Brussels, 08/07/2010 (Agence Europe) - Further to a request from Riga, Latvia, the European Commission presented a proposal on Monday 5 July aimed at allowing Latvia to raise the current threshold beyond which it can apply a simplified regime on those liable to pay VAT.
The VAT directive allows member states the possibility of applying special tax schemes to small businesses, and especially to exempt taxpayers whose annual turnover is below a certain threshold. With this exemption, a taxable person does not have to charge VAT on his supplies and, consequently, cannot deduct the VAT on inputs. This annual turnover ceiling differs from one member state to the next, depending on its date of accession. The threshold for Latvia was fixed at €17,200, corresponding to LVL 10,000. The Latvian derogation request seeks to simplify the VAT system for small enterprises, by introducing this simplification measure for taxable persons with an annual turnover no higher than €50,000. The Commission has agreed to this request, considering that the measure will significantly reduce the burdens on those businesses eligible for the scheme and release them from many of the VAT obligations under the normal VAT arrangements. The scheme would be optional for taxable persons and, if the threshold is increased, Latvia expects about 60% of the taxable persons eligible (32,494 taxable persons in 2008) to make use of the simplification measure. According to the analysis carried out by Latvia of VAT declarations of economic operators within the foreseen threshold, the net amount of VAT payable into the national budget of these taxable persons is a negative figure. As a result, the proposed measure would have almost no impact on the overall amount of VAT revenue collected at the stage of final consumption, the Commission points out. Under the terms of the proposal, the derogation would run until 31 December 2013 or until entry into force of a directive on the annual turnover threshold below which supplies of a taxable person may be exempt from VAT - whichever comes first. (O.L./transl.jl)