What is Transfer Pricing?
TP documentation is a document substantiating the transaction(s) between related parties, which facilitates the defence of transactions in cases of disagreement with the State Revenue Service (hereinafter - SRS).
The purpose of the TP documentation is to determine the market prices to apply for CIT purposes between related parties and to ensure that entities in your group have sufficient evidence that the prices applied to their inter-company transactions correspond to arm’s length principle.
Benefits of transfer pricing:
- Pricing and substantiation of transaction market prices
- Protection document in case of SRS audit
- The results may also be used in disputes with counterparties, minority shareholders or third parties that are legally involved.
Legal regulation of transfer pricing documentation in the Republic of Latvia
As of 01.01.2018 the amendments to the Law "On Taxes and Duties“ came into force. With said amendments, Latvia has introduced the Organisation for Economic Co-operation and Development (OECD) format of the TP documentation, consisting of a Master File and a Local File.
- Mandatory preparation and submission of transfer pricing documentation
- New format for transfer pricing documentation: Master files & Local file documentation
- Penalty for lack of documentation or violation of essential requirements
- It is possible that the previous agreement on the conformity of the transaction price with the market price for the previous reporting years
- Annual renewal
- Transfer price adjustments create CIT liabilities starting from 2018
“Our transfer pricing practices help companies design and implement economically justified transfer prices, document transfer pricing policies and respond to requests from tax administrations.” Dainis Tunsts, Partner
What are the requirements for preparing transfer pricing documentation?
- Related foreign entities
- Related natural persons (relationship to the third degree, in-laws to the second degree)
- Companies or individuals located in low-tax or tax-free countries and/or territories, and
- Another related Latvian taxpayer, if the transaction takes place within the same supply chain with another related foreign company or with companies / persons located in low-tax or tax-free countries and/or territories.
Grant Thornton Baltic transfer pricing team
TP projects are based on professional specialists, project management and communication skills together with a pragmatic and effective approach. We would especially like to emphasize our extensive experience in carrying out the work described in this offer. We are confident that our employees, combining their high professional skills and extensive experience, will be able to provide you with an optimal solution to the issues described in this offer. We believe that our experienced team will be perfect for your business. If necessary, we will also have the opportunity to engage consultants from other Grant Thornton members.
We will be happy to answer all your questions and provide more information about our company, employees and this offer.