How VAT is calculated
There are two directions, and they are easy to mix up. Adding starts from the net price: multiply by the rate and add the result. Removing starts from a price that already includes the tax: divide the gross by the coefficient to find the base.
- Add 21%: €100 × 21% = €21, total €121;
- remove 21%: €121 ÷ 1.21 = €100, tax €21.
The common mistake is subtracting 21% from the gross amount — that gives €95.59, not €100.
Latvian VAT rates
- 21% — standard rate, most goods and services including construction work;
- 12% — reduced: medicines and medical devices, books and periodicals, infant goods, public transport, district heating;
- 5% — fresh fruit, berries and vegetables;
- 0% — exports, intra-EU supplies, international transport.
Registration threshold
VAT registration becomes mandatory once taxable turnover exceeds €50,000 over 12 months. Below that you may work without VAT and issue invoices without VAT.
Construction: the reverse charge
Between two VAT payers, construction services fall under the reverse charge (Article 142 of the VAT Act) — the recipient accounts for the tax and the invoice shows no VAT amount. See reverse charge invoice.