As of September 16, 2024, Latvia is rapidly approaching the implementation of mandatory electronic invoicing (e-Invoicing), a transformative step for businesses and public administration alike. The Latvian Ministry of Finance has introduced a series of amendments to the Accounting Law (24-TA-438), mandating the use of e-Invoices across all sectors. This change represents a broader strategy to enhance transparency, streamline financial processes, and ensure compliance with European standards.
The transition will be executed in two critical phases, starting in January 2025 with government-related transactions and extending to private businesses by January 2026. Companies operating in Latvia need to prepare now to meet the upcoming deadlines and ensure they are aligned with the new regulatory framework.
Understanding the Key Drivers Behind Latvia’s e-Invoicing Mandate
Latvia’s move toward mandatory e-Invoicing is part of a broader European Union initiative aimed at increasing the efficiency and security of financial transactions while reducing the scope of tax fraud and errors. The adoption of e-Invoicing, particularly through standardized formats, facilitates real-time reporting, enabling governments to track tax liabilities more effectively. In Latvia, this initiative aligns with efforts to curtail the shadow economy, which remains a significant issue in the region.
e-Invoicing also supports businesses by automating invoice generation, transmission, and storage, leading to reduced paperwork, fewer manual errors, and faster processing times. For many companies, these changes could result in cost savings and operational efficiency gains over time. However, the move to e-Invoicing also brings challenges, particularly in terms of compliance with new technical standards and reporting requirements.
Phase One: e-Invoicing for Public Sector and Government Transactions
(Effective January 1, 2025)
The first phase of Latvia’s e-Invoicing rollout, beginning on January 1, 2025, will focus on transactions involving the public sector. This includes government-to-government (G2G), business-to-government (B2G), and government-to-business (G2B) transactions. All entities engaged in transactions with the Latvian state administration will be required to issue e-Invoices.
The e-Invoices must conform to the Peppol BIS Billing 3.0 standard, a European-wide framework designed to ensure interoperability and standardization across borders. The invoices will need to be submitted in XML format, facilitating automated processing and integration with tax authorities’ systems.
At this stage, businesses should start transitioning their invoicing systems to accommodate e-Invoicing for transactions with public entities. This will require implementing compatible software capable of generating and transmitting invoices in the prescribed format. Moreover, businesses should be mindful of potential updates to their workflows to ensure compliance by the 2025 deadline.
Benefits for the Public Sector
The Latvian government’s push for mandatory e-Invoicing in the public sector offers several advantages:
- Increased transparency and accountability: e-Invoicing ensures that all financial transactions are recorded digitally, reducing the risk of fraud and human error.
- Faster invoice processing: Automated systems can process invoices much faster than manual methods, leading to quicker payments and improved cash flow for businesses working with the government.
- Compliance with EU regulations: By adopting the Peppol standard, Latvia ensures its e-Invoicing practices align with broader European Union requirements, facilitating smoother cross-border transactions.
Phase Two: Extending the Mandate to Business-to-Business Transactions
(Effective January 1, 2026)
The second phase, starting on January 1, 2026, marks the extension of the e-Invoicing mandate to business-to-business (B2B) transactions. From this date, all companies operating in Latvia must issue e-Invoices for their B2B dealings. This phase expands the regulatory scope to include a much broader range of entities, affecting nearly all businesses that engage in commerce within Latvia.
Moreover, with the start of this phase, businesses will also be required to submit electronic invoice data directly to the State Revenue Service (SRS). The SRS will act as a centralized hub, collecting and processing invoice data to ensure proper tax reporting and real-time oversight of economic activities.
This mandatory data submission aligns with Latvia’s broader Continuous Transaction Controls (CTC) framework, which aims to increase government visibility into business transactions and improve the accuracy and timeliness of tax payments. By enabling real-time reporting, the CTC model helps reduce the risk of underreporting income and other forms of tax evasion.
Challenges for Businesses
While the shift to e-Invoicing offers long-term benefits, businesses will face several challenges as they adapt to the new system:
- Software integration: Companies must invest in software that can generate e-Invoices according to the Peppol BIS Billing 3.0 standard and communicate with the SRS portal.
- Compliance and training: Businesses will need to ensure that their teams understand the new requirements and can properly handle e-Invoicing procedures. This may require staff training and process reengineering.
- Cost implications: While e-Invoicing may reduce operational costs in the long run, the initial transition could involve investments in technology, training, and system updates.
Latvia’s Technical Infrastructure for e-Invoicing
Although the move to e-Invoicing is inevitable, Latvia’s technical infrastructure for facilitating this transition is still under development. The Latvian Ministry of Finance is finalizing the details of the e-Invoice exchange channel that will allow businesses and the public sector to securely transmit invoices to the tax authorities.
To ensure full interoperability, the Latvian government has chosen to implement the Peppol e-delivery network, a widely adopted standard in Europe that enables seamless electronic document exchange between businesses and government entities. Peppol’s infrastructure ensures compatibility across different countries and sectors, simplifying cross-border transactions within the European Union.
Currently, there is no single, mandatory platform for issuing e-Invoices in Latvia. However, several options are available for businesses dealing with public entities:
- E-address: A tool for secure digital communication with Latvian public administration.
- ePakalpojumi platform: A government service platform that can be used to submit invoices to central government authorities.
- Riga Municipality’s e-services: Businesses dealing with Riga’s municipal authorities can use their dedicated platform for e-Invoicing.
Timeline and Key Dates to Remember
- June 7, 2024: End of public consultation period on the draft law. Businesses and stakeholders have until this date to provide feedback on the proposed e-Invoicing regulations.
- January 1, 2025: Mandatory e-Invoicing begins for all transactions involving public entities, including G2G, B2G, and G2B dealings.
- January 1, 2026: e-Invoicing becomes mandatory for all B2B transactions, and businesses must submit invoice data to the SRS.
Conclusion: Preparing for Latvia’s e-Invoicing Future
Latvia’s transition to mandatory e-Invoicing marks a significant step forward in the digitization of its financial and taxation systems. By the beginning of 2026, e-Invoicing will be a legal requirement for nearly all businesses operating in the country, creating a more transparent, efficient, and compliant financial ecosystem.
For businesses, the time to act is now. Early preparation will be crucial to ensure a smooth transition, from updating invoicing systems to training staff and ensuring compliance with the new standards. Those who fail to adapt could face penalties or disruptions in their business operations, while those who embrace the change will likely benefit from more streamlined processes and improved financial oversight.
