Tax and Legal News

VAT for electronically supplied services has been changed

Special scheme for taxable persons supplying electronic services to non-taxable persons

The application of 

Special scheme for taxable persons supplying electronic services to non-taxable persons

The application of VAT for electronically supplied services has been changed in Latvia and other member states of the EU since 2015.

Electronically supplied services are those services which are delivered over the Internet or via the electronic network – such supply of services is essentially automated and involves minimal human intervention. It is deemed impossible to render electronically supplied services without any information technology. Please see the list:

  •     Website hosting and webpage hosting,
  •     the supply of digitized products generally, including software and changes to or upgrades of software,
  •     Accessing or downloading photographic or pictorial images or screensavers,
  •     Delivery of music and films,
  •     Accessing automated online games which are dependent on the Internet,
  •     Subscription to online newspapers and journals,
  •     Automated distance teaching dependent on the Internet – the function and the supply of which requires limited or no human intervention (sending the teaching aids shall not be considered a distance teaching).

Telecommunication services, radio and television broadcasting services and goods, where the order and processing is done electronically, as well as e-mail services will not be regarded as electronically supplied services.

Detailed listing of electronically supplied services can be found in Article 7 of the VAT Implementing Regulation (EU) No 282/2011.

The new procedure provides special scheme for companies supplying electronic services to non-taxable persons – mostly individuals. Since 01.01.2015. the place of supply for such services shall be considered the declared place of residence or a place where the recipient is located. The relevant VAT shall be paid to the Member state where the recipient is located.

To ease the new procedure, the company must apply and pay VAT only in one Member State for the services provided within the territory of EU.

The company shall be registered as a tax payer of the special scheme. There are 2 special schemes provided:

    “Union scheme” – the special scheme for electronic service suppliers being taxable persons established within EU, but not established in the Member State of the service consumption;

    ‘non-Union scheme’ – for service suppliers who are taxable persons which are not established within EU.

With regard to above-mentioned – there are new procedures of application and declaration invented which provide what information the companies must collect in order to fill out the declaration.

Please note that the new order is not applicable to electronically supplied services provided between legal persons (companies) or in other words – in this situation B2B principle applies.

in Latvia and other member states of the EU since 2015.

Electronically supplied services are those services which are delivered over the Internet or via the electronic network – such supply of services is essentially automated and involves minimal human intervention. It is deemed impossible to render electronically supplied services without any information technology. Please see the list:

    Website hosting and webpage hosting,

    the supply of digitized products generally, including software and changes to or upgrades of software,

    Accessing or downloading photographic or pictorial images or screensavers,

    Delivery of music and films,

    Accessing automated online games which are dependent on the Internet,

    Subscription to online newspapers and journals,

    Automated distance teaching dependent on the Internet – the function and the supply of which requires limited or no human intervention (sending the teaching aids shall not be considered a distance teaching).

Telecommunication services, radio and television broadcasting services and goods, where the order and processing is done electronically, as well as e-mail services will not be regarded as electronically supplied services.

Detailed listing of electronically supplied services can be found in Article 7 of the VAT Implementing Regulation (EU) No 282/2011.

The new procedure provides special scheme for companies supplying electronic services to non-taxable persons – mostly individuals. Since 01.01.2015. the place of supply for such services shall be considered the declared place of residence or a place where the recipient is located. The relevant VAT shall be paid to the Member state where the recipient is located.

To ease the new procedure, the company must apply and pay VAT only in one Member State for the services provided within the territory of EU.

The company shall be registered as a tax payer of the special scheme. There are 2 special schemes provided:

  •     “Union scheme” – the special scheme for electronic service suppliers being taxable persons established within EU, but not established in the Member State of the service consumption;
  •     ‘non-Union scheme’ – for service suppliers who are taxable persons which are not established within EU.

With regard to above-mentioned – there are new procedures of application and declaration invented which provide what information the companies must collect in order to fill out the declaration.

Please note that the new order is not applicable to electronically supplied services provided between legal persons (companies) or in other words – in this situation B2B principle applies.