The branches of foreign companies and permanent representative offices of non-residents (foreign merchants) in Latvia fall under the purview of the “Accounting Law.” According to Article 18 of this law, it mandates the preparation of an annual report for each reporting year. The framework, contents, and submission guidelines for this report are outlined in the Law on Annual Statements and Consolidated Annual Statements and its associated regulatory acts. While these entities must comply with the financial statement preparation requirements specified in laws governing relevant economic activities and taxes, it’s noteworthy that the Law on Annual Statements and Consolidated Annual Statements does not explicitly enforce the necessity of preparing annual reports for foreign branches and representative offices in accordance with its provisions.
Furthermore, foreign branches and permanent representative offices are subject to Corporate Income Tax (CIT) obligations. They are required to submit a CIT declaration through the standard procedure, computing the tax base by a factor of 0.8 and applying a 20% tax rate. This tax is applicable to both the profit share transferred to the parent company and the allocated profit for non-economic activity-related expenses.
Considering these legal mandates and common practices, it’s established that foreign branches and permanent representative offices should compile an annual financial statement encompassing a Balance Sheet and a Profit or Loss statement. The preparation and approval of this report align with the procedural guidelines laid down by law.