Worldwide transfer pricing reference guide 2014

Latvia (continued)
Documentation requirements (continued)
• Description of the selected transfer pricing method for testing compliance of the price (cost) applied to a controlled transaction with the
market price (cost)
• Depending on the selected transfer pricing method — financial analysis of comparable unrelated companies or analysis of price (cost)
applied to comparable transactions between unrelated companies and its compliance with the market price (cost)
• Other documents supporting the price (cost) applied to transactions between the taxpayer and related party — concluded agreements,
documents justifying expenses, written resolutions and decisions made in board, council, shareholder and other internal meetings
For non-qualifying taxpayers (with net turnover and related party transaction annual value under statutory threshold) preparation of
transfer pricing documentation is optional. However, they still should comply with statutory requirement to controlled prices being at
arm’s length. In practice, it means that the taxpayer may provide the State Revenue Service with transfer pricing documentation that is
limited in scope, substantiating that prices applied to intercompany transactions are at arm’s length.
Documentation deadlines
There is no deadline set for the preparation of the transfer pricing documentation, but the relevant documentation could be required
during the State Revenue Service’s tax audit. The tax audit may be initiated throughout the year, however taxable income adjustments
may take place after the corporate income tax return is filed (i.e., four to seven months after the end of financial year). Transfer pricing
documentation should be submitted within 30 days following a request by the State Revenue Service.
Statute of limitations on transfer pricing assessments
The State Revenue Service has rights to make tax assessment of local transactions within three years, and cross border transactions
within five years period after the tax becomes due.
Return disclosures/related party disclosures
Related party transactions must be disclosed in Appendix 2 of the Corporate Income Tax return. The taxpayer should disclose the related
parties involved, the types of transactions (e.g., purchase or sale of goods, services or fixed assets), volume of transactions and transfer
pricing methods applied.
Transfer pricing-specific returns
There are no transfer pricing-specific returns in Latvia; however, related party transactions must be disclosed in Appendix 2 of the
Corporate Income Tax return.
Frequency of tax audit and transfer pricing scrutiny by the tax authority
Small and medium taxpayers in Latvia have a medium risk of being subject to a general tax audit, while large taxpayers have a high
likelihood of tax audits. All taxpayers are exposed to high risk of transfer pricing being reviewed as a part of an audit. In addition, the
likelihood that if transfer pricing is reviewed as a part of the audit, the transfer pricing methodology will be challenged, is medium for
taxpayers.
APA opportunity
A taxpayer has an opportunity to conclude an APA between the taxpayer and the State Revenue Service for cross border transaction
with a related foreign company when the transaction exceeds EUR1.43 million over a period of 12 months.
There are specific Cabinet Regulations regarding an APA that specify the information to be included in an APA application, describe the
procedure and timeframe for concluding an APA, and set the fee for filing an APA.
Expected reaction to OECD Report on BEPS
Currently, no law amendments have been anticipated with respect to the OECD Report on BEPS.
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