The Latvian parliament voted on December 12 to adopt a value-added tax hike of 3% tabled by the government. The legislation also means that the level of VAT charged on products currently subject to concessions will also experience a hike.
Under the changes, the current VAT level of 18% will be increased to 21%, while products and services which are currently subject to the reduced level of 5% will be subject to a rate of 10%.
Separately, the Latvian government is also in the process of implementing certain elements of the European Union VAT directive into domestic law, which will, among other changes: allow transactions within a group of companies to be exempted from VAT, provided at least one member of the group has an annual turnover of LVL250,000 (EUR356,000); allow vendors to reclaim VAT paid to the government when the buyer has failed to make a payment in cases of bad debt; allow VAT to be applied to certain real estate transactions; preclude the need for VAT to be paid on low value gifts and samples; and relax VAT rules concerning the importation of goods.
These changes are due to go into effect in 2010.
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