VAT Reverse Charge: 🇱🇺 Luxembourg to 🇱🇻 Latvia

Yes. When a VAT-registered business in Luxembourg supplies B2B services to a VAT-registered business in Latvia, the reverse charge mechanism applies under Article 196 of EU VAT Directive 2006/112/EC. The Luxembourg supplier invoices at 0% VAT, and the Latvia customer self-accounts for VAT at their local rate of 21%.

If the customer is VAT-registered, put 0% VAT on the invoice. You must include the customer's Latvia VAT number and the note: "VAT reverse charge — Article 196, Directive 2006/112/EC". Do not charge Luxembourg VAT (17%) on cross-border B2B service invoices.

The standard VAT rate in Latvia is 21%. When reverse charge applies, the Latvia customer declares 21% VAT in their local VAT return and simultaneously deducts it as input VAT — so the net cash effect is zero for a fully VAT-registered business.

Yes. You must report cross-border B2B services in your EC Sales List (ESL), also known as VIES or Recapitulative Statement. Report these as services (not goods) using the customer's Latvia VAT number. Filing frequency depends on Luxembourg's local rules — typically monthly or quarterly.

If the customer in Latvia does not have a VAT number, reverse charge does not apply. For B2C supplies or non-registered businesses, different rules apply. For most services, you would charge Luxembourg VAT (17%). For digital/electronically supplied services, Latvia VAT (21%) may apply via the EU One Stop Shop (OSS) scheme.

Verify the customer's VAT number using the EU VIES system at ec.europa.eu/taxation_customs/vies before issuing a zero-rated invoice. Latvia VAT numbers start with the prefix "LV". Keep a record of the VIES confirmation for your audit trail.

Reverse charge under Article 196 applies to most B2B services where the place of supply is the customer's country. Some services have special rules — for example, services related to immovable property are taxed where the property is located, and short-term vehicle hire has specific rules. For standard professional, consulting, digital, and software services between Luxembourg and Latvia, reverse charge applies.

Your invoice must include: (1) Your Luxembourg VAT number, (2) The customer's Latvia VAT number, (3) 0% VAT / VAT amount: 0.00, and (4) The legal reference: "Reverse charge — Article 196, Council Directive 2006/112/EC". Some suppliers also add the Latvia equivalent note in the local language.