On 21 May 2025, the Ministry of Smart Administration and Regional Development (VARAM) published an information report entitled “On the progress of the introduction of structured electronic invoicing”. The report proposes to postpone the mandatory introduction of electronic invoicing in business-to-business (B2B) transactions from 1 January 2026 to 1 January 2027, while allowing voluntary use from March 2026. These changes are justified by several critical factors, including technical readiness, a lack of digital skills and insufficient preparation time.

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.

Good things are worth waiting for. This could be said about the new amendments to Latvian transfer pricing regulations, which this time are especially favourable for taxpayers (hereinafter – “TP”). Changes have come into force that allow local transfer pricing documentation to be prepared in English. This article covers the new changes, the details of their application and possible challenges. 

State support for companies is often associated with direct subsidies, grants, or tax reliefs. However, a state or municipal investment in a company's share capital, which may take the form of acquiring shares or stocks, in-kind contributions (such as the transfer of real estate or equipment), or recapitalisation, also constitutes a form of state aid. It is important to remember that any public investment in a company’s share capital, if it meets the criteria set out in Article 107 of the Treaty on the Functioning of the European Union (TFEU), is considered state aid and is subject to EU regulation. This is a grave error that Member States occasionally make, as they fail to recognise that any such investment must be assessed against these criteria, which may otherwise result in the granting of unlawful state aid. 

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.

Starting from 1 January 2026, the Directive on Administrative Cooperation in the field of crypto-assets  (DAC8), adopted in 2023, will come into force. It will require service providers and platform operators to report to the State Revenue Service (SRS) on sellers of certain types of crypto-assets. As a result, the legal framework of the Republic of Latvia (RoL) is currently being updated to ensure compliance with the requirements of the Directive. A draft law has recently been prepared clarifying the application of exemptions in relation to the scope of information to be reported.

In today’s world, innovation has become a critical component of competitiveness and economic growth. Companies and individuals around the world are looking for new solutions in the hope that the market will recognise and demand them. Innovation usually means the introduction of new ideas, methods or products that promote growth and competitiveness by improving processes, services or technologies. However, when pursuing progress, it is important to assess whether innovations will truly improve society as a whole and whether the benefits they offer are accessible to everyone. Specifically, will innovations be inclusive? In this article, we will explore the link between social innovation and social justice, or how innovation can help reduce social exclusion, provide accessible solutions for all and promote long-term positive change in society.

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.

The tax authority has once again raised the issue of authentication procedures in the State Revenue Service’s (“SRS”) Electronic Declaration System (“EDS”), in line with national information system security policies and digital transformation guidelines.
This article discusses the proposed amendments to the Cabinet Regulation No. 7 “Regulations on the State Revenue Service’s Electronic Declaration System” of 9 January 2024 (“Cabinet Regulation No. 7”). 

NIS2 (Network and Information Security Directive) is a European Union (EU) directive aimed at strengthening cybersecurity across the EU, particularly concerning critical infrastructure and essential services. In Latvia, this directive has been transposed into national legislation by the adoption of the National Cybersecurity Law (NCL). Right now, companies should have clarity about their status (whether NCL subject or not) and should have registered by 1 April 2025, at the National Cybersecurity Centre (NCC). Organisations are due to appoint a cybersecurity manager and submit their first self-assessment report by 1 October 2025 and begin reporting cybersecurity incidents from 1 July this year. 

Resident tax status obliges an individual to pay personal income tax (PIT) on their global income in a particular country and generally allows tax relief for residents. Similarly, the correct determination of tax resident status is important to avoid double taxation by applying the relevant laws and regulations. This article describes the experience of PwC specialists concerning the intricacies of determining and registering the tax residency status of Ukrainian nationals in the Republic of Latvia (RoL).

One of the main conditions for the successful functioning and development of the groups of companies (group) is sufficient funding. However, there is no common model for best financing the economic activities of the group. In some cases, the lending and borrowing functions in the financing of the group companies may be performed by the same undertaking (treasury firm or holder), which attracts third party financing and allocates financial resources to the other members of a multinational group. In such circumstances, the cash company carries out a centralised treasury activity within the group. When assessing transfer pricing issues, it is essential to define the transaction boundaries accurately and to assess in detail the functions and activities implemented by the cash company. This text message discusses the process and purpose of the treasury function and provides guidance on pricing the service provided by the treasury holder. 

In commercial transactions, there may be cases when a buyer, upon discovering defects in the purchased goods, wishes to cancel the contract or claim damages. However, not every defect identified by the buyer is necessarily considered a legitimate defect. Furthermore, it must be noted that the buyer (the business) is required to take certain actions in order to retain the right to compensation for damages or contract cancellation when defects in the goods are properly identified. This article casts more light on this. 

In Latvia, there is frequent talk of progress in gender equality, yet the reality is harsher. Latvia ranks last in the European Union for gender pay equality, and the gap between men’s and women’s wages is unfortunately growing. While the EU’s average gender pay gap in 2023 was 12%, in Latvia this figure reached 19%, worsening the country’s position (17.1% in 2022) and placing it last among all 27 Member States. In other words, for every euro earned by a man in Latvia, a woman earns only 81 cents.

