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Country Commercial Guides FY 2000: Latvia Report prepared by U.S. Embassy Riga, released July 1999 Note*

CHAPTER VI. Trade Regulations and Standards

Latvia passed its current customs laws in October, 1994, with adjustments for the European Union requirements taking effect on July 1, 1997. Customs duties apply both to the import and export of goods. Latvia requires licenses for the import of grains, sugar, fuel, tobacco, alcohol and arms, and for the export of ferrous and non-ferrous metal scrap, ethyl alcohol, and spirits. Overall, there are 97 classes of goods which correspond to HS Codes. In case of disputes, the official European version of codification is used.

The applicable import rates vary depending on the origin and the type of the goods imported. The basic rate is from 0 to 55 percent. There are separate rates applicable to goods originating in countries with Most-Favored-Nation status and with which Latvia has free-trade agreements. Export rates vary from 0 to 100 percent.

The Customs Law provides for customs duty exemptions. Foreign investors most commonly exempt the temporary import of goods, and the foreign investment of fixed assets. Temporary import into Latvia may not exceed 24 months.

Imports are also subject to excise and value-added-taxes (VAT). VAT rates are either 0 or 18 percent. VAT taxpayers are entitled to deduct the tax which they pay on supplies (input VAT) from the tax which they charge their customers (output VAT), provided that the input supplies relate to the activity of the taxpayer. Persons whose sales, excluding exempted sales, exceed 10,000 Lats (approx. USD 18,000) within a 12 month period must, within the following 30 days, be registered with the State Revenue Service for VAT payers.

The following groups of supplies are subject to a zero percent VAT rate:

-- The supply of goods outside Latvia
-- Services which are related to the supply of goods outside Latvia
-- Services and supply of goods not supplied within Latvia
-- Supply of goods and services related to the maintenance
and service of international transportation
-- Tourism services in certain instances
-- On the basis of reciprocity, services and goods related to diplomatic and consular officers enjoying immunity
-- Certains services if the recipient is a non-resident

Excise taxes are applied to alcoholic beverages, tobacco products, gold/jewelry, and cars at various rates. Excise taxes for fuel and oil also apply, with the tax for petrol, oil, and diesel fuel ranging from USD 245 to USD 360 per 1000 litres. Oil gases are taxed at USD 56 per 1000 kilograms. Transitional rules of the law, which are applicable till the end of year 2000, increase the excise tax to USD 434 per 1000 liters on gasoline and USD 320 per 1000 litres on diesel.

There are several exemptions from the excise tax in regard to vehicles, such as smaller cars and certain trucks. Excise tax for alcohol and tobacco products is generally paid by purchasing excise tax stamps.

Latvian customs authorities require the following import documentation: a copy of the contract, an invoice, a bill of lading indicating the amount, weight and value of the goods, and the original certificate of origin (from EUR.1 or form A). At the border, an importer or his agent must complete a customs declaration and a customs freight delivery note. Document requirements for exports include: a declaration, transport documentation, a contract, a certificate of origin, and a license. Export licenses are issued by the Customs Authority.

There are over 60 customs warehouses in Latvia with storage terms that are unlimited in length. Products stationed there can be further processed in order to improve their appearance and prepare them for distribution or re-sale.

Export rates are not imposed on exports, except for art objects and antiquities (0-20%) and for non-ferrous metals.

Latvia became a member of the World Trade Organization on February 10, 1999, and has free trade agreements with 26 countries, including all European Union and European Free-trade Association (EFTA) countries, the Czech Republic, Slovakia, Poland, Slovenia, Lithuania and Estonia. The existing free-trade agreement with the Ukraine does not extend to food commodities. Latvia also has Most-Favored-Nation trade agreements with 21 other nations, including the United States, Canada, China, India, Australia, the CIS countries, and Hungary.