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Other than complying with a legislation does not recognize the use of If an adjustment is sustained, can
requirement per the previous other methods, as allowed by the OECD penalties be assessed? If so, what
question, describe the benefts, if Guidelines. rates are applied and under what
any, of preparing and maintaining conditions?
a transfer pricing study? Is there a priority among the Yes. A penalty of 20 percent or 30 percent
acceptable methods?
Shifting the burden of proof, and Comparable uncontrolled price method, is applied. It can be halved i.e. 10 percent
requirement in practice/expectation resale price method and cost-plus or 15 percent if certain criteria are met.
of tax authorities.
method have priority. To what extent are transfer pricing
To satisfy the requirement and/or If there is no priority of methods, penalties enforced?
obtain the benefts, are there any is there a best method rule? Always.
requirements on when the transfer
pricing study must be prepared No. What defenses are available with
and submitted? respect to penalties?
If the taxpayer is required to prepare Transfer pricing audit Transfer pricing documentation.
full transfer pricing documentation (net and penalties What trends are being observed
turnover and transaction value criteria currently?
are met), it must be submitted to the tax When the tax authority requests
authority within 1 month of the request. a taxpayer s transfer pricing The tax authoritys interest in transfer
documentation, how long does pricing has increased and therefore
Based on KPMG in Latvias experience, the taxpayer have to submit its pricing in all intra-group transactions may
extensions are possible. However, each documentation? be questioned. More transfer pricing
case must be negotiated. Thirty days if the taxpayer is required audits are performed by the tax authority.
to prepare full transfer pricing
When a transfer pricing study is documentation.
prepared, should its content follow Special considerations
Chapter V of the OECD Guidelines? If an adjustment is proposed by the Are secret comparables used by
Yes, with some exceptions. tax authority, are dispute resolution tax authorities?
options available to the taxpayer KPMG in Latvia has no information about
Latvia is not a member of the OECD, outside of competent authority?
thus the OECD Guidelines are not the use of any secret comparables.
applicable. However, Latvian legislation Yes. If the taxpayer appeals the Is there a preference, or requirement,
is based on the OECD Guidelines. decision of the tax authority on transfer
prices, it can submit an application to by the tax authorities for local
Does the tax authority require an the Transaction Evaluation Commission comparables in a benchmarking set?
advisor/tax practitioner to have (in Latvian Darijumu novertejuma Yes, if local comparables can be found.
specifc designation in order komisija) established under the Ministry If local comparables are not available,
to prepare or submit a transfer of Economics of the Republic of Latvia. a European benchmarking study is
pricing study? Generally, the Commission issues a acceptable.
No. decision on the market value of the If local comparables are found by the
particular transaction within 30 days after
the receipt of the taxpayer s application. tax authority but they are not included in
Transfer pricing methods If the tax authority does not agree to the entitys benchmarking study, the tax

Are transfer pricing methods outlined it and the matter is taken to court, the authority could reject the entitys results.
in Chapter II of the OECD Guidelines Commissions decision is in the nature of
acceptable? a recommendation.
Yes, with some exceptions. Latvian If the appeal of the tax authoritys
legislation accepts transaction methods: decision is not benefcial to the taxpayer,
CUP, resale price, and cost plus. They matters are more often taken to court
also accept proft-based methods: and not to the Transaction Evaluation
proft split, and TNMM. However, the Commission.

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