT invoice shall be included in VAT return as deductible input tax.

In the case of application of the general rules, the recipient of goods or services may be a non-registered taxable person. If the recipient of goods or services is a non-registered taxable person , he or she does not have the right to deduct the input tax.

Reverse VAT payment procedures shall be applied to the categories of goods or services specified in the Value Added Tax Law, if the supplier of goods (service provider) and recipient of goods (services) are registered taxpayers and the transaction has been carried out inland.

State budget

The reverse charge mechanism is applied to supplies of goods or services specified in Articles 141, 142, 143, 1431, 1432, 1433 and 1434 of the Value Added Tax Law, when the supplier of goods or services and the recipient of goods or services are registered taxpayers and the transaction is carried out within the territory of Latvia (inland).

Reverse charge mechanism

1. The supplier of goods or services:

  • issues a VAT invoice to the recipient of goods or services indicating the value of the supplied goods or services of EUR 1000 excluding VAT and including a reference to the Section of the Value Added Tax Law, if any of the special taxation arrangements referred to in Section 141, 142, 143, 143.1, 143.2, 143.3, or 143.4 of the Value Added Tax Law is applied to the supply of goods or services, or to the relevant Article of Council Directive 2006/112/EC of 28 November 2006 on the common system of VAT;
  • includes a transaction value of EUR 1000 in VAT return.

2. The recipient of goods or services:

  • pays the VAT invoice value of EUR 1000 to the supplier of goods or services;
  • calculates VAT amount of EUR 210 on the transaction value indicated on the VAT invoice, applying the appropriate VAT rate (i.e., EUR 1000 x 21%);
  • includes the calculated VAT amount of EUR 210 in VAT return as VAT payable to the State budget;
  • if the received goods or services are intended for the provision of transactions subject to VAT of the recipient of goods or services, the calculated VAT amount of EUR 210 shall be included in VAT return as deductible input tax.