Invoicing and Tax regulation in Latvia

Navigating Latvia’s evolving e-invoicing and tax regulations can be challenging. That’s why this guide provides an overview of the latest requirements, helping you stay compliant and avoid potential penalties.

In the guide, we will cover:

Regulations Timeline

Latvian E-invoicing Requirements (2024 updated)

Tax Regulations

Digital Reporting

Penalties

Achieve Global Invoicing and Tax Compliance with Space Invoices

 

 

Regulations Timeline

A quick review of all current and upcoming regulations Latvia mandates regarding e-invoicing and digital reporting. For more details, check out the sections below.

 

Regulations in effect:

B2B, B2C and B2G e-invoicing are voluntary.

 

Upcoming changes to Latvian e-invoicing:

1st January 2025: Mandatory issuance of e-invoices to budget entities (B2G);

1st January 2026: Mandatory e-invoicing for all B2B transaction in Latvia

1st January 2026: Mandator transfer of all e-invoice data to the State Revenue Service

 

 

Latvian E-invoicing Requirements (2024 Updated)

In Latvia, the only rule in place will become active on 1st January 2025 requiring issuance of e-invoices to all budget entities (B2G).

B2C and B2B e-invoicing will remain optional until 2026, many Latvian businesses have already proactively adopted this technology. The benefits of e-invoicing include improved operational efficiency, faster payment processing, better compliance with tax regulations and significant cost savings, making it a better choice than traditional paper invoices.

Though e-invoicing is not yet mandatory, it is highly encouraged. To support this transition, Latvia has implemented:

The PEPPOL network

European standard format EN 16931

 

Governmental Body Responsible for E-invoicing in Latvia

Responsibility for e-invoicing regulations in Latvia lies with the State Revenue Service, known as Valsts ieņēmumu dienests or VID and the Ministry of Finance.

Click here to visit the official State Revenue Service website, or here to visit the Ministry of Finance website.

 

E-invoicing Formats

Latvia mostly uses the XML format for sending and exchanging e-invoices. They have developed the E-rēķinu, an e-invoicing platform designed to align with the European standard EN 16931, which is also compatible with the PEPPOL network.

 

E-invoice Requirements

Invoices must be issued within 15 days from the date the goods are dispatched or the services are provided. They can be issued in either electronic or paper form, and they must comply with EU standards, while including the necessary components:

Date of Issuance;

Unique Invoice Number;

Identification of the Seller and the Buyer: Including full name, address, VAT identification number, and contact information if needed;

Details about Goods or Services Provided: Description, quantity, unit price, total amount excluding VAT;

VAT Information: Total amount excluding VAT, applicable VAT rate, total amount including VAT, VAT rate;

Payment Terms;

Bank Account Details;

Currency;

Reference Numbers (optional);

Signature (optional).

For sales within Latvia that do not exceed a tax value of 150 euros, the Latvian VAT Law allows for the issuance of a simplified invoice.

 

E-invoice Archiving

You must archive invoices for a minimum period of 5 years.

 

 

Tax Regulations

VAT Rates

In Latvia, the standard VAT rate is 21%. A reduced rate of 12% applies to items like medicines and specialized baby products, while a second reduced rate of 5% is applied to printed and electronic publications. Additionally, a 0% tax rate is available for certain exports and supplies of goods.

 

Corporate Tax

Latvia has a corporate tax rate of 20%, but it only applies to distributed profits. For reinvested profits, Latvia offers reduced corporate taxes:

0% Tax on Retained Earnings: Profits that are retained and reinvested in the company are not taxed in Latvia.

 

VAT on Digital Services in Latvia

Digital services in Latvia are generally subject to a standard rate of 21%.

Digital services, also known as electronically supplied services (ESS), are services delivered over the internet or an electronic network, such as a LAN. The following are examples of digital services to which these regulations apply:

Websites, web hosting;

E-books;

Software downloads;

And music, films, games.

 

 

Digital Reporting

Latvia has already implemented some digital reporting requirements, with more on the way:

Already mandatory digital reports of VAT returns and Payments,

Upcoming B2B, B2C and B2G e-invoicing.

 

VAT Registration and Thresholds

For Latvian entities, the VAT registration threshold has been set at €50,000 since January 2024. However, if your turnover is below that, you can still opt for voluntary registration.

For EU-based businesses engaged in distance selling of goods or services to Latvian consumers, the threshold is €10,000, with two options:

Non-EU businesses selling into Latvia, however, have no VAT registration threshold—they need to register right away.

 

VAT Returns and Payments

In Latvia, you need to submit VAT returns digitally, with reports and payments due by the 23rd of the month after the tax period. While it’s recommended to use the Latvian Electronic Declaration System (EDS) online portal, it’s not mandatory.

How often you need to report depends on your company’s annual turnover:

Monthly reporting is usually required for most businesses.

Longer reporting periods might be allowed if you submit a good reason to the Latvian Tax and Customs Board.

 

 

Penalties

Fines of up to €700 can be imposed for the late submission of a Latvian VAT return.

Penalties can range from 10% to 100% of the unpaid VAT, depending on the situation, with an additional annual interest rate of 18.25% applied to late payments.

If VAT is underreported or incorrectly declared, fines of up to 30% of the understated amount may be imposed.

 

 

Achieve Global Invoicing and Tax Compliance with Space Invoices

One way to comply with (e-)invoicing, tax and reporting regulations in Latvia is to use a provider like Space Invoices.

You will be able to:

Have one API for current and future global tax and invoicing compliance, including Latvia

Save time and money with less than a week-long integration

Support and upsell your clients worldwide, including Latvia

Rest assured all documents are archived and successfully reported to responsible institutions

Become the one-stop shop for current and future clients

Save time and money streamlining the process and eliminate manual errors

Having questions about achieving compliance in Latvia?

We are ready to help.

 

The information in this guide is strictly informative, as regulations and timelines change frequently. While we make every effort to monitor updates and maintain the accuracy of our content, we recommend consulting with a tax professional or e-invoicing specialist for the most reliable and personalized advice. The latest update was made on September 3rd, 2024.

Looking to automate real-time reporting and tax compliance for Latvia? Let's talk