VAT tiers & reverse charge

Updated 25 September 2026 5 min read

Latvia has four VAT rates and a separate reverse-charge mechanism. Understanding the difference means getting invoices right from the start. This article explains each rate and when reverse charge enters the picture.

The Latvian VAT rates

Latvia operates four VAT rates:

21 %: standard rate. Applies to most goods and services sold in Latvia.
12 %: reduced rate. Applies, among others, to medicines and medical devices, specialised infant food, domestic passenger transport, firewood and heat supplied to households, and the fresh fruit, berries and vegetables listed in Annex 1 of the VAT Law (kinds typical of Latvia, whatever their country of origin; 12 % since 1 January 2024, permanent from 1 January 2026). From 1 July 2026 to 30 June 2027 it also applies, temporarily, to bread, milk, fresh poultry and eggs.
5 %: reduced rate. Applies to books and press publications, printed or electronic, published in Latvian or another language the law lists (for example an official language of an EU or EEA state).
0 %: zero rate. Applies to exports outside the EU and intra-EU supplies to VAT-registered buyers in other member states.

Reverse charge is not a rate

Domestic reverse charge applies to specific sectors where fraud risk is higher: timber and wood products, construction services, scrap metal and secondary raw materials, mobile phones, tablets, laptops and integrated circuits, cereals and industrial crops, and unwrought precious metals.

If you sell goods or services from these categories to a VAT-registered buyer in Latvia, the buyer, not the seller, is responsible for accounting for VAT. Your invoice should note "Reverse charge VAT applies" (or the Latvian equivalent), and you do not show a VAT amount.

What such an invoice looks like in each sector, which return rows it goes in, and how to issue 0% supplies is covered in VAT invoices by situation.

In Fakts such a line is entered at 0% with the reason "Reverse charge". The invoice prints that wording, and the Peppol XML files the line under the reverse-charge category. If you're unsure whether your transaction falls into a reverse-charge category, check with your accountant.

Picking the right rate per line

When building an invoice, each line item has a dropdown with the four VAT rates. Pick 0% and a reason appears under the line: reverse charge, export outside the EU, goods supplied within the EU, or exempt from VAT. If you are not registered for VAT, your lines are 0% and say that the supplier is not registered.

Selecting a VAT rate on a line Interface shown in Latvian

Quick reference:

Standard services and goods: 21 %.
Fresh fruit, berries and vegetables typical of Latvia: 12 %.
Books and press in a qualifying language: 5 %.
Exports outside the EU or goods supplied to an EU VAT-registered buyer: 0 % with the matching reason.
Timber, construction, scrap metal, IT devices, cereals, precious metals: possibly reverse charge (0% with that reason).

Zero-rate: exports & intra-EU

The zero rate applies when goods physically leave the EU (export), or when you sell goods to a VAT-registered buyer in another EU member state (intra-community supply).

Zero-rate does not mean the transaction is VAT-exempt, it means the rate is 0 %. Unlike exemption, the zero rate gives you the right to recover input VAT on related costs. This distinction matters for VAT accounting purposes.

For cross-border services within the EU, the rules depend on the type of service and where the buyer is established. If you have EU clients for services, ask your accountant to confirm which rules apply to your situation.