1. Selling Establishments

As regards selling establishments of foreign enterprises in Latvia, there is no distinction between those which sell in the national market and those which sell abroad.

In order that sales profits may be taxable in Latvia, it is only necessary that the sale shall have been effected by an enterprise established there. The taxable profit will be the profit on which a Latvian enterprise working under the same conditions would itself be liable.

Consequently, a foreign enterprise may invoice its goods at the price at which it would sell them to third parties and, if allocation by separate accounting is employed, the accounts of the taxable establishment will be examined in the light of this principle.

If profits are calculated empirically as a percentage of turnover (see pages 296 and 297, concerning the choice of methods), use will be made of the coefficients applying to commercial enterprises selling the same goods.

2 and 3. Manufacturing and Processing Establishments

The profits and advantages derived from the industrial operations of factories, workshops, yards, etc., owned by a foreign enterprise in Latvia are taxable in the same way as profits from commercial business transacted in Latvia, and the rule governing the examination of the accounts of these establishments will be that their profits must correspond to those which a Latvian industrialist would have earned by similar operations.

If the industrial establishment has a commercial establishment attached to it which sells the manufactured goods direct, the whole profit from production, manufacture and sale is taxable.

The empirical method is also applied in this case and, as usual, obeys the general rules already given.

4. Buying Establishments

The mere fact that an enterprise has an establishment in Latvia whose sole business is to buy goods and sell them to the parent enterprise does not render the latter liable to tax. The establishment must not, of course, carry out any industrial operations upon the goods bought and must not sell to third parties ; otherwise, the dealings come under the cases already dealt with.

5. Research and Statistical Establishments, Display Rooms, etc

These and other establishments not engaging in any industrial or commercial operation and participating only indirectly in the profit-making activities of the enterprise are not taxable.


There are no special rules for assessing the profits of insurance companies, transport enterprises, gas, light and power enterprises, telegraph and telephone companies, or mining enterprises, and what was said before concerning allocation methods and the apportionment of profits between branch and parent enterprise applies to foreign enterprises of these various kinds which have establishments or installations in Latvia.

Although not concerned with the allocation of profits, it may be noted that the method of calculating patente tax in the case of banks and insurance companies is not the same as that in force for other enterprises (see page 290).