This article serves as a reminder of who is liable to file Intrastat reports and how the information to be disclosed will change from 2021.

In our Flash News editions of 6 March and 15 May 2020 we said that the EU is planning to simplify the VAT treatment of e-commerce and Latvia is planning to amend the VAT Act on e-commerce. This article explores the progress in adopting these changes and the latest e-commerce developments in the UK.

This article completes what we wrote last week.

Compensation for loss is not subject to VAT but how do we know whether the amount that becomes payable if the customer terminates a fixed-term service contract through their fault, is a contract penalty, compensation for loss, or consideration for services? In their guidance “VAT Treatment: Questions and Answers” the State Revenue Service (“SRS”) explains that VAT is not charged on a contract penalty, down payment, deposit or compensation unless this is consideration for a supply of goods or services. This article explores two rulings in which the Court of Justice of the European Union (“CJEU”) explains how to assess whether compensation received is essentially consideration for services.

Under the Taxes and Duties Act and the State Revenue Service (“SRS”) Act, the tax authority has a wide range of tasks and responsibilities in tax administration. The SRS monitors the economic and financial activities conducted by all entities and individuals and enforces compliance with the tax laws. To fulfil its statutory responsibilities, the SRS carries out various control measures, from ones that can go unnoticed by the taxpayer until a certain moment to serious inspections requiring the taxpayer’s presence. This article explores thematic reviews as well as their substance, key aspects, and expected outcomes.

In this article, you will find a summary of the latest developments in the Estonian tax system.

On 2 July 2020, the Court of Justice of the European Union (“CJEU”) ruled on case C-835/18 (SC Terracult SRL). The dispute was over the tax authority’s refusal to allow a taxable person to adjust invoices after the tax authority had completed a tax audit and assessed an additional tax liability, thus denying the taxable person’s right to a tax refund. The tax authority’s decision was final because the taxable person had accepted it. The taxable person sought to adjust invoices on the basis of new facts which were not known when the tax authority made the decision and which resulted in reverse-charge VAT being applied to the underlying transactions.

Given the impact of Covid-19 on many companies, on 14 July the Cabinet of Ministers adopted regulations to allocate EUR 19.2 million in aid to companies in the tourism industry and EUR 51 million in aid to exporters whose financial position has significantly deteriorated as a result of Covid-19. The new rules will come into force on the effective date of the European Commission’s decision on the compatibility of business aid with the EU internal market. This aid will be administered by the Latvian Investment and Development Agency, awarding it within the available finance allocation and by reference to the sequence in which aid requests are submitted. The aid will take the form of a grant aimed at helping companies pay wages and salaries.

In its ruling of 11 June 2020, the Court of Justice of the European Union (“CJEU”) answered preliminary questions asked by a Romanian court as to whether moving goods to another member state constitutes a deemed intra-Community supply and whether the existence of a VAT identification number or the requirement for identification denies the right to a VAT refund in another member state under the 9th directive. This article explores the CJEU findings.

On 5 June 2020, Parliament adopted the Handling of Covid-19 Consequences Act in its final reading. The new law aims to lay down a legal basis for support measures after the end of the emergency situation caused by the coronavirus pandemic.

In our Flash News of 10 September 2019 “State Revenue Service seeks collection from tax debtor’s business partners” we wrote about how the SRS suspended a trader’s business after he refused to pay taxes owed by its supplier. The SRS has recently lost more cases in which a trader disputed his business suspension enforced by the SRS after he withheld information about one of his suppliers and in which a trader refused to pay a supplier’s tax debt at the SRS’s request. This article explores key aspects of those disputes.

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.

As we wrote earlier in our article “Tax solutions to deal with COVID-19 consequences,” both the VAT Act and the case law permit taxable persons to avoid adjusting their input tax deduction if they have acquired goods or services with VAT but for objective reasons have stopped doing business, implementing projects, and supplying goods or services to their customers. This article explores guidance the State Revenue Service (“SRS”) published on 24 April to analyse VAT treatment in certain situations facing many businesses.

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.