SAFE (Security Action for Europe) is a European Union financial instrument established to provide financial assistance to Member States, enabling them to undertake urgent and substantial public investments in support of the European defence industry. It forms part of the EU’s broader response to the markedly deteriorated security environment in Europe and is designed to reinforce the European Defence Technological and Industrial Base (EDTIB). SAFE aims to promote joint procurement, boost defence production capacity, and reduce strategic dependencies on external suppliers. It will make available up to EUR 150 billion in low-cost, long-term loans, aligned with Member States’ national defence investment plans.

The instrument entered into force on 29 May 2025, and includes a provision for value added tax (VAT) exemptions on contracts concluded under its framework. Read more in this article.

The European Union is about to embark on one of the most significant modernisations of the value-added tax (VAT) system since the introduction of the VAT Directive. The driving force behind these changes is the “VAT in the Digital Age” (ViDA) legislative package, which will have a profound impact on the business environment across the EU. In response to this crucial legislative phase, the EU VAT Committee convened an extraordinary 126^th meeting on 21 March 2025 to provide clarification and guidance to Member States on the practical implementation of the planned reforms, particularly regarding e-invoicing and digital reporting.

It is important for finance professionals — accountants, finance directors and company directors — to understand the conclusions of this meeting and their implications for the regulatory framework. This article provides a detailed analysis of the key legal aspects, the policy directions and the necessary actions that businesses need to take to ensure compliance and maintain their competitiveness.

The European Union has launched its most comprehensive VAT reform to date with the initiative “VAT in the Digital Age” (“ViDA”), marking a turning point in both tax administration and business operations across the EU. ViDA has three main goals: 1) to reduce VAT fraud, 2) to improve the efficiency of tax administration, and 3) to adapt the existing VAT system to the digital economy. One of the cornerstones of this initiative is the introduction of structured e-invoices and digital transaction reporting for cross-border transactions.

Although ViDA will officially come into force gradually, starting in 2028, businesses engaged in cross-border B2B transactions must already prepare for significant changes. The impact of the Directive will be felt far beyond VAT reporting — it will affect financial processes, IT infrastructure, data management, and the overall corporate compliance strategy. This article explores how ViDA will change the rules of the game, the main obligations and risks for businesses, and why it is essential not to wait until the last minute to start preparations.

The question of when the sale of property shifts from being considered a private sale to being regarded as an economic activity has always been a pertinent issue. On the website of the State Revenue Service (“SRS”), there is an informative material titled “Economic Operators”, which outlines the conditions under which the SRS identifies a registrable economic activity (https://www.vid.gov.lv/lv/saimnieciskas-darbibas-veiceji). The Court of Justice of the European Union (CJEU) has also repeatedly considered disputes regarding what is regarded as economic activity. Among others, the CJEU examined a Latvian case concerning whether the supply of timber from private forest to eliminate storm damage constitutes economic activity (Judgment of 19 July 2012, Rēdlihs v. State Revenue Service (C 263/11). The criteria for the existence of economic activity were also addressed in a recent CJEU judgment in a Polish case (3 April 2025, E. T., C-213/24). Full details are available in the article.

Digital transformation in both the public and private sectors is rapidly advancing, with one of its central elements being the digitisation of document circulation. On 17 April 2025, the Ministry of Finance (“MoF”) submitted proposed amendments to the Value Added Tax (“VAT”) Law for public consultation, aiming to align it with the requirements set out in the Accounting Law regarding the issuance of structured electronic invoices, or e-invoices. These changes represent a significant step toward a fully digital and efficient accounting and tax administration system in Latvia. 

In practice, the application of VAT to hire-purchase transactions (lease/finance lease) still leads to confusion, as a recent ruling by the Senate suggests (the ruling of 6 December 2024 in case A420225819, SKA-38/2024).  

Conclusion of the article from the previous week.

All taxable persons are obliged to register for VAT purposes, unless they can be considered a small business, i.e., if the total value of taxable transactions carried out domestically and also certain non-taxable transactions does not exceed EUR 50,000 per calendar year (+EUR 5,000 per year).

As you may known, Etsy is one of the largest international internet trading platforms offering handmade items of various categories. Sales of their products, products, artworks through various trading platforms are currently popular.

