VAT-exempt supply
In Latvian: Ar PVN neapliekams darījums
A VAT-exempt supply (ar PVN neapliekams darījums) is a supply of goods or services that the VAT Law exempts from tax, such as insurance, lending, services of state-recognised educational institutions, residential letting to individuals and the sale of used real estate. No VAT is charged, and the related input VAT cannot be deducted.
The exemptions are listed in Section 52 of the VAT Law and apply only when a transaction matches the description exactly. The list also covers medical and dental technician services, social care, cultural events, gambling, and an author’s remuneration for a work and its use.
An exemption is not a 0% rate. With 0%, as on exports, input VAT can be deducted; with an exemption it cannot, so the VAT paid to suppliers becomes a cost. A business with both taxable and exempt supplies deducts input VAT in proportion.
An invoice for an exempt supply must cite the section of the VAT Law or article of the EU VAT Directive that grants the exemption. Some exempt supplies, such as insurance, financial services and residential letting, count towards the EUR 50,000 registration threshold.
Example
SIA “Ozols” lets a flat to a private individual for EUR 600 a month. Residential letting to individuals is exempt, so the invoice carries no VAT but cites Section 52(1), Clause 25 of the VAT Law. SIA “Ozols” cannot deduct the VAT it paid on renovating the flat.
How Fakts handles it
Fakts lets you mark a line without VAT as “Exempt from VAT”, printed under the invoice table and sent as Peppol VAT category E in the e-invoice.
Legal basis
- Value Added Tax Law, Section 52 likumi.lv
- Value Added Tax Law, Section 125(1), Clause 15 likumi.lv
- Value Added Tax Law, Section 59(2) likumi.lv
This explanation is for information and does not replace tax or legal advice. The law in its current consolidated text prevails.