The application of the reverse charge procedure for certain transactions has been clarified 18/06/2019

A number of changes to the Value Added Tax (VAT) Act will come into force on July 1 this year. One of them is to clarify the application of the reverse value tax (VAT) payment procedure introduced last year in transactions with metal products, construction products, household electronic equipment and household electric appliances.

At present, the VAT Law provides that the reverse charge procedure is applicable to the supply of metal products and related services. Amendments to the law provide for a clarification of the scope of transactions in the field of metal products, which will be subject to these special VAT arrangements. As of July 1, this procedure will no longer apply to metal-related services and the list of metal products will be narrowed down, providing that the Cabinet of Ministers will establish a list of semi-finished ferrous and non-ferrous metals, the supply of which will be subject to this special procedure. Changes have been made to the VAT Directive.

The European Commission (EC) has not authorized Latvia to introduce a reverse VAT payment procedure for the supply of construction products, household electronic equipment and household electrical appliances. Thus, the reverse charge procedure for construction products and household electronics introduced on 1 January 2018 is expected to apply until 31 December 2019.

As the reverse VAT arrangements in these sectors were determined to combat VAT fraud and this has not lost its relevance, the Ministry of Finance has repeatedly requested the EC to allow Latvia to derogate from the general VAT regime provided for in the Directive, allowing for the application of reverse VAT arrangements for construction products. supplies and certain deliveries of household electronic appliances and household electrical appliances. In the case of a positive EC decision, amendments would be introduced to make this special VAT regime applicable after 31 December 2019.

The fight against VAT fraud is one of Latvia's top priorities. The measure that promotes the reduction of VAT fraud is the introduction of reverse VAT arrangements for certain supplies of goods and services. The application of these arrangements is a departure from the general VAT arrangements, so it is a special VAT treatment for the calculation and payment of VAT in the domestic sector for certain sectors where VAT on the supply of goods or services to the public budget is paid by the recipient of goods or services for transactions carried out. between registered VAT payers.



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