Reverse charge in Latvia: how to invoice under the domestic reverse charge

Which sectors

The list is closed (VAT Act, Section 84(4)). Each sector has its own section, its own list of goods or services and its own code, which the buyer uses in the VAT 1 report.

Conditions they share

• The supply takes place in Latvia and both seller and buyer are VAT registered. If the buyer is not, ordinary VAT applies.
• For scrap metal the buyer also needs a licence or permit (Section 143(1), point 2).
• No sector has a value threshold.
• The buyer pays the amount without VAT, and only by non-cash means.

What the invoice must show

• The customer’s Latvian VAT number (VAT Act, Section 125(1), point 6). Without it the reverse charge cannot apply, since both parties must be VAT registered.
• The value of the goods or services without VAT (the invoice paragraph of each section).
• No VAT rate and no VAT amount (Section 129(3)). The total due equals the total without VAT.
• The words “nodokļa apgrieztā maksāšana” (reverse charge, Section 125(1), point 16).
• Every other ordinary detail: date, number, both parties’ names, addresses and VAT numbers, description, quantity, unit and price without VAT.

In the VAT return

• The supplier reports the value in row 41.1 and lists every invoice in part III of the VAT 1 report whatever the amount, even below 150 euro (Cabinet Regulation No. 40, points 17.3 and 31.3).
• The customer calculates VAT at 21% and reports it in row 52 as output tax and in row 62 as input tax, and also in row 66 if the purchase is not used for taxable supplies. In part I of the VAT 1 report each invoice carries the sector’s code (R1 to R7).
• The customer reports the tax in the period in which it received the goods or service and the invoice (VAT Act, Section 124(4) and (5)).

What the reverse charge does not cover

• Household electronics such as TVs: Section 143.5 was repealed from 1 January 2020.
• Metalworking services: since 1 July 2019 Section 143.4 covers goods only.
• Emission allowances, gas and electricity to dealers: Latvia has not introduced a domestic reverse charge for them.
• Phone accessories and spare parts sold on their own, stand-alone design work, and maintenance that does not affect a building’s walls.

Reverse charge with EU customers

The same words “nodokļa apgrieztā maksāšana” also go on an invoice for services to a business in another EU country, but that is a different mechanism: the customer pays VAT in its own country and the supply goes in row 48.2, not 41.1.

How long the rules apply

The Latvian VAT Act sets no end date for any sector. For construction and scrap the EU basis has none either (VAT Directive, Article 199(1)). The timber derogation (Implementing Decision 2009/1008/EU) and Article 199a of the VAT Directive, on which Sections 143.1 to 143.4 rest, run until 31 December 2026, so check the State Revenue Service near the end of the year.

In a Peppol e-invoice

The line takes VAT category AE (reverse charge) at a rate of 0, and the VAT breakdown carries the reason code VATEX-EU-AE or the text “Reverse charge” (rule BR-AE-10). BR-AE-02 requires the seller’s VAT number and the buyer’s VAT number or registration number; BR-AE-05 requires the 0 rate.