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Ceturtdiena 29.09.2016 | Name days: Mihails, Miķelis, Mikus, Miks, Miģelis
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EU directive prohibits application of reduced VAT rate on real estate management

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Baltic news, News from Latvia, BNN.LV, BNN-NEWS.COM, BNN-NEWS.RUEuropean Union’s directive on value added tax does not allow for relieving housing management services of VAT, notes Finance Ministry’s representative Aleksis Jarockis.

«The VAT directive does not allow relieving housing management service sector of VAT application. Such a tax relief cannot be applied in any EU member state. This directive also does not provide the option of applying reduced VAT on housing services. Latvia currently uses a reduced VAT rate. It is applied on heating energy supply and wood fuel supplies to consumers who are residents,» – explains the ministry’s representative.

Jarockis notes that by introducing requirements of the so-called VAT directive, it will be necessary to apply 21% VAT on housing management services in Latvia. It will only apply to management, not utilities and cases when services are provided by registered VAT payers.

Amendments apply to the management service, not utilities or other services. This is why the manager’s written receipt for services rendered has to clearly define the services provided by the manager and the services provided by other parties.

The ministry’s representative also said that people who are engaged in management of apartments but the worth of their services does not exceed EUR 50,000 will still be able to use the right not to register with the State Revenue Service’s VAT payers register. If such a person is already registered as VAT payer, the administrative burden will reduce for them, because the issue of VAT receipts will be made easier for transactions.

«VAT regime will not change in relation to received goods or services if the service manager only performs the duty of a mediator. VAT relief will be kept for residents for rent of living space,» – Jarockis emphasized.

It is expected that housing management service provider who is a registered VAT payer will have the right to apply a special VAT payment and pre-tax deduction procedure.

Deputies of Harmony’s Saeima faction have submitted a legal draft on the application of a reduced VAT rate – 12% – for housing management service providers, as reported by Harmony’s consultant Katrina Iljinska.

The decision to apply 21% VAT rate on housing management service starting from 1 July was made in November 2015 alongside with the state budget. As a result, resident’s bills for such services are expected to rise, the political party notes.

Ref: 102.109.109.5698


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