Introduction
By using online sales platforms, companies today can much more easily sell goods and services not only in Latvia and the European Union (EU), but worldwide. For consumers, this provides the opportunity to purchase goods and services from sellers across the globe. At the same time, the rapid development of e-commerce raises significant questions regarding the application of value added tax (VAT).
Latvian companies engaged in selling goods and services online currently have access to several VAT regimes, and choosing the correct regime is crucial both for mitigating tax risks and maintaining competitiveness.
VAT regimes available for e-commerce
Latvian companies selling goods and services online may apply several VAT regimes:
OSS (One Stop Shop)
The OSS regime is intended for VAT registration and declaration for goods and services sold to EU consumers. In Latvia, it has been in force since 1 July 2021 and replaced the former MOSS regime, which applied only to electronic services.
The OSS regime may be used by both EU and non-EU businesses and is divided into:
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EU OSS – for EU-established businesses;
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Non-EU OSS – for businesses established outside the EU.
IOSS (Import One Stop Shop)
The IOSS regime applies to goods imported from third countries and sold to EU consumers where the intrinsic value of a single consignment does not exceed EUR 150. Under this regime, VAT is charged at the moment of sale, while customs procedures are simplified.
The IOSS regime has been applicable in the EU since 1 July 2021.
Small and Medium-Sized Enterprises (SME) Regime
From 1 January 2025, an SME regime applies allowing businesses with total EU turnover of up to EUR 100,000 to avoid VAT registration in Latvia and other EU Member States, provided that local VAT registration thresholds are not exceeded.
Special VAT Registration for Receiving Services and Goods
From 1 July 2025, Latvia has introduced a special VAT registration regime solely for the receipt of services and the acquisition of goods from other EU Member States. This regime does not impose an obligation to charge VAT on sales where the general VAT registration threshold has not been reached
VAT Registration thresholds
In Latvia, the general VAT registration threshold is EUR 50,000 annual turnover. Until this threshold is exceeded, a business is not required to register for VAT in respect of domestic transactions.
In e-commerce, an additional EU-wide threshold of EUR 10,000 applies to sales to EU consumers (per country). Once this threshold is exceeded, VAT must be charged in the consumer’s Member State, either via the OSS regime or by registering separately in each Member State.
The SME regime (100 000 EUR threshold) may be aligned with the OSS regime, allowing businesses to avoid separate VAT registrations in multiple EU Member States.
Application of VAT
In e-commerce transactions it is necessary to determine where the delivery of the goods ends. If goods are shipped to another country, VAT is applied in the country where the customer is located.
At the same time, the seller must comply both with Latvian rules on VAT application and VAT registration, as well as with the VAT rules of the country in which the customer is located. If the customer is located in an EU Member State, the EU-wide e-commerce VAT regimes apply. However, if the customer is located outside the EU, for example in the UK, the VAT and tax rules of those countries must also be taken into account.
Where the VAT is applicable?
Sales to Latvian Customers
If goods or services are sold to customers in Latvia, Latvian VAT rates apply:
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21% – standard rate;
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12% – for example, medicines;
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5% – for example, books.
VAT does not apply until the EUR 50,000 turnover threshold is exceeded, after which VAT becomes mandatory.
Sales to EU Consumers
Where customers are located in other EU Member States and total cross-border turnover exceeds EUR 10,000, VAT must be charged at the customer’s local VAT rate. VAT may be paid:
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via the OSS regime in Latvia; or
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by registering for VAT separately in each customer’s Member State.
In practice, most businesses opt for the OSS regime due to simplified administration.
Sales to Customers Outside the EU
Sales to customers outside the EU generally qualify as exports and are not subject to Latvian VAT, provided appropriate export evidence is available. However, sellers must also assess VAT or equivalent tax obligations in the customer’s country.
For example:
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in the United Kingdom, foreign sellers must register for VAT from the first transaction;
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in Switzerland, from 2025, VAT registration for e-commerce businesses is mandatory from the first sale;
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in Norway, the VOEC regime applies with an annual threshold of NOK 50,000.
Goods Supplied from Third Countries to EU Consumers
If goods are supplied to EU customers directly from third countries (for example, China), VAT must be paid at the time of sale by registering under the IOSS regime. This regime applies to goods with a value below EUR 150.
The EU plans to abolish the EUR 150 threshold in the future, making sellers responsible for import VAT regardless of the value of the goods.
When Is the Online Platform Responsible for VAT
Online platforms (such as Amazon, eBay, Etsy, Airbnb) are responsible for charging and remitting VAT only in specific situations, primarily:
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where they facilitate the import of goods from third countries in consignments not exceeding EUR 150; or
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where the seller is not established in the EU.
If a Latvian company sells EU-manufactured goods to EU consumers, even via an online platform, VAT responsibility always remains with the seller.
