Since 18 February 1995, the Law “On Taxes and Duties” has been in effect in Latvia. At the moment, according to this law, as amended on March 5, 2020, the classification of taxpayers and the obligation to register as taxpayers are determined.
In accordance with part 6 of Article 14 of the Law of Latvia “On Taxes and Duties”, a permanent establishment of a non-resident (foreign merchant) in Latvia for the application of all tax laws is considered a separate domestic taxpayer. If a non-resident (foreign merchant) has a permanent establishment in Latvia (within the meaning of parts seven and eight of this article (indicated below)), then it must be registered as a taxpayer with the State Revenue Service of Latvia.
Part 7 of Article 14 stipulates that a non-resident (foreign merchant) has a permanent establishment in Latvia, if all the conditions mentioned below are simultaneously met:
- a non-resident (foreign merchant) uses a certain place of business in Latvia;
- the place of business is permanently used or formed for the purpose of its permanent use;
- the place of business is used for carrying out economic activities.
Part 8 of Article 14 stipulates that, regardless of what is mentioned in part seven, it is considered that a non-resident (foreign merchant) has a permanent establishment in Latvia if the non-resident (foreign merchant) in Latvia performs at least one of the following actions:
- uses a building site or carries out a construction, assembly or installation works or performs supervisory or consultative functions related to the building site or the abovementioned works;
- uses equipment or installations, drilling platforms and special ships intended for the research or extraction of natural resources, or carries out supervisory or consultative work related thereto;
- within a time period or time periods which in aggregate exceed 30 days in any six month period provides services, including consulting, management and technical services, engaging its employees or associated personnel;
- uses the operation of a natural, legal or other person for the benefit of its economic activity, if the abovementioned person has been granted and habitually exercises (more than once in a taxation period) an authority to conclude contracts in the name of a foreign undertaking.
If a foreign merchant in Latvia constantly uses rented premises as an office and employment, for example, two employees on the basis of employment contracts, then the State Revenue Service of Latvia may establish the presence of the characteristics specified in part 7 and paragraph 3 of part 8 of Article 14 of the Law of Latvia “On taxes and duties”, and require mandatory registration as a domestic taxpayer of Latvia.
In order to register as a taxpayer, it is necessary to choose the type of permanent establishment of a non-resident (foreign merchant) that is most suitable for the economic activity carried out in Latvia – LLC, JSC, representative office of a foreign merchant, branch or other structure.
Registration as a taxpayer in Latvia is carried out by the Register of Enterprises of Latvia, and those legal entities that, in accordance with the laws, do not need to register in the Register of Enterprises, are registered as payers by the State Revenue Service of Latvia.
The Register of Enterprises of Latvia, in accordance with the procedure established by law, registers merchants and their branches, cooperative societies, individual enterprises, peasant or fishing farms, branches of a foreign merchant, representative offices of a foreign merchant, representatives of foreign merchants, representative offices and representatives of organizations, European economic interest groups, European commercial societies, European cooperative societies, political parties, societies and formations, trade unions, religious organizations and their institutions also as taxpayers and assigns a single eleven-digit registration number, which is also the taxpayer registration code.
A registration certificate issued by the Register of Enterprises of Latvia (if any) is also a taxpayer’s certificate.
If the activity of a foreign merchant in Latvia is not related to the receipt of income, then the most acceptable option for registration as a taxpayer will be registration in the Register of Enterprises of a representative office of a foreign merchant without the right to conduct commercial activity This structure may have a bank account in Latvia and pay the expenses related to the activities of the representative office. A representative office is not a legal entity and it is not entitled to carry out commercial activities in Latvia.
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