Latvians renting out their properties for short-term leases have faced unexpected VAT reassessments for three years following the introduction of the simplified regime. Many are afraid to register, fearing overwhelming amounts and unfair demands, writes LSM+.
Guntis Stirna calls himself a pensioner from Old Riga. The apartment where he lives with his wife in winter is rented out during the summer season to earn extra income and to escape the noise for that time. They have been doing this for several years. Now, renting out the property has been put on hold due to the requirement to register under the simplified VAT regime. This regime was introduced last summer and applies to the rental of properties in cooperation with foreign platforms, such as Booking. Since many of those who registered faced an unpleasant surprise — a demand to pay turnover tax for the last three years, Guntis Stirna is currently waiting it out, LSM+ reports.
"I got scared and did not register. I heard about the charges against Linda Murniece and a few other cases. And I realized that now, in the low season, I only use Airbnb, which pays VAT on its side, and I can take some time to study the situation and understand what the consequences will be for me in case of registration," Stirna said.
According to him, the maximum he faces is "25,000 euros." "In the best case, if a lower VAT rate is applied to the entire turnover, it could be around 15,000 euros."
Currently, out of approximately 1,800 short-term rental landlords under the agency's scrutiny, about 700 have registered, which is less than half. The requirement to register under the VAT regime and pay tax for services received from foreign platforms has existed for several years, including before the changes in the law, noted the State Revenue Service (VID). The agency pointed out that this was discussed in online seminars and on internet channels.
"It cannot be said that this is a new norm or new requirement. Perhaps some people have overlooked the obligation to pay tax. We reached out to all individuals for whom we have information that they use foreign platforms, so people were informed. And now the responsibility for fulfilling these obligations lies with them," explained Inga Antipova, head of the processes and organization department of the VID Tax Administration.
The Commission for Combating the Shadow Economy has received complaints from dozens of people. Today, January 13, this issue is scheduled to be discussed in the Saeima. Are compromises possible? The State Revenue Service reported that entrepreneurs can extend the deadline for tax payment and divide the amount into several payments. However, this does not exempt them from the obligation to pay the tax in full.
