The VAT treatment in the financial and insurance (“F&I”) sector prescribed by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, which exempts F&I services without recovery of input tax on goods and services acquired for supplying those services, remains unchanged since 1977. Irrecoverable input tax causes extra cost to F&I players and their customers as well. Our experience suggests that the VAT treatment in the financial sector has been suffering from legal uncertainty and high administrative costs incurred in applying the VAT rules. The outdated definitions of services make it difficult for fintech companies to figure out how to claim an exemption. And there are no instruments to reduce the burden of irrecoverable input tax. This article explores whether the F&I sector is in for change.

The Cabinet of Ministers is to debate proposals for amending the VAT Act that provide for transposing three Council directives that prescribe the VAT treatment of e-commerce by expanding the scope of special VAT schemes and introducing a new scheme for goods imported from third countries or territories. We have written earlier about the expected EU changes to the VAT treatment of e-commerce from 2021.

Amid the international outbreak of COVID-19 and the resulting public uncertainty, we see that crime in general, including fraud, blackmail, money laundering and other economic crime, tends to grow. It basically makes sense to expect such activities from persons that have been involved in illegal activities and tried to exploit the weakest links of the existing legal framework and public order in their own interests. A similar illegal strategy is implemented in the present situation, in which people are focusing on other crucial and urgent issues and becoming less cautious or making rash decisions because of the emergency situation. Practice also suggests that the rising crime rates are directly linked to the circumstances caused by COVID-19.

A survey PwC conducted in late 2019 finds that 77% of Latvian company representatives have asked the State Revenue Service (“SRS”) for assistance or comment, and about a half of their enquiries were concerned with interpreting tax laws.

We have already informed our MindLink.lv subscribers about tax measures aimed at helping employers, workers and traders cope with the economic consequences of the COVID-19 crisis. Idleness benefit is one of the support measures for employers and workers. This article explores how to record idleness benefit in the books and how to prepare an employer’s statement for an idle worker.