Businesses in Latvia face new Value Added Tax (VAT) registration rules in 2025, impacting how companies determine their VAT obligations. The most significant change? The €50,000 VAT registration threshold now includes certain non-VAT taxable transactions, meaning more businesses may need to register for VAT.
If your business exceeded €50,000 in turnover in 2024, including applicable real estate, financial, or insurance transactions, you must have registered with the SRS VAT register by January 15, 2025. If not, VAT obligations apply retroactively from January 1, 2025.
What’s Changing?
1. VAT Registration Threshold Now Includes More Transactions
Previously, only transactions subject to VAT counted toward the €50,000 threshold. Starting in 2025, businesses must also include certain non-taxable transactions, such as:
- Real estate transactions
- Financial and insurance services
- Other transactions previously exempt from VAT registration
2. Strict Deadlines for VAT Registration
- If your 2024 turnover (including new applicable transactions) exceeded €50,000, you must be registered for VAT.
- Businesses that registered by January 15, 2025, only start paying VAT once included in the SRS VAT register.
- Late registrations (after January 15) mean VAT must be paid retroactively from January 1, 2025.
3. No Immediate Deregistration for VAT-Payers
Once registered for VAT in 2025, businesses cannot voluntarily opt out of the VAT register, regardless of their 2025 turnover.
4. Exceptions & Special Cases
- Businesses exceeding €50,000 but staying under €55,000 in 2024 could defer VAT registration until December 31, 2024.
- Certain fixed assets, intangible assets, and incidental transactions do not count toward the VAT threshold.
- Businesses that exceed €50,000 but only engage in taxable transactions (not exempt ones) can opt out of VAT registration in 2025.
Example Scenario
A company rents apartments for residential purposes (earning €40,000, VAT-exempt) and leases commercial spaces for office use (€12,000, subject to VAT). Their total revenue for 2024 is €52,000, which now qualifies them for VAT registration.
- If they registered before January 15, 2025, VAT applies once listed in the SRS VAT register.
- If they registered after January 15, VAT payments start retroactively from January 1, 2025.
Other VAT Changes Coming in 2025
The new VAT rules also align with EU directives to simplify VAT for small businesses and adjust VAT rates for:
- Diplomatic and consular missions
- Cultural and sports events
- Cross-border transactions
While these amendments aim to standardize VAT across the European Union, the full legal framework is still pending, with updates expected via Latvia’s official gazette and the SRS website.
What Businesses Should Do Next
- Review your 2024 turnover – Does it include newly applicable transactions?
- Check VAT registration deadlines – If you missed the January 15 deadline, VAT applies retroactively.
- Stay updated on pending VAT changes – Follow official tax sources for further clarifications.
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