Latvia plans to amend the regulation on natural resources tax (hereinafter – NRT), significantly changing its application to battery energy storage systems (hereinafter – BESS). The amendments provide for a reduction of the applicable NRT rate for the BESS, an extension of the exemption in respect of such projects and the removal of the existing exemption based on a supplier’s guarantee that end-of-life equipment will be returned to the supplier’s country.
What will change?
Under the regulation currently in force, an NRT payer who establishes a solar power plant for the purposes of carrying out its economic activity, with the total installed capacity of photovoltaic panels amounting to at least 1 MW, may be exempted from the payment of NRT on photovoltaic panels, inverters and electric accumulators for the accumulation of voltage produced by photovoltaic panels, provided that such NRT payer itself ensures the measures and covers the costs related to the waste management of the above equipment and is registered with the State Environmental Service (hereinafter – SES).
After the amendments enter into force, the NRT exemption is intended to apply more broadly – to all BESS, irrespective of whether they are integrated into a solar power plant, a wind power plant or operated as a standalone electricity storage equipment. Accordingly, the amendments would preserve the principle of the existing exemption, while extending the range of equipment to which this mechanism may apply.
The amendments also provide for the removal of the existing minimum installed capacity requirement, which under the current regulation is linked to the application of the exemption to solar power plants with the total installed capacity of photovoltaic panels amounting to at least 1 MW.
It is also intended to discontinue the current possibility not to pay NRT where the supply agreement includes a guarantee that the relevant equipment will be returned to the supplier’s country at the end-of-life.
One of the most significant practical changes is the planned reduction of the NRT rate for the BESS from 1 January 2027 – from EUR 17.03/kg to EUR 2.00/kg. For photovoltaic panels, inverters and other electrical and electronic equipment, the NRT rate is expected to remain unchanged – EUR 3.00/kg.
The procedure for applying the exemption to the BESS is expected to be established in Cabinet regulations, which the Cabinet of Ministers has been instructed to issue by 30 September 2026; whereas the new NRT rate will be regulated by the Natural Resources Tax Law.
Who must pay NRT?
Under the Natural Resources Tax Law, the NRT payer is the person who first sells in the territory of Latvia or uses for the purposes of carrying out its economic activity photovoltaic panels, inverters or accumulators in solar power plants; the amendments would extend this regulation by replacing solar power plant accumulators with any BESS. Therefore, in each project it is important to determine which person is the NRT payer: if the equipment is first supplied in the territory of Latvia by the manufacturer or supplier, the obligation rests with that person; whereas if the project developer imports the equipment itself, the application of NRT and substantiation of the exemption will be the developer’s responsibility.
How to obtain the NRT exemption?
In practice, the NRT exemption may be obtained in several ways.
The NRT payer may enter into an agreement with a waste management company that has established an extended producer responsibility scheme (hereinafter – RAS), by paying such waste manager the fee determined by it for the future disposal of the equipment. In Latvia, there are currently three waste managers with whom an agreement may be concluded for the management of panels and inverters – SIA “Zaļā josta”, SIA “LATVIJAS ZAĻAIS PUNKTS” and AS “AJ Power Recycling”; whereas management services for solar power plant accumulators are currently also offered by SIA “ZAĻAIS CENTRS”.
The NRT payer may establish its own RAS, which is a complex process and, at the same time, requires taking into account significant financial security to be provided to the State in connection with participation in that scheme.
However, if the developer itself imports into the territory of Latvia equipment subject to NRT for use in its economic activity, for example, solar panels for the operation of its solar power plant, the exemption may also be obtained by itself ensuring the waste management of the relevant equipment and registering with the SES. In practice, this means registering a waste management plan in the SES system, attaching information on the location, quantity, capacity, connection and construction of the equipment, the installation date and supply documents, as well as a description of waste management. Such description must be accompanied by a confirmation or letter of intent from a waste manager regarding the management of the relevant equipment, indicating the planned waste-related activities and indicative costs.
In this case, the developer is not required to make an immediate payment to the waste manager, but confirms its undertaking to cover the relevant costs when disposal of the equipment becomes necessary. Importantly, this alternative — namely, obtaining the NRT exemption without an immediate payment to the waste manager by preparing and registering a waste management plan — is available only to the developer itself, which imports the equipment for use in its economic activity, for example, for the operation of a solar park.
When choosing the NRT exemption mechanism, it is important to observe the applicable deadlines in a timely manner. NRT is payable on equipment that was first placed on the market in Latvia or whose use for the purposes of carrying out economic activity commenced during the previous reporting period. Accordingly, the exemption must be ensured in respect of the quarter in which the equipment is commissioned or actually starts to be used.
What about transformers and other electrical equipment?
Transformers and other electrical equipment of an energy project must be assessed separately from photovoltaic panels, inverters and BESS. They are not covered by the special NRT exemption applicable to solar power plant equipment, which will be extended to BESS by the amendments and allows for the preparation and registration of a waste management plan.
In respect of transformers, an NRT exemption may be available, for example, by participating in an RAS, i.e. by entering into a waste management agreement with an operator within the RAS scheme, or by establishing one’s own RAS scheme.
In certain cases, it must be assessed whether the specific equipment could fall within the exemption for large-scale stationary installations; however, this does not apply automatically and depends on the technical parameters and manner of use of the equipment.
An additional exemption may currently still apply where the NRT payer first imports other electrical equipment and uses it for the purposes of carrying out its economic activity, provided that the relevant supply agreement includes binding provisions ensuring that, at the end-of-life, the equipment will be returned to the supplier’s country for waste recycling and management.
The amendments are not yet in force
The above amendments to the Natural Resources Tax Law have been submitted to the Cabinet of Ministers for consideration for some time, but have not yet been approved. Therefore, the regulation envisaged by the amendments will apply only after its approval by the Cabinet of Ministers and adoption by the Saeima.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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