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Catering sector in Latvia consistently lobbies for lower Value-Added Tax (VAT) rates

Continuation of discussion on lowering Value-added Tax (VAT) for public dining establishments by 12% to be considered next week by the Saeima budget and Finance Committee, as lawmakers deliberate...

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Businesses in Latvia persistently advocate for tax reductions on catering services
Businesses in Latvia persistently advocate for tax reductions on catering services

Catering sector in Latvia consistently lobbies for lower Value-Added Tax (VAT) rates

In a bid to boost the catering industry and encourage tax compliance, the Latvian Association of Hotels and Restaurants (LVRA) has proposed a plan to reduce VAT for public catering services. This initiative, if approved, would make Latvia one of the European Union (EU) countries to implement such a policy, following in the footsteps of Germany and many other EU nations.

The proposal, currently in the legislative draft stage, suggests a permanent reduction of VAT for restaurant food from the current 21% to 7%, similar to the VAT rate applied to public catering in most EU countries. This change would apply to restaurants, bars, canteens, cafes, and other catering services.

Andris Kalniņš, head of the LVRA, has emphasised that this move would make catering services more accessible to the wider public and help reduce the shadow economy in the sector. The President of the Commission, Janis Reirs (JV), has supported the initiative, stating that while it may not directly reduce the price of catering services, it would contribute to the payment of taxes.

Reirs also mentioned that the application of reduced VAT to fruits and vegetables grown in Latvia serves as a successful example. He further added that reducing the VAT rate for public catering could build the productivity of residents, potentially leading to increased turnover, profit margins, and the possibility of employing more people.

The proposal's evaluation will consider various factors, including tax payments, shadow economy, employment indicators, and other aspects of the sector. Deputies have agreed to continue the initiative on introducing reduced VAT in the amount of 12% for public catering at a meeting on Wednesday, May 15. The Ministry of Finance and the Ministry of Economics have been asked to prepare calculations by Wednesday regarding the catering sector in Latvia to evaluate all available information.

In the EU, it has been concluded that reducing the VAT rate for public catering contributes to the overall development of the sector. If approved, this change could mark a significant step forward for the Latvian catering industry, bringing it in line with other EU countries and potentially driving growth and development in the sector.

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