A foreign company must register a Permanent Establishment (PA) in Latvia if it has a permanent place where it conducts economic activities. It is necessary to register a permanent establishment in Latvia if a foreign company carries out construction, construction supervision, construction management or other work in the territory of Latvia or, for example, a warehouse is rented.
A permanent establishment in Latvia operates in accordance with the conventions on double taxation avoidance and prevention of fiscal evasion concluded between Latvia and the resident's country.
A foreign company has a permanent establishment in Latvia if all the following conditions are met at the same time:
- a non-resident (foreign merchant) uses a fixed place of business in Latvia;
- the place of business is used permanently or it is created with an intention to be used permanently;
- the place of business is used for economic activities.
Irrespective of the conditions aforementioned, it is considered that a foreign company has a permanent establishment in Latvia if at least one of the following activities is carried out:
- uses a construction site or carries out construction, assembly or installation work, or carries out supervision or consultancy activities in relation to the construction site or the works mentioned;
- uses equipment or devices for exploration and extraction of natural resources, drilling rigs and special ships or carries out supervision or consultancy activities in relation to them;
- provides services, including consultancy, management and technical services using its own employees or external personnel for a period or periods that in total exceed 30 days in any six-month period;
- uses activities of a natural, legal or other person for the purposes of its economic activities if such person has been granted authorization and it regularly (more than once during the tax period) uses authorizations to conclude contracts on behalf of the non-resident (foreign merchant).
A permanent establishment in Latvia can be registered with the SRS within 10 business days; registration does not require equity capital.
A permanent establishment of a foreign company records its income and expenses in relation to its activities and, accordingly, its assets and liabilities, for the purposes of the corporate income tax separately from the foreign company of which it is a permanent establishment. For a permanent establishment with accountancy separate from the non-resident (including separate accountancy for funds credited to the joint current account) there does not arise a taxable object subject to the corporate income tax until the moment the permanent establishment distributes profit.
Most important aspects
Possibility to register a permanent establishment in Europe. Can carry out commercial activities, is not a legal person, must provide the annual report.
Reports
A permanent establishment in Latvia submits SIC reports (if employees hired) according to the general procedure, VAT (if a VAT number is registered), must submit the annual report. A permanent establishment in Latvia is a corporate income tax payer.
Taxes
A permanent establishment in Latvia pays PIT, SIC for employees and VAT, if any should be applied, according to the general procedure. A permanent establishment pays CIT if profit is distributed in dividends or when conditionally distributed profit is generated.
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Why choose Euroaudit:
Euroaudit is your Representative in Latvia providing tax consultancy, accounting and legal person registration services. Please contact our specialists by phone +371 25900918 or e-mail: info@euroaudit.lv
