Latvia, as a Member State of the European Union, applies a value added tax system in accordance with the EU VAT Directive. This means that the rules for tax settlement are very similar to those applicable in Poland and other EU countries.
For entrepreneurs conducting international sales, especially in the Baltic region, it is important to understand the rules for VAT settlement in Latvia. This applies both to the applicable rates and the situations in which VAT registration is required.
In this article, we explain what VAT in Latvia is in 2026, what rates apply, and when an entrepreneur must register for VAT in Latvia.
Key information about VAT in Latvia
- the standard VAT rate in Latvia is 21%,
- reduced VAT rates are 12% and 5%,
- a 0% rate also applies to selected transactions,
- VAT registration is mandatory after exceeding a certain turnover threshold,
- the VAT system in Latvia operates in accordance with European Union regulations.
What is the VAT rate in Latvia in 2026?
The standard VAT rate in Latvia in 2026 is 21%. It applies to most goods and services available on the market. In addition, two reduced rates apply – 12% and 5%, which are used in selected sectors of the economy.
VAT in Latvia operates according to the same principle as in other EU countries. The entrepreneur charges VAT on sales and can then deduct the tax paid on purchases related to business activity.
Example: a company sells a service for EUR 1000, charges 21% VAT (EUR 210), and the customer pays EUR 1210 gross.
The output tax is paid to the Latvian tax authority – Valsts ieņēmumu dienests (VID).
What are the VAT rates in Latvia?
In Latvia, four VAT levels apply.
| VAT rate | Application |
|---|---|
| 21% | most goods and services |
| 12% | passenger transport, some hotel services |
| 5% | selected food products, publications |
| 0% | exports and intra-Community supply of goods |
In practice, this means that an entrepreneur selling different products may apply different VAT rates depending on the category of goods or services.
What does the standard VAT rate in Latvia cover?
The standard VAT rate in Latvia is 21% and applies to most commercial transactions.
It is used, among others, in the case of:
- consulting and advisory services,
- sale of electronics,
- marketing services,
- sale of cars,
- IT services,
- online sales and e-commerce.
For example, a Polish company providing a marketing service to a Latvian company may apply the reverse charge mechanism. In such a case, VAT is accounted for by the recipient of the service in their own country.
When are reduced VAT rates applied in Latvia?
Reduced VAT rates in Latvia are 12% and 5% and are intended to support selected sectors of the economy.
They are most often applied in the following areas:
- passenger transport,
- hotel services,
- selected food products,
- books and publications,
- certain medical services
For example, the sale of fresh fruits and vegetables in many cases is subject to a 5% VAT rate, which aims to increase the availability of basic food products.
How does the VAT system in Latvia work?
VAT in Latvia is an indirect tax charged at every stage of the turnover of goods or services. This means that the entrepreneur adds VAT to the sales price but at the same time has the right to deduct the tax previously paid on the purchase of goods or services related to business activity. Therefore, only the difference between output tax and input tax is paid to the tax authority.
To illustrate the mechanism, a simple example can be used. A company purchases equipment for EUR 500 plus VAT and then sells a service for EUR 1000 plus VAT. In such a situation, the entrepreneur does not pay the full amount of tax from the sales invoice to the authority, but only the difference between the VAT due on the sale and the VAT paid on the purchase. As a result, the system operates in a neutral way for businesses, and the actual burden of VAT is ultimately borne by the final consumer purchasing the product or service.
When is VAT registration required in Latvia?
VAT registration in Latvia is mandatory after exceeding a specified sales threshold. Currently, the VAT registration threshold is EUR 50,000 annual turnover.
An entrepreneur must also register for VAT when:
- conducting sales in Latvia,
- carrying out intra-Community transactions,
- providing services to companies from other EU countries,
- conducting online sales to consumers in Latvia
In many cases, VAT registration is required even if the company does not have a physical presence in Latvia.
Why is knowledge of VAT in Latvia important for entrepreneurs?
Understanding VAT rules in Latvia is particularly important for companies conducting international sales. This applies primarily to businesses operating in e-commerce, online stores selling to customers in other EU countries, companies exporting goods, providers of digital services, and entities carrying out B2B transactions within the EU market.
In such situations, the method of tax settlement depends, among others, on the place of sale, the status of the counterparty, or the distribution model. Incorrect application of the rate or improper settlement of transactions may result in the need to pay outstanding tax, as well as the accrual of interest by the tax administration. Therefore, entrepreneurs operating in the international market should have a good understanding of the rules under which VAT systems operate in individual EU countries.
VAT in the Baltic countries – comparison
The VAT system in the Baltic countries is very similar.
| Country | Standard VAT rate |
|---|---|
| Lithuania | 21% |
| Estonia | 22% |
| Latvia | 21% |
Thanks to this, entrepreneurs operating in the region can relatively easily conduct business in several countries at the same time.
VAT OSS in e-commerce
If you conduct online sales to European Union countries, it is worth considering using the VAT OSS (One Stop Shop) system. The OSS system allows entrepreneurs to settle VAT from multiple EU countries in one tax return instead of registering separately in each country. This solution is particularly popular in the e-commerce sector.
FAQ – frequently asked questions
What is VAT in Latvia?
The standard VAT rate in Latvia is 21%. In addition, reduced rates of 12% and 5% also apply.
What is the VAT rate in Latvia for services?
In most cases, services in Latvia are subject to the standard 21% VAT rate.
Does a Polish company have to pay VAT in Latvia?
It depends on the type of sale. In many cases, VAT is settled in the country of the buyer or within the VAT OSS system.
Who manages the VAT system in Latvia?
The collection of VAT is handled by the Latvian tax authority Valsts ieņēmumu dienests (VID).