What Is Changing and Why
Latvia has confirmed the introduction of a temporary reduced VAT rate of 12% on essential food products, effective from 1 July 2026. The standard Latvian VAT rate remains 21%, and this new reduced rate sits between it and the existing 5% super-reduced rate that applies to certain specific categories.
This policy move is part of a broader effort across EU member states to ease the cost of living by reducing the tax burden on staple food goods. Several other EU countries including Hungary, Poland, and Ireland already apply zero or reduced VAT rates on basic foods, and Latvia is now aligning more closely with this approach.
For businesses operating in Latvia whether Latvian-registered entities, foreign companies with a Latvian VAT registration, or EU businesses purchasing goods or services in Latvia this change has direct implications for invoicing, bookkeeping, VAT return preparation, and foreign VAT recovery claims.
Which Food Products Qualify for the 12% Rate?
The reduced rate applies specifically to essential food items as defined under Latvian legislation. While the full scope is set by the Latvian State Revenue Service (Valsts ieņēmumu dienests – VID), the principle across EU jurisdictions is consistent: basic, unprocessed, or minimally processed foods intended for human consumption are typically in scope.
| Category | VAT Rate (from July 2026) | Status |
|---|---|---|
| Essential food items (staples, basic groceries) | 12% | New Rate |
| Specific categories (e.g. infant formula, certain medical foods) | 5% | Existing Reduced |
| Standard goods and services | 21% | Unchanged |
| Processed/luxury food items | 21% (likely) | Unchanged |
Classification Risk!
The boundary between “essential” and “non-essential” food is a common source of VAT disputes. Products such as confectionery, prepared meals, luxury food items, or food served in hospitality settings may not qualify for the 12% rate. Always verify the exact product classification against the VID’s published guidance before applying the reduced rate.
If you are uncertain whether a specific product line qualifies, contact VATcube’s advisory team for a product-level classification review. Applying the wrong rate in either direction can trigger penalties and interest on underpaid VAT, or create complications during a VAT audit.
How This Affects Businesses Operating in Latvia
For Latvian-Registered Businesses
If your business is VAT-registered in Latvia and supplies or purchases qualifying food products, you must ensure that your accounting software, ERP system, and billing platform are updated before 1 July 2026 to recognise and correctly apply the 12% rate. Failure to charge the correct rate on sales invoices will result in either over- or under-collection of VAT, both of which create compliance problems.
For Foreign Businesses with a Latvian VAT Number
If your company holds a Latvian VAT registration and trades in food goods, the same update obligations apply. You should also review your VAT return preparation procedures to ensure the new rate is correctly reported under the appropriate tax code in your Latvian VAT returns.
For EU Businesses Purchasing in Latvia (VAT Recovery)
EU businesses that incur Latvian VAT on eligible business expenses including food purchased for qualifying business purposes such as conferences, staff events, or working meals may be entitled to reclaim that VAT under the EU 8th Directive refund mechanism. The rate change affects the quantum of VAT that can be claimed, so accurate rate identification on supplier invoices is critical.
Practical Compliance Steps: A Checklist
Below is a pre-July 2026 compliance checklist for businesses affected by Latvia’s food VAT rate change.
Identify qualifying products. Review your entire product catalogue against the VID’s published classification list. Segregate items that fall under the 12% rate from those remaining at 21% or 5%.
Update your ERP / accounting software. Add the new 12% tax code in your system before the effective date. Test the configuration with dummy invoices before go-live.
Latvia’s VAT Framework: Context for International Businesses
Latvia has been a member of the European Union since 2004 and its VAT system operates within the framework established by the EU VAT Directive (2006/112/EC). The standard rate of 21% has been in place since 2011, and Latvia like other EU states has discretion under the Directive to apply one or two reduced rates of no less than 5% to goods and services listed in Annex III of the Directive.
Food products for human consumption are explicitly included in Annex III, giving Latvia the legal basis to apply the new 12% rate. The “temporary” nature of the measure suggests it may be subject to a defined end date or a legislative review, similar to how several EU member states introduced temporary rate reductions during the 2022–23 cost-of-living crisis and subsequently extended or made them permanent.
Foreign businesses with operations or purchasing activities in Latvia should note that Latvia’s tax authority (VID) has increasingly invested in digital compliance infrastructure, including real-time monitoring of VAT transactions. Accuracy in rate application is therefore more easily audited than in previous years.
Foreign VAT Recovery in Latvia: Don’t Leave Money on the Table
One of the most consistently overlooked opportunities for EU businesses is the recovery of foreign VAT incurred during cross-border business activities. Latvia is one of the countries covered by VATcube’s extensive European network.
Common categories of eligible Latvian VAT that EU businesses fail to claim include:
- Hotel and accommodation expenses for business travellers
- Conference and exhibition registration fees
- Working meals and catering at qualifying business events
- Car hire and fuel for business purposes
- Supplier invoices for goods purchased in Latvia
- Import VAT on goods brought into Latvia under DDP terms
With the introduction of the 12% food rate, it becomes even more important to verify that VAT shown on Latvian food-related invoices is correctly stated — as this directly affects the amount you can recover. VATcube’s team performs a full invoice audit as part of its hands-free VAT reclaim service, ensuring no recoverable amount is missed.
🌍 VATcube’s Latvia Network
VATcube has on-the-ground expertise and local contacts in Latvia and across all 27 EU member states. Our more than 90% successful claim hit rate means you can estimate your refund with confidence. Request a free VAT assessment today to find out what you could recover.
How VATcube Can Help – VATcube Expert Insight
VATcube specialises in Foreign VAT Reclaim services, with a network spanning all EU member states including Latvia. We help businesses of all sizes recover foreign VAT, navigate cross-border compliance requirements, and ensure their VAT positions are optimised and defensible.
Many EU businesses leave significant amounts of Latvian VAT unclaimed each year not because the legislations are constantly changing making the process more complicate. With Latvia introducing a new rate, invoice accuracy becomes even more important. VATcube’s foreign VAT recovery service includes a full invoice audit to catch these discrepancies before submission.
Our services relevant to the Latvia VAT rate change include:
- Foreign VAT Recovery – recovering Latvian and EU-wide VAT on your business travel and cross-border expenses on a no-win, no-fee basis.
- VAT Registrations & Advisory – guidance on whether your business needs a Latvian VAT registration, and assistance with the process.
- Hands-Free VAT Reclaim – end-to-end management of your VAT refund claims, from invoice audit to payment receipt.
- Free VAT Assessment – a complimentary review of your cross-border activities to identify untapped VAT refund opportunities.
With over a decade of experience and a 90%+ successful claim hit rate, VATcube gives your finance team confidence that no recoverable VAT is left behind.
Free VAT Assessment
Not sure which of your digital subscriptions qualify for VAT reclaim? VATcube offers a FREE VAT assessment where an analysis of your SaaS invoices, identify eligible claims, and estimate your potential refunds.
Stop leaving money on the table. Start by booking your FREE VAT assessment with VATcube today.