A Latvian logistics company invoices a German manufacturer for EUR 45,000 in warehousing services. A Rīga-based online store ships cosmetics to customers in France, Spain, and Poland. A Latvian SIA purchases raw materials from an Italian supplier. Three transactions, three different VAT treatments — and getting any of them wrong triggers consequences in two countries simultaneously.

Cross-border VAT within the EU is not a single rulebook. It is a matrix of rules that depends on whether your counterpart is a business or consumer, whether you are selling goods or services, and whether those goods physically cross a border. For Latvian companies trading within the European Union, understanding this matrix is not optional — it determines how you invoice, what you report, and how much tax you owe.

Quick Summary

EU cross-border VAT operates on different rules for B2B versus B2C transactions. B2B sales use reverse charge principle - zero-rate Latvian invoices with buyer self-assessing VAT in their country (requires valid VIES verification). B2C distance selling has EUR 10,000 annual threshold - below uses Latvian 21% rate, above requires destination country rates via OSS system. Services depend on place of supply rules with extensive exceptions for digital services, property-related services, and short-term rentals. Key compliance requirements include monthly EC Sales Lists, proper documentation for goods movement, and VIES verification. OSS enables single quarterly filing for all EU B2C sales. Common pitfalls include incomplete documentation, late OSS registration, and triangulation complexities. Proper planning prevents multi-country compliance obligations.

B2B: The Reverse Charge Principle

The foundational rule for business-to-business transactions within the EU is elegantly simple in theory: the seller does not charge VAT. Instead, the buyer self-assesses VAT in their own country.

When you sell to an EU business (intra-Community supply):

You issue an invoice without Latvian PVN — at the 0% rate — provided two conditions are met. First, the buyer must have a valid VAT registration number, verifiable through the EU's VIES system. Second, the goods must physically leave Latvia (for goods) or the service must fall under the general B2B place-of-supply rule (for services — meaning the service is taxed where the buyer is established).

You report the transaction in your PVN declaration under intra-Community supplies and in the EC Sales List (Kopsavilkuma paziņojums), submitted monthly to VID. Missing the EC Sales List does not change your tax liability, but it generates automatic inquiries from VID and can result in penalties of EUR 50–150 per report.

When you buy from an EU business (intra-Community acquisition):

Your supplier invoices you without their country's VAT. You then self-assess Latvian PVN at 21% on the purchase — reporting it simultaneously as output VAT (tax due) and input VAT (tax deductible). If the purchase is fully deductible (used entirely for taxable business activities), the net effect is zero. But the reporting must happen. Omitting the self-assessment in your declaration is a compliance error that VID flags routinely.

(A common misconception: some businesses believe that receiving a VAT-free invoice from an EU supplier means no VAT applies at all. It does not. You owe Latvian PVN on the acquisition — you just also get to deduct it, making the cash impact neutral but the reporting obligation real.)

For a detailed explanation of the reverse charge mechanism, see our article on reverse charge VAT in Latvia.

B2C: Distance Selling and the EUR 10,000 Threshold

Selling to private consumers in other EU countries follows different rules entirely. Since July 2021, the EU-wide threshold for distance selling stands at EUR 10,000 per year (across all EU member states combined, not per country).

Below EUR 10,000: You may charge Latvian PVN at 21% on all B2C sales across the EU. This simplifies things but may make your prices uncompetitive in countries with lower VAT rates.

Above EUR 10,000: You must charge the VAT rate of the buyer's country. A sale to a French consumer carries 20% French TVA; to a German consumer, 19% German Umsatzsteuer; to an Estonian consumer, 22% Estonian käibemaks.

Without a simplification mechanism, exceeding the threshold would require you to register for VAT in every EU country where you have customers. That is where the One-Stop Shop (OSS) transforms the equation. By registering for OSS through VID in Latvia, you file a single quarterly declaration covering all B2C sales across the EU. VID distributes the tax to the respective member states. One registration, one filing, 27 countries covered.

E-commerce businesses should read our dedicated guide: E-commerce VAT in Latvia: OSS, IOSS, and distance selling.

Services: Place of Supply Matters

For cross-border services, the VAT treatment depends on where the service is considered "supplied" — a concept that sounds abstract but has very concrete consequences.

B2B services (general rule): Taxed where the buyer is established. A Latvian IT company providing development services to a French company does not charge Latvian PVN. The French company self-assesses French TVA. The Latvian company reports it as an intra-Community service supply.

B2C services (general rule): Taxed where the seller is established. The same Latvian IT company providing services to a French individual charges Latvian PVN at 21%.

Exceptions abound. Services connected to immovable property are taxed where the property is located. Short-term vehicle rentals are taxed where the vehicle is made available. Electronically supplied services (SaaS, digital content, online courses) sold B2C are taxed where the consumer resides — regardless of the general rule. Restaurant and catering services are taxed where they are physically performed.

