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Transfer Pricing

Our transfer pricing practice was honoured by the International Tax Review as Baltic States Tax Firm of the Year, a reflection of our capability to handle the most complex transfer pricing matters with a team of multiple dedicated specialists across the region, supported by a broader professional network.

We deliver fully tailored TP model development and TP documentation solutions, meticulously adapted to your company’s transaction profile and risk exposure, because for us, transfer pricing is more than compliance. Partnering with us provides not only local compliance assurance but also access to a large, award-winning team with deep regional and international expertise.

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We help businesses manage risks by aligning practical transfer pricing services with your overall global business operations and objectives. Our professionals also assist with strategic documentation to support your transfer pricing practices and help resolve disputes efficiently.

Our solutions focus on the timely resolution of intergroup pricing matters, including economic analysis, aligning tax outcomes with value chains, and documenting transfer pricing positions to support regulatory requirements. 

How Deloitte can help?

Transfer pricing documentation preparation

We provide comprehensive end-to-end support for preparing transfer pricing documentation in line with OECD guidelines and local regulations.

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Review of transfer pricing documentation / Risk assessment

We offer expert review of centrally prepared group-level transfer pricing documentation to ensure compliance with Latvian local regulations.

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Transfer pricing model / policy development

We support groups in designing and implementing effective transfer pricing models and policies.

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Dispute prevention and resolution

We assist clients in obtaining tax rulings to resolve specific transfer pricing or tax-related challenges.

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Frequently asked questions – find your answer

Master file must be submitted if (i) the total amount of related-party transactions exceeds EUR 15'000'000 or (ii) the total amount of related-party transactions exceeds EUR 5'000'000 and the company’s annual turnover exceeds EUR 50'000'000.

Local file must be submitted if the total amount of related-party transactions exceeds EUR 5,000,000.

If you have any questions regarding the calculation of related-party transaction amounts or the preparation of transfer pricing documentation, please do not hesitate to contact us.

Master file must be prepared if the total amount of related-party transactions exceeds EUR 5,000,000.

Local file must be prepared if the total amount of related-party transactions exceeds EUR 250,000.

If you have any questions regarding the calculation of related-party transaction amounts or the preparation of transfer pricing documentation, please do not hesitate to contact us.

 


    Transfer pricing documentation needs to be submitted within 12 months after the end of the financial year. 

When calculating the volume of related-party transactions, the total amount of all such transactions carried out during the financial year must be taken into account.

It is important to note that for financial transactions, such as loans, both the accrued interest and the loan principal amount (in the year the loan is granted) must be included.

 

The cost of preparing transfer pricing documentation depends on the scope and complexity of the transactions involved.

For service transactions, a separate analysis must be conducted for each distinct service. This typically includes a functional analysis, selection of the appropriate transfer pricing method, cost base assessment, and a benchmarking study. The same approach applies to manufacturing and distribution activities, each requiring a stand-alone analysis.

In addition, financial transactions—such as loans, guarantees, and cash-pooling arrangements—also require separate and specialised analysis.

Since the level of work and complexity varies by transaction type, the fee for transfer pricing documentation is always tailored to the specific circumstances of each case.

Based on our experience, in most cases, the centrally prepared documentation is general and therefore non-compliant with the local regulations. 

Such documentations usually expose Latvian companies to the non-compliance fine of up to EUR 100,000. 

 

In most cases, the applied mark-up is tested by performing a benchmarking study, which analyses the specific profit level indicator for independent comparable companies. 

Following the OECD Transfer Pricing Guidelines, the most appropriate method for determining an arm's-length interest rate is to analyse either internal comparable data or external comparables, such as bonds. Typically, the analysis of external comparables involves a two-step process:

Determining the Borrower's Credit Rating: Assessing the creditworthiness of the borrowing entity, which may be influenced by group membership and other relevant factors. 

Conducting a Benchmarking Study: Identifying and analysing comparable bonds or other financial instruments with similar terms and conditions to establish a market-based interest rate. 

This approach ensures that the interest rate applied is consistent with what independent parties would agree upon under similar circumstances.

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Watch the complete video series

Videos

Operational Transfer Pricing (“OTP”) provides confidence that the agreed-upon transfer pricing policies are actually happening on the ground, all around the world. This not only enables the business to implement these policies, but also to confirm that they are consistent in all the company’s records.

This area is under increasing scrutiny due to the BEPS project and tax authorities around the world testing, in detail, the actual outcomes of TP policies. Without a robust OTP system in place, organisations might not be able to implement TP policies consistently nor respond appropriately to TP audits.

For many companies, transfer pricing represents the largest tax risk if the company and tax authority cannot agree on the appropriate arm’s length price. This can result in large penalties from the tax authorities, which has implications not only on finances, but also on reputation in the market.

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Get in touch

Helmuts Kruskops

Helmuts Kruskops

Senior Manager | Transfer Pricing
+371 29173511
Edmunds Fernāts

Edmunds Fernāts

Leading state aid expert | Tax
Alise Konstantinova

Alise Konstantinova

Manager | Tax