Covid-19, Financial Services, Latvia, Legislation, Markets and Companies

At tomorrow's Saeima meeting KPV LV will not back the opposition's proposal to cut the VAT rate on hospitality and food services to 5 percent but will continue to fight for the tax measure in the workgroup, said Economics Minister Janis Vitenbergs (KPV LV) who earlier came up with a similar proposal. 

The minister said that the government coalition had a lengthy discussion as to whether the VAT cut would be the right measure for coping with the crisis and other coalition partners rejected the proposal to lower the VAT rate.

Vitenbergs said that KPV LV would not give up its ambition to secure the VAT cat for the affected industry but said that the result could be achieved a bit later, although the industry needs support urgently. 

The minister said that the government considers vouchers or some other support system instead of the VAT cut. 

The Ministry of Economics previously submitted to the Finance Ministry's working group a proposal to introduce a reduced VAT rate of 5 percent for the catering and accommodation sectors for three years.

The ministry argued that in Latvia the VAT rate for catering services is 21 percent, which is the second highest rate in the European Union (EU). At the same time, from July 1 this year, Germany will reduce the VAT rate on catering services from 19 percent to 7 percent, while Lithuania is considering reducing the VAT rate on catering services from 21 percent to 9 percent, and Estonia is discussing a reduced VAT rate of 9 percent for catering companies.

At the same time, the VAT rate for accommodation services in Latvia is 12%, while in most European Union countries reduced VAT rates are being applied, including Lithuania and Estonia, where the VAT rate for accommodation services has been reduced to 9 percent.