Located in the Baltic region, the republic of Latvia provides foreign investors access to one of the largest markets in the world. With the numerous incentives available for business owners doing business here, it is no surprise that foreign investors choose to set up branches of their companies in the republic for running regional operations. A foreign branch is an extension of a parent company located in a foreign country, which performs the same activities under the same name. Establishing a branch office is an easy and cheap way of expanding one’s business into a different market compared to setting up a new entity. For the branch to be incorporated, the parent company must adopt the decision for its purpose. The branch will act as an independent unit of the company and conduct all activities according to the business and management plans in existence. To incorporate a branch office, the minimum share capital is 2,800 EUR.
If you are a business owner interested in establishing a foreign branch office here or considering expanding your business to the Baltic region, this is a comprehensive guide on everything you need to know about a foreign branch office and how to register it.
Registering a foreign branch office
Setting up a branch office is quite easy; all you need to do is follow the steps. Firstly, draft the articles of association and sign the documents in the presence of a notary public. Next, prepare the documents required, and then fill out the application form. Lastly, submit the form with the documents to the Latvian Commercial Registry. The branch must have a registered address in the country and be registered for tax purposes. It takes at least 4 days to process the registration of a foreign branch office. The following conditions apply to the establishment of a branch:
- It cannot carry out activities aside from that of the parent company
- Its licenses have to be issued by the Latvian authority
- The parent company shall present information about itself
Documents to be submitted
A foreign or local company has to present the following documents at the local office of the Trade Register to receive its Certificate of Registration:
- Name, address, and registration number of the parent company
- Notarised copy of the Certificate of registration
- Evidence certifying the appointment of a fiscal representative
- Latvian registered address, and trading name of the branch
- Memorandum of Association
- Proof of payment of the share capital
- Shareholders’ register
Choosing a company name
After selecting a legal entity, the next step is to reserve a business name. However, for a branch office, there is no need for this, as it would have the same name as the parent company. Although, it must still be reserved. It is unlikely for a name to be the same as an already existing business in the city, as all business names are unique and registered in the Trade Register.
Opening a bank account
A branch office does not need to have a local bank account, as it will use the parent company’s account. However, the fiscal agent has to submit the account details to the Latvian Tax Authorities. Some companies choose to still open a corporate bank account in the country despite this.
Types of taxes
The same taxes apply to local entities and branches in the country. However, corporate tax is only charged on Latvian-sourced income alone.
- Corporate income tax is levied at a standard rate of 20%
- Withholding tax is charged at a 20%
Note that a company will enjoy the double tax treaty if there exists an agreement between the country of origin and the republic.
