Amendments to the law On excise tax were published on 20 October 2022. The objective is to align Latvian law On excise tax with the new EU Directive 2020/262/EU, which will supersede the existing Directive 2008/118/EC. The amendments are to enter force on the same date as the new EU Directive, 13 February 2023.

While the amendments introduce rather extensive changes in the application of tax, a key novelty is the regulation on the application of excise tax in distance sales of excise goods. As you may know, on 1 July 2021 the EU introduced the so-called OSS (One Stop Shop) regime for the application of value added tax (hereinafter VAT), which substantially simplified the payment of VAT on supplies of goods to individuals in another member state of the EU.  Under the OSS regime, VAT is paid in the consumer’s country, i.e. the country of residence of the individual who purchases goods from a supplier in another member state, which has not registered as a VAT payer in that country. To date, the law On excise tax regulated the application of excise tax to distance sales of only coffee and non-alcoholic beverages, and did not regulate that of alcoholic beverages. Under general requirements, the payment of excise tax in Latvia was the responsibility of the individual who purchased alcoholic beverages from an on-line store registered in another member state. This regime made it substantially difficult to pay and administer excise tax, and in most cases it was not done at all.

The new amendments introduce an equivalent application of excise tax to both supplies of coffee and non-alcoholic beverages and alcoholic beverages to be delivered to Latvia by way of distance sales. According to the amendments, payment of excise tax in Latvia will be the responsibility of the supplier of goods – person of another member state or a Latvian representative appointed by the tax payer. Tax will be applied at rates in force in Latvia according to the local payment procedure.

Please note that the new regulation will also apply to those Latvian companies that deliver excise goods from Latvia to individuals in other member states. Latvian suppliers will need to pay excise tax in the member state where their customer is located in accordance with the rules on excise tax applicable in that member state. If excise tax on goods supplied to individuals in another member state has been already paid in Latvia, it will be possible to recover it according to the procedure specified in the law.

 

 

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The article provides an insight into what KPMG Baltics SIA considers to be key changes in tax legislation in the 4th quarter of 2022.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Gunta Kauliņa, Senior Manager in Tax, KPMG in Latvia