Company formation and accounting in Latvia
Last updated: 2016-07-05
According to the Commercial law of the Republic of Latvia, you can register a branch office of Latvian merchant and a branch office of a foreign merchant.

What is a branch office?

A branch office is organizationally independent part of an enterprise. A branch office is territorially or otherwise separated from the main enterprise. In the place of a branch office on behalf of the merchant regularly are conducted business activities.

Mandatory requirements for the branch office are: independent / separated management (director), employees and assets (property). The branch office may use/have own (separated) bank account and accounting. However, (legal) owner of all assets is the main enterprise.

A branch office has no status of legal person and the main enterprise (merchant) is responsible for obligations that arise from activities of the branch office. However, according to decision of Latvian court a branch office is separated (independent) taxpayer in Latvia and if a branch office is liquidated, then the main enterprise has no rights to return overpaid taxes of the branch office.

One of the aims to open a branch office is territorial expansion of business.

Location of the main enterprise is the legal address. Whole company is managed from the main enterprise.

The branch office can use name (firm) that differs from name (firm) of the main enterprise.

Information, necessary for registration.

To prepare documents, need following information:
  • Name, registration number and legal address of the foreign company (merchant).
  • Type of the foreign company (merchant).
  • Name of a register, where the foreign company is registered (recorded).
  • Name of a branch office if the name is different from the foreign company’s name.
  • Legal address of the branch office in Latvia.
  • Amount of equity capital (defined, subscribed and paid amount of equity capital).
  • Information about a person that has rights to represent the foreign company (need, name, surname, date of birth, address, passport data). Also need to write scope of authority.

Documents, necessary for registration.

  • Application of certain form.
  • Document (of certified copy of the document), that proves registration of the foreign company.
  • Permission to establish a branch office, if according to legislation of the foreign country such permission is required.
  • Notary certified copy of the articles of association (statute), the memorandum of association (foundation agreement) or similar (equated) document of the foreign company.
  • Document, that confirms authorities (and scope of authorities) of a natural person to represent the foreign company in all activities, related with a branch office.
  • Permission of an owner of immovable property to register legal address of a branch in that property.
  • Documents, confirming payment of state duty and payment for publication.

How to register a branch office?

Registration procedure is similar to Latvian and foreign merchant branch office with the difference, that for registration of foreign merchant branch office must provide additional documents (for example, document that certifies registration of a foreign merchant, notary certified copy of the articles of association, the memorandum of association).

Usual procedure is following:
  • Obtaining and compiling of information.
  • Preparation of documents.
  • Signing of documents.
  • Payment of payments (state duty, publication etc.).
  • Submission of documents to the Register of enterprises.
  • Receiving of reviewed documents (usually after 3-4 working days after submission).

Difference between branch office and subsidiary company or daughter company.

Daughter company has separated personality, daughter company is legal person.
Mother company and daughter company are two separated persons. Mother company just owns shares of daughter company and these shares gives the mother company to make certain decisions regarding the daughter company.
Mother company does not own property of daughter company. And responsibility of mother company for debts of daughter company usually is limited only with contribution in share capital. To establish daughter company, must create and pay equity capital.

A branch and a foreign merchant (“mother company”) is the same person. A branch is not legal person. A foreign merchant owns all property of a branch. A foreign merchant is responsible for all debts of a branch. A branch, on basis of authorization, just operates on behalf of a foreign merchant. To establish a branch, equity capital is not required.

Management of a branch office.

Main enterprise appoints and authorizes certain natural person(-s) to represent the foreign company in activities, related to the branch office. The main enterprise can authorize a person to represent the branch office in its entirety (in all activities) or to represent only in certain activities.

Rights and amount of rights to represent a branch office are recorded in the Register of Enterprises and the information is publicly available.

Based on the authorization a person can do certain activities (for example, conclude contracts).

Taxation and accounting.

A branch office of a foreign merchant must do accounting and pay taxes to the budget of Latvia (for example, company income tax, payroll taxes, VAT, etc.).

To calculate company income tax, a branch office of a foreign merchant submits to Latvian tax authority the declaration on company income tax (also must submit profit or loss statement and balance). A branch office of a foreign merchant must calculate company income tax according to the Rules of The Cabinet of Ministers of the Republic of Latvia - "Determination of taxable income and tax payment procedure for permanent establishments of non- residents".

Taxation of a branch office is the same as taxation for a limited liability company. Usual taxes:
  • Corporate income tax – 15% from profit.
  • Personal income tax from salaries – 23% from modified (decreased) amount of gross salary.
  • The state mandatory social contributions – 34.09% from gross salary.



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