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. 

The global trend towards digital solutions is becoming increasingly apparent in the financial and tax sectors. The introduction of e-invoicing, which was initially seen as a formal compliance requirement, is now becoming an important strategic step towards more efficient, transparent and sustainable business management. Like many other countries, Latvia has begun the gradual introduction of e-invoicing to strengthen fiscal discipline, reduce the shadow economy and modernise data exchange processes. These measures require companies to review their existing systems and introduce technological solutions that ensure compliance while adding real value to business processes. 

In practice, there are cases where businesses located in different countries, having agreed to apply the laws of the Republic of Latvia (“RoL”) to a contract, are unaware or forget that not only the provisions of the Civil Law or the Commercial Law may apply, but also the United Nations Convention on Contracts for the International Sale of Goods (“Convention”), unless the contracting parties have excluded its application. 

In this article, we look at the circumstances under which the Convention is applicable and how it can impact claims for damages.  

What is Big Data? We usually talk about Big Data when traditional data processing methods can no longer cope with the volume, velocity, variety and reliability of the data. While there is no specific amount of data that can be labelled as Big Data, it is usually a data set that exceeds the capabilities of traditional databases and data processing tools. What should you do if you need to analyse such a huge data set and don't have immediate access to a fully-fledged Big Data platform? In this article, we will look at how you can use available tools to gain insight into this Big Data when no specialised solution is yet available.  

Manual procurement documentation is time-consuming and prone to human error. Employees often use previous procurement documentation to create new documentation, which, if not thoroughly reviewed, can harbour risks. According to Gartner, 65% of procurement leaders are actively investing in artificial intelligence (AI) to improve productivity rates and reduce the risk of human error. AI is a useful tool for tasks such as analysing historical procurement data, preparing documentation and evaluating candidates. 

Tax residents in the Republic of Latvia (RoL) have the right to recover overpaid personal income tax (PIT), submit a payroll tax booklet to the employer and add a relative as a dependent for tax purposes to receive tax relief. Does a person who is a non-resident for tax purposes, employed by a Latvian company and earning income subject to PIT also have such a right? This article summarises the criteria under which non-residents can recover overpaid PIT for unused tax reliefs and eligible expenses.

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).  

In recent years, intersectionality has become a hot topic in various fields, from political science to the provision of social services. The concept is also increasingly mentioned in public procurement processes to emphasise the need for comprehensive solutions that foster a more inclusive and equitable society. Intersectionality is a new and innovative look at how different identities such as gender, age, nationality, ethnicity, physical and cognitive ability affect people’s experiences and opportunities. This approach helps us to understand that socio-economic challenges affect different population groups differently and how they impact people's personal and working lives, including the management of organisations.

Intra-group financing transactions are a way for corporate groups to promote efficient capital allocation, stimulate development and provide more flexibility and control over financial resources than external financing. However, as with all other intra-group business transactions, transfer pricing risks should not be forgotten in financing transactions.

This article discusses an important but sometimes overlooked comparability factor to consider in cross-border financing transactions with related parties: the sovereign risk premium.

This judgement of the European Court of Justice (ECJ) dealt with an important issue relating to the free movement of capital within the European Union. The case concerned a Polish law that restricts the tax exemption for internally managed collective investment undertakings (CIUs) from other EU countries to those managed by external entities. The said tax exemption was denied for CIUs that are managed internally. This restriction was contested as incompatible with EU law, in particular with the free movement of capital.

Given the current challenges facing Europe—ranging from increasing geopolitical tensions and slowing economic growth to intensified global technology competition—the European Commission (EC) has concluded that the European Union (EU) requires a comprehensive business plan that integrates climate action, circularity, and competitiveness.

On 26 February 2025, the EC presented the Clean Industrial Deal (CID), a strategic plan designed to accelerate decarbonisation, re-industrialisation, and innovation while enhancing the competitiveness of EU industries. The CID aims to strike a balance between the EU's global competitiveness and its ambitious environmental goals outlined in the Green Deal.

In today’s rapidly evolving digital landscape, many companies are adopting e-invoicing to enhance their accounting processes and boost efficiency. However, for e-invoicing to be effective, accounting policies must be updated to clearly define the new procedures and requirements. This article explores the key considerations when updating accounting policies to integrate e-invoicing effectively.

This article concludes the discussion from last week’s article.

According to the Pay Transparency Directive 2023/970 (“Directive”), the concept of work of equal value covers four aspects: skill set, accountability, necessary effort and working conditions. As the Directive is to be implemented by June 2026, these aspects have become topical. This article deals with  the legislature’s guidance.

Companies that operate at a loss for an extended period of time remain in the sights of tax administrations, including the Latvian State Revenue Service, especially if these companies are part of a multinational group of companies and carry out controlled transactions.

This article looks at a number of court cases in European countries that show how complex and difficult it is for companies and tax administrations to scrutinise the transfer pricing of loss-making companies.

The closing part of last week's Article.