Standard procedure of VAT refund to persons registered in Latvia.If an individual or legal entity is registered in Latvia as a payer of value-added tax (VAT), then such person must calculate VAT and submit a declaration.
If the result of the calculation is VAT overpayment, then the taxpayer has the right to request from the government to refund the overpaid tax.
Conditions for VAT refund are specified in 108. and the following articles of the law.
The Latvian State Revenue Service (SRS) within 30 days after receiving the declaration, examines the declaration and approves overpayment.
If the taxpayer has tax debts, then debts can be covered (paid) from overpaid VAT.
If the taxpayer does not have tax debts or after paying debts, there is still a VAT overpayment, then in the usual case the SRS transfers the overpayment to next taxation periods (months or quarters) until the end of the taxation (calendar) year. If the taxpayer must pay VAT during next taxation periods, then the taxpayer can use overpaid VAT for the payment.
A taxpayer submits a VAT declaration for the last taxation period of a year (for December or for the fourth quarter). SRS within 30 days examines the declaration, approves overpayment, and accumulated VAT overpayment during 10 days after approval transfers to the taxpayer's bank account.
So, if a taxpayer submits VAT declaration for the last taxation period of the year until 20th January, then the overpaid VAT can be received at the end of February / early March.
In which cases Latvian VAT payer can sooner receive VAT overpayment ?In any case, the SRS within 30 days examines VAT declaration and approves overpayment. Below are mentioned cases when a taxpayer has right to receive overpaid VAT immediately after approval (without waiting until the end of the year). Cases / conditions are as follows:
- At least 90% of transactions are subject to VAT at a rate of 0% or the place of transactions (according to the VAT Law) is outside Latvia. For example, the export of goods, the sale of goods to a VAT payer of another state of the European Union, if the goods are exported from Latvia.
- The amount of overpaid VAT exceeds 1500 euros, and at least 20% of transactions are subject to VAT 0% rate, a reduced VAT rate or a transaction is made outside Latvia (in accordance with the VAT Act).
- Overpayment arose because of the acquisition of fixed assets, the amount of overpayment exceeds 150 euros, and the company demanded a refund of VAT.
- Overpayment exceeds 1500 euros, and overpayment arose in connection with the acquisition of goods (services) for operations with sawnwood, scrap metal or for the provision of construction services. For example, the company bought goods, paid VAT for goods, and goods are used to provide construction services.
- The overpaid VAT amount exceeds 5000 euros.
In what cases can the SRS extends the period for the verification of the VAT declaration?The standard period is 30 days. During these 30 days, the SRS may require you to scan and send invoices, checques (receipts), may require you to send bank statements. Also may require you to send a list of transactions for which VAT is deducted.
It is also possible that the SRS will make thematic inspection of the company's activities or even an audit. Therefore, it is important to deduct VAT only in cases, defined in legislation.
First of all, this means that the company has the right to deduct VAT only if the purchased goods or received services are subsequently used for VAT of taxable transactions.
Another nuance, not specified in the legislation, is related with transaction partners. If there are problems with your partner (for example, a partner does not pay VAT (debts), does not submit VAT declaration or otherwise violates the law), then there is a high possibility that the SRS will make a thematic inspection or audit of your company.
The law specifies the following basis for extending the term for approval of VAT overpayments:
- The SRS made a decision to start an audit.
- The taxpayer must correct the VAT declaration, the amount for lost (bad) debts.
- A taxpayer can not provide the basis (documents) for applying the VAT 0% rate. For example, the goods are exported from Latvia ("export"), but there are no documents proving export (no customs declaration or other documents).
- The SRS informed a taxpayer that the SRS will check data consistency (conformity). For example, the taxpayer reported in the declaration that he bought the goods from company X, but company X did not report the transaction in the declaration and did not calculated VAT. In such case data of both companies does not match and the SRS will need to understand why the data does not match.
- SRS required additional information.
Return of overpaid VAT to a person registered outside the European Union.According to the SRS, persons registered as VAT payers in Norway, Switzerland, Iceland and Monaco, have the right to demand a refund of VAT overpaid (paid) in Latvia.
In order for a VAT payer of a certain state to have the right to claim a VAT refund paid in Latvia, it is necessary that the Latvian VAT payer has the right to demand a refund of VAT paid in the corresponding state.
Also fulfill the condition: VAT must be paid for the purchase of goods or services received in Latvia, or for the import of goods, necessary for economic activities outside the European Union.
Additional conditions to have the right to demand refund of VAT paid in Latvia:
- During the overpayment, the company registered economic activities outside the European Union.
- During the period of overpayment, the enterprise corresponds to the status of the payer's VAT registered outside the European Union (status defined in legislation). That is, a person has a VAT number or number equal (equivalent) to VAT in the corresponding state.
- During a period, when the overpayment was made, a company was not registered as VAT payer in Latvia.
- During a period of overpayment, a foreign company did not made in Latvia transactions, for which the company must register in Latvia as VAT payer.
- During a period of overpayment, a company did not conduct (make) such economic activity, for which the company must register in Latvia.
The procedure for submitting an application and the procedure for review of the application are defined in Rules of the Cabinet of Ministers.
Return of overpaid VAT to a person registered in another EU country.Conditions are following:
- VAT is paid for goods or services purchased in Latvia, or for the import of goods, that are necessary to do transactions subject to VAT.
- During a period for which a company requires a refund of VAT, this company:
- It was registered in another EU country as a VAT payer.
- He did not conduct such economic activities, which must be registered in Latvia.
- Was not registered in Latvia as a VAT payer.
- Did not made such transactions, for which it was necessary to register as a VAT payer in Latvia.
The procedure for submitting the application and the procedure for processing of the application are stated in the relevant Rules of the Cabinet of Ministers.
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