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Latvia: Supreme Court clarifies definition of permanent establishmentSupreme Court Senate, in case Nr.SKA-358/2013, due to Swedish company “Snickers Workwear AB” claim against the State Revenue Service of Republic of Latvia (hereinafter SRS), in the Judgment of September 30, 2013, has clarified what criteria shall be taken into account determining whether the permanent establishment of the company exists.
Swedish company who is one of the leading manufacturers of workwear industry in Europe, have established Daughter Company in Latvia. In SRS view, the Board member of the Daughter Company is considered as the dependant agent of the Swedish company. Therefore the activity of the Latvian company has created a situation that the Swedish company has the non-registered permanent establishment in Latvia and the income have to be imposed with Enterprise income tax.
According to article 7 and 8 of the Law On Taxes and Fees, it is considered that a non-resident (foreign merchant) has a permanent representative office in Latvia if all of the following conditions are complied with simultaneously:
1) the non-resident (foreign merchant) utilises a specific place for activities in Latvia; 2) the place for activities is permanently utilised or is established for the purpose of being utilised permanently; and 3) the place for activities is utilised for the performance of entrepreneurial activities (commercial activities).
In the Judgment Court has clarified that for determining the existence of permanent representative establishment shall also be taken into account the following:
Therefore, according to the Judgment, the case was decided in favour or Swedish Company “Snickers Workwear AB” and for determining whether the company has existing permanent establishment, Article 7 of the Law On Taxes and Fees as well as other criteria have to be taken into account.
Valters Gencs Tax Attorney & Founding Partner Gencs Valters Law Firm, Riga Email: valters.gencs@gencs.eu Tel: +371 67 24 00 90
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For questions, please, contact Valters Gencs, attorney at law at info@gencs.eu
The material contained here is not to be construed as legal advice or opinion.