These exceptions are not edge cases. In our practice, at least 30% of cross-border service transactions require specific analysis of the place-of-supply rules rather than relying on the general rule. When in doubt, verify before invoicing — correcting the VAT treatment after the fact is significantly more work.

Practical Pitfalls for Latvian Businesses

Failing to verify VIES. Before issuing a zero-rated intra-Community invoice, check the buyer's VAT number on the VIES portal. If the number is invalid — even temporarily — your zero-rate treatment is not protected. VID can reclassify the supply as domestic and assess 21% PVN.

Incomplete documentation for goods. Zero-rating intra-Community goods supplies requires proof that the goods left Latvia. Transport documents (CMR, bills of lading), signed delivery confirmations, and logistics provider records are essential. "The goods were shipped" is not documentation — "CMR number X, signed by recipient Y on date Z" is.

Ignoring triangulation. When goods move from country A to country C but are invoiced through a Latvian company (country B), triangulation rules apply. Getting this wrong can create VAT obligations in countries where you have no presence and no registration.

Late OSS registration. If you exceed the EUR 10,000 B2C threshold mid-year, the obligation to charge destination-country VAT applies immediately. Retroactive OSS registration is possible but creates a cleanup exercise that nobody enjoys.

The EU VAT system rewards preparation and penalizes improvisation. For Latvian businesses expanding across European borders, building VAT compliance into the expansion plan — not bolting it on afterward — is the approach that avoids expensive surprises.

FAQ

How does VIES verification work and what happens if a customer's VAT number becomes invalid? VIES verification through the EU database confirms VAT number validity before issuing zero-rated invoices. Check https://ec.europa.eu/taxation_customs/vies/ before each transaction. If a number shows invalid even temporarily, your zero-rate protection is lost and VID can reclassify the supply as domestic (21% VAT). Some valid numbers show temporary VIES issues due to database maintenance - document your verification attempt with timestamps and screenshots. For regular customers, verify monthly and maintain verification logs. Invalid numbers require immediate contact with customers to obtain correct information or treat as domestic sales.

What documentation is required for intra-Community goods supplies to maintain zero-rate treatment? Proof that goods physically left Latvia is essential for zero-rate protection. Required documents include transport documentation (CMR notes, bills of lading, courier receipts), signed delivery confirmations from recipients, customs export declarations where applicable, and logistics provider tracking records. Electronic confirmations are acceptable if they contain sufficient detail (delivery address, date, recipient signature/confirmation). Missing documentation means VID can reclassify as domestic sales (21% VAT) plus potential penalties. International courier services provide comprehensive delivery confirmation that typically satisfies requirements.

How does the OSS system work for Latvian businesses selling B2C across the EU? OSS registration through VID allows quarterly filing for all EU B2C sales above the EUR 10,000 annual threshold. You charge destination country VAT rates (France 20%, Germany 19%, etc.) and report sales by member state. VID distributes collected VAT to respective countries. Registration must occur before exceeding the threshold to avoid compliance gaps. OSS covers goods already within the EU and all digital services. Benefits include single registration replacing 27 potential VAT registrations, quarterly rather than monthly filing, and simplified refund procedures for overpaid amounts.

What are the place of supply rules for different types of services to EU customers? General rule: B2B services taxed where buyer established (reverse charge), B2C services taxed where seller established (Latvian 21%). Major exceptions: electronically supplied services (SaaS, digital content) to consumers always taxed at consumer location; real estate services taxed where property located; transport services have complex rules based on route; short-term vehicle rental taxed where vehicle provided; restaurant/catering services taxed where performed. These exceptions apply frequently - approximately 30% of cross-border service transactions require specific analysis rather than general rules. When uncertain, verify before invoicing to avoid costly corrections.

What are triangulation scenarios and how should Latvian companies handle them? Triangulation occurs when goods move from country A to country C but are invoiced through a Latvian company (country B), creating a three-party chain. Example: Dutch supplier ships directly to French customer, but Latvian company handles the sale. This triggers specific EU VAT rules to prevent double taxation or non-taxation. The Latvian company may need to self-assess VAT on the acquisition from Netherlands and charge VAT on the supply to France, with complex simplification rules available. Triangulation requires careful documentation and often professional advice, as incorrect treatment can create VAT obligations in multiple countries simultaneously.

Cross-Border Sales? Build VAT Into Your Expansion Plan.

A single misclassification -- B2B treated as B2C, goods versus services, or wrong place-of-supply rule -- can create reporting obligations in multiple EU countries simultaneously. We structure cross-border VAT compliance before you enter new markets, not after VID asks questions.

Get cross-border VAT guidance →

EU Cross-Border VAT: Rules for Latvian Businesses