What should be taken into account by sellers who have chosen to make use of the opportunities offered by the platforms in the application of VAT in the course of their economic activities? 20.02.2025. The national Revenue Service published a briefing material: “Information material application of VAT to transactions on online platforms.” This Article casts some light on it.

The obligation to register for VAT purposes depends not only on the registration threshold set in Latvia for domestic transactions (EUR 50,000), but also on the type of services supplied to a VAT payer of another EU Member State, if the place of supply of these services is determined under Section 19, Paragraph One of the VAT Law (the recipient of the service is responsible for the payment of VAT), or on the type of services received, the place of which is determined under the above-mentioned Section. According to the VAT Law, VAT registration is also required if the purchase of goods by a company in the territory of the EU reaches or exceeds EUR 10,000 in the current calendar year (currently, this threshold can be used not only by inland taxpayers but also by taxpayers from another EU Member State). The registration requirement has so far prevented SMEs from “enjoying” their status. Some changes have already come into force from 1 January 2025, others will become effective on 1 July 2025. This article looks at these changes.

Businesses, especially those with cross-border operations, are not finding it easy to apply value added tax (VAT).

In the context of domestic as well as cross-border transactions, we have discussed more than once how a customer’s free transfer of equipment to a service provider affects the amount of a subsequent supply of services. In practice, there are situations where a service provider lacks some specific equipment he needs for providing services to a customer, and the customer transfers the necessary equipment to the service provider free of charge. Also, there was uncertainty as to whether such a transactional structure affects the customer’s right to deduct input VAT on the equipment.

In its recent judgment C-475/23 Voestalpine Giesserei Linz GmbH, the Court of Justice of the European Union (CJEU) has ruled on the right to deduct input VAT in such a transactional structure.

In this article we present the CJEU’s perspective on this issue.

In an earlier MindLink article we wrote about proposals for amending the value added tax (VAT) framework. The proposals mandate e-invoicing in cross-border transactions and require changes to how EU sales lists are completed. The proposals also place responsibility for collecting VAT on platforms through which transactions are made in the accommodation and transport sector, and the one-stop shop (OSS) scheme is to be expanded.

A recent ruling from the Court of Justice of the European Union (CJEU) addresses the VAT treatment of electricity supplied to users of electric vehicles (EVs) through a third-party network. The original proceedings involved a German company contesting the Swedish tax authority’s decision on electricity supplied in Sweden. The CJEU ruling emphasises clarity in VAT treatment and reinforces adherence to the VAT framework. In this article, we summarise the key arguments and facts the CJEU considered in its ruling.

On 30 September 2024 the Latvian Supreme Court issued Ruling No. A420226518 after hearing a Latvian company’s appeal against a decision from the State Revenue Service (SRS) and a ruling from the Regional Administrative Court. The dispute was over the results of a tax audit that questioned the company’s right to deduct input VAT when acting as intermediary in cross-border transactions. The SRS viewed the transactions as fictitious because the original seller (two unrelated Latvian companies) and the end buyer (a related Lithuanian company) had allegedly entered into a secret agreement. The SRS said the company was aware of that agreement and engaged in documenting the transactions as an intermediary to reduce the amount of value added tax (VAT) and corporate income tax (CIT) payable to the government.

We have read conflicting opinions from the State Revenue Service (SRS) on how financing from the State or EU funds affects value added tax (VAT). Persons receiving such funding should consider this issue carefully and may have to seek SRS approval for VAT treatment. To help you navigate this complexity, we will offer some guidelines based on the assessment made by the Court of Justice of the European Union (CJEU) in its ruling C‑87/23 of 4 July 2024. The case involves a dispute between the Latvian Information and Communications Technology Association (LICTA) and the SRS.

To pick up where we left off last week, in this article we look at proposals for amending the VAT Act, which include a move to direct application of 0% VAT to diplomatic and consular offices, update the conditions for registering a fiscal representative with the State Revenue Service (SRS) and ease the terms of the special VAT scheme for imports. We will also look at the margin scheme for second-hand goods and exemptions available to non-domestic taxable persons suppling goods in temporary storage.