Value Added Tax in Latvia - VAT general information
Pievienotās vērtības nodoklis (PVN) – Latvians refer to PVN as VAT
VAT is a turnover tax levied at each stage of the production and distribution chain. Liability for VAT rests with the person supplying the taxable goods or services. However, ultimately, the actual burden of the tax is borne by the final consumer.
On 9 March 1995, Latvia adopted a VAT type of turnover tax to replace, as of 1 May 1995, the old non-cumulative turnover tax. Latvians refer to the VAT as Pievienotās vērtības nodoklis, abbreviated as PVN.
The VAT Act 1995 has been amended by the VAT Amendment Act 2004, which implemented, as of May 1, 2004, the provisions of the Eighth Council Directive 79/1072/EEC of December 6, 1979 on the harmonization of turnover taxes within the European Community. This was done to bring the Latvian VAT legislation in line with the EU VAT rules.
The VAT Act currently reflects the provisions of Council Directive 2010/88 of December 7, 2010 what amends Council Directive 2006/112 on the common system of value added tax (VAT Directive). VAT Act also reflects the provisions of Council Directive 2007/74 of December 20, 2007 and the provisions of Council Directive 86/560/EEK of November 7, 1986.
VAT is an EU tax and ultimately its application and operation need to be considered by reference to EU law. EU law takes precedence over domestic law at the behest of the taxable person. Where an EU directive is unconditional and sufficiently precise, an individual may rely on its provisions against national legislation which does not conform to it. Latvian VAT Act which contravenes EU law or does not implement a directive correctly cannot be applied against the taxable person. Judgements of the Court of Justice of the European Union have supremacy over domestic decisions.