VAT rates applicable in Latvia
Latvia applies a VAT system compliant with the EU VAT Directive (2006/112/EC), with several rates depending on the type of goods and services involved. Latvian VAT is called "Pievienotās vērtības nodoklis", or PVN for short.
Standard rate: 21%
The standard VAT rate in Latvia is 21%. It applies to the vast majority of commercial goods and services: sales of goods, business services, commercial leases, digital services, and so on. This rate is comparable to other Baltic and Central European countries.
Reduced rate: 12%
A reduced rate of 12% applies to certain categories defined by Latvian law:
- Basic food products (bread, milk, certain vegetables)
- Medicines and medical devices (excluding those at the 5% rate)
- Hotel and tourist accommodation services
- Passenger transport
- Restaurant services (under certain conditions)
- Heat supply for residential heating
Super-reduced rate: 5%
The 5% rate applies to a narrower list:
- Books, newspapers and periodicals (print and digital)
- Certain specific medicines and pharmaceutical products
- Feminine hygiene products
Zero rate: 0%
Some transactions are VAT-exempt with a right to deduct (0% rate): exports outside the EU, intra-community supplies of goods to VAT-registered businesses in other member states, international transport, and certain financial services under specific conditions.
Exemptions with no right to deduct
Certain activities are VAT-exempt with no right to deduct: financial and banking services, insurance, residential property transactions (unless an option is exercised), medical and education services. A company operating exclusively in these areas isn't VAT-liable and can't recover VAT on its purchases.
Latvian VAT registration threshold: around €40,000 to €50,000
In Latvia, a company must register for VAT once its annual taxable turnover exceeds roughly €40,000 to €50,000, depending on the threshold in force (or its equivalent in another currency). This threshold is assessed over a rolling 12-month period.
This threshold doesn't apply to intra-EU transactions: a company that acquires or supplies goods and services with other EU countries must register for VAT from the very first relevant transaction, regardless of turnover.
Below the turnover threshold, a company can choose not to register for VAT. This can make sense for service providers selling mainly to individuals (B2C), who can't recover VAT anyway. On the other hand, a company that regularly buys VAT-inclusive goods or services generally benefits from registering voluntarily, even below the threshold, to recover VAT on its purchases.
"This threshold, around €40,000 to €50,000, suits small structures just starting out particularly well. It lets you invoice without VAT during the launch phase, simplifying admin, subject to checking the exact threshold in force with the VID when you form the company."
Filings and obligations
Once registered for VAT, a Latvian company is subject to regular tax filing obligations:
- Monthly filings if annual turnover exceeds €40,000 (deadline: the 20th of the following month)
- Quarterly filings possible if turnover is below €40,000
- Intra-community summary statements (EU client listings), monthly or quarterly
- Electronic invoicing strongly recommended and progressively becoming mandatory
All filings are made through Latvia's online tax portal (EDS, Electronic Declaration System), accessible remotely by any authorised accountant or representative. Filings are in Latvian, which is usually why companies hire a local accountant.
Special rules for digital services (B2C)
Latvian companies supplying digital or electronic services to individuals resident in other EU countries are subject to the specific VAT rules from the 2021 e-commerce VAT reform.
Since 1 July 2021, a Latvian company selling digital services (software subscriptions, digital content, streaming, etc.) to individuals in other member states must apply the VAT rate of the buyer's country, not the Latvian rate. To simplify these obligations, the EU set up the One Stop Shop (OSS), which lets you declare and pay everything from Latvia.
The OSS in practice
Through the OSS, a Latvian company can declare and pay, in one place, the VAT due across every EU country on its B2C digital-service sales. This is a major simplification: no need to register in every country where you have customers. The Latvian tax authority then redistributes the amounts to the other member states.
VAT refunds for non-residents
A company from another EU country that has paid Latvian VAT on purchases in Latvia without being registered there can request a refund through the intra-community refund procedure (via its own country's VAT portal).
For non-EU companies, Latvia applies the principle of reciprocity: VAT refunds are possible for nationals of countries with which Latvia has a reciprocity agreement. In practice, this procedure is rarely used by entrepreneurs who have structured their activity through a Latvian company, since that company is directly VAT-registered in Latvia.
Getting a Latvian VAT number
A Latvian VAT number (PVN number) is obtained from the Latvian tax authority (Valsts ieņēmumu dienests, VID). The process is entirely digital and generally takes 5 to 10 business days. Required documents include:
- An extract from the Latvian companies register (Uzņēmumu reģistrs)
- Information on planned activity in Latvia and the EU
- Forecast taxable turnover
- Information on directors and shareholders
For companies formed by non-residents, the Latvian tax authority may request additional information on economic substance and the reality of activity in Latvia before issuing a VAT number. This is an anti-fraud measure that poses no problem for companies with genuine activity.