{"id":11946,"date":"2021-05-04T10:54:11","date_gmt":"2021-05-04T10:54:11","guid":{"rendered":"https:\/\/breicis.com\/?page_id=11946"},"modified":"2023-12-02T23:31:00","modified_gmt":"2023-12-02T23:31:00","slug":"company-branch-representative-office-latvia","status":"publish","type":"page","link":"https:\/\/breicis.com\/en\/company-branch-representative-office-latvia\/","title":{"rendered":"Company, branch, representative office Latvia"},"content":{"rendered":"

A Company, a branch of the foreign company or a representative office – which form of\u00a0 business to choose?<\/strong><\/h1>\n

Introduction<\/h2>\n

Upon commencement of the business activity in Latvia, a foreign company depending on the intended business activity should select the most appropriate legal form of business in Latvia.<\/p>\n

The foreign entity may select to establish in Latvia either a representative office, register a permanent establishment with the State Revenue Service or a branch with the Enterprise Registry (fili\u0101le); or to establish a legal entity \u2013 limited liability company (sabiedr\u012bba ar ierobe\u017eotu atbild\u012bbu).<\/p>\n

This article addresses the basic tax and legal considerations for selecting the most appropriate form of business in Latvia.<\/p>\n

1. Representative office<\/h2>\n

General<\/h3>\n

A representative office is a minimum presence that a non-resident entity can legally have in Latvia. By definition, a representative office is not allowed to engage in any commercial activity, and as long as this restriction is observed it is not taxed in Latvia (except, payroll taxes of the employees’ income). The representative office is suitable if there are only auxiliary and preparatory activities carried out. To find out whether the intended activity is auxiliary or not, it should be concluded if this activity in itself forms an essential and significant part of the activity of the foreign enterprise as a whole and whether this activity should generate income.<\/p>\n

Usually, the following list of activities that a representative office can undertake would not be considered a commercial activity for tax purposes: creating business opportunities, improving the exchange of commercial, scientific or technical information, carrying out market research and information processing, developing trade and economic links with Latvian businesses.<\/p>\n

Tax and accounting status<\/h3>\n

A representative office is not treated as a trading entity for Latvian accounting and tax purposes. It is therefore not required to maintain separate accounting records and\/or systems, file regular tax returns or prepare annual accounts.<\/p>\n

The only exception is requirements relating to the representative office\u2019s capacity as an employer. If it employs local staff, the representative office must comply with the Personal Income Tax Act and the Social Security Act, including provisions relating to tax accounting procedures.<\/p>\n

2. Permanent establishment of the foreign company<\/h2>\n

General<\/h3>\n

If the foreign entity\u2019s activity extends the scope of allowable activities, which are not subject to tax, the foreign entity should register its presence in Latvia. The activities should be tested according to the double tax treaty Latvia has entered with a respective country of the foreign entity (Article 5 of the treaty) and Article 14 of the Taxes and Duties Act, in case if there is no treaty in place.<\/p>\n

Overall, the foreign entity has to register its presence, if it has \u201ca place of business\u201d in Latvia:<\/p>\n