The registration of Value Added Tax (VAT) payers in the country by the State Revenue Service (SRS) in the register is controlled by these provisions; Article 3 and paragraphs 1 and 9 of Article 26 of the Act ‘On Value Added Tax’. Any company which engages in business activities and purchases goods in the EU area whose value exceeds EUR 50 000 without tax in the present calendar year must be registered by SRS within 30 days. After registration, it can choose to exit from the register 2 years preceding the day of registration. Companies owned by foreigners must register for VAT provided they engage in the provision of taxable goods or services. They can choose to register in person or through a representative. A company not registered for VAT but makes distant sales and has a value of sold products or services surpassing the 24,000 LVL threshold must register for VAT with the SRS. A company that fails to register in time, shall face penalties as well as pay for the VAT incurred on all taxable goods and services provided during the period.
VAT eligibility
Not every company operating within the country is obligated to pay VAT. Registering for VAT applies to the following:
- Natural persons
- Legal persons
- Partnerships
- A group of people carrying out joint economic activity based on a contract
- A non-EU resident or non-EU citizen who performs taxable business on EU territory
- General partnerships, limited liability companies(SIA), etc. must submit VAT applications to the Register of Enterprises
Types of VAT rates
There are three basic types of rates. The standard VAT rate is 21%, the reduced rate is 12 percent and applies to certain goods and services while the 0 percent rate applies to import and export supplies within, goods and services for diplomatic missions, etc.
Registration
Registering for VAT is mandatory for a natural or legal person carrying out taxable transactions in the country whose value has surpassed LVL 10,000 in 12 months. This registration should be filled out within 30 days of the meeting or exceeding the amount. After an applicant fills out for registration, the SRS reviews the form and registers the application in the Register of VAT Taxable Persons within 15 working days of receiving the application. If it chooses to refuse the registration, it must inform the applicant of this decision in five days and state the reason for the refusal. When the registration is approved by the SRS, a certificate is issued to the VAT applicant. Local companies must register for VAT if the value of their taxable products and services earnings exceed the 35,000 LVL threshold. A company that supplies goods or services to an EU state, is required to register for VAT before the closure of the transaction.
VAT registration procedure
VAT is charged according to the Value Added Tax Act to any goods and services. It must be paid by all taxpayers registered in the republic. The taxes paid to belong to the state budget. To register, a taxable person must apply with the SRS by filling out the application form and when it is registered, such a person must pay a certain amount to the state account.
VAT exemptions
Although most companies pay taxes, certain services are exempted such as banking and financial services including transactions with shares and securities. Other services include social security services, medical care, education services, real estates services such as leasing, gambling, and postal services. Aside from this, to prevent double taxation, the government also offers double taxation agreements with over 50 states.
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