AMENDMENTS TO THE NEW VAT LAW

AMENDMENTS TO THE NEW VAT LAW

On the 7th of February 2013 the Amendments to the Value Added Tax Law were published. These amendments will come in force on the 21st of February. The amendments are as follows:

 A new rule on providing construction services to governmental and municipality institutions, which was “forgotten to implement” in the Transitional Rules of the VAT Law, has been introduced.

    Requirements for the simplified VAT invoice have been changed. The new VAT law mistakenly contained a requirement to contain a unit of measurement, price per a unit without VAT and total transaction without VAT in a simplified VAT invoice: this new requirement meant that ordinary cashier’s checks are invalid as VAT invoices and that additionally to a check another document would be needed – an invoice or a receipt, whereas sellers of goods would be obliged to re-programme their cash registers so that checks issued would fulfil the legal requirements. The amendments improve these faulty requirements:

Before amendments

After amendments

Article 126. Simplified tax invoice(1) A simplified tax invoice is an invoice which contains such requisites and information:4) title of goods or type of services, amount and unit;5) price of goods or services (price per one unit without tax) and total value of transaction (without tax);

4) title of goods or type of services and amount;

5) price of goods or services (with or without tax) and total value of transaction (with or without tax);

VAT APPLICATION PROCEDURE

On the 22nd of January 2013 Cabinet of Ministers Rules Nr.17 on VAT law application procedure and certain requirements for payment and administration of VAT came in force. The Rules are applicable from the 1st of January 2013.

The Rules regulate, inter alias:

  • Application of a 0% VAT tax rate
  • Procedure of VAT exemption for certain goods and services
  • Procedure of deduction and correction of input tax as well as necessary documentation
  • Procedure of VAT invoicing
  • Granting and annulling permit for applying special VAT regime for importing goods
  • Log book model and record keeping procedure
  • Record keeping procedure for second-hang goods, artworks, collector’s items and antiques

The Rules contain new regulations, for example:

  • Right of a taxpayer to repay VAT for a third country national for goods purchased in Latvia, subject to Tax Administration’s issued permission
  • Correction of input tax for goods which were stolen or destroyed in a natural disaster 

VAT DECLARATION

On the 24th of January 2013 Cabinet of Ministers Rules Nr.40 on the Value Added Tax Declaration came in force.

The Rules contain new terminology in accordance with the new VAT Law and the VAT Directive. The VAT declaration contains a new report – Report on use of real estate (Annex 8, VAT 7 Report); because the new VAT law requires registration of real estate within Tax Administration for conducting any kind of transactions (both the transaction subject to VAT and not), the only exception is real estate used for fulfilling state administration functions.

The Rules are applicable for filling and submitting VAT declaration and its reports starting from 2013 (first month’s, first quarter’s, first half-year taxation period).

VAT REFUND TO THIRD COUNTRY’S TAXPAYERS

On the 25th of January 2013 Cabinet of Ministers Rules Nr 27 regulating refund of VAT to taxpayers registered in third countries or third territories came in force.

The regulation has not changed in substance; However the Rules contain new regulation regarding import of goods, adjust documents needed for a third country’s taxpayer to authorize someone to represent it in the Tax Administration and provide that an application shall contain information on every VAT invoice issued in Latvia or every document confirming import of goods in Latvia.

VAT REFUND TO ANOTHER EU STATE

On the 17th of February 2013 Cabinet of Ministers Rules Nr.16 regulating procedure of filing an application to receive VAT refund in another EU Member State and procedure how the VAT is refunded to the taxpayer of another EU Member State came in force.

Although substantially the previous regulation has remained, there are some new additions:

    The application for a refund shall contain information on every VAT invoice issued in the state of refund or information on every document confirming the import of goods (likewise an applicant of another EU state shall include in his/her application information on VAT invoice issued in Latvia or every document confirming import of goods in Latvia).

    Regulation providing that VAT sum mistakenly refunded to other country’s applicant shall be repaid to the state budget or the future refunds will be decreased by the amount of mistakenly repaid sum.

 ACCOUNTANCY REGULATION

On the 18th of January 2013 amendments to the Cabinet of Ministers Rules Nr.585 regarding conduct and regulation of accountancy came in force.

VAT invoice in foreign currency

The Rules provide that if a VAT invoice is issued in foreign currency, then the amount of tax which shall be calculated in Latvian lats in accordance with the exchange rate provided by the Bank of Latvia or the European Central Bank at the date of transaction or at the date of receiving the advance payment.

Advance payment

The Rules define “cash and non-cash advance payments”; explaining that advance payment is sum of money given to an employee to fulfil work-related task (for example, cover representation expenses), but an advance payment is not a pre-payment of salary or a loan to an employee. The Rules also contain a regulation on advance payment reporting.