PwC Guide to reporting and documenting transfer prices
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To help taxpayers covered by transfer pricing (TP) legislation understand how those rules affect their obligations from the financial year 2018 onwards, PwC’s transfer pricing team has put together guidelines for reporting and documenting transfer prices, which we refer to as the “Guide” in this article and on our website.
Transfer pricing rules and history
Recent years have seen TP emerge as a key area of cross-border taxation facing multinational enterprises and tax authorities because TP largely determines income and expenses as well as related companies’ taxable profits in various tax jurisdictions.
Latvia adopted a legal framework to enforce the arm’s length principle in related-party transactions as far back as 1995. Amendments were enacted in late 2018 to widen the TP framework for transactions performed in financial periods beginning from 2018.
If taxpayers defined by the CIT Act
are to meet the TP requirements and prove that their transfer prices are arm’s length, they must consider as many as six pieces of Latvian legislation.
Since even an experienced professional might find it difficult and time-consuming to navigate this maze of regulations and neither the State Revenue Service nor any other institution involved in formulating TP requirements has published any guidance, PwC’s transfer pricing team has prepared the Guide after carefully analysing every key aspect.
The Guide to reporting and documenting transfer prices
The material we prepared to help taxpayers find the information they need in a fast and easy way has the following elements:
Practical steps explaining in simple terms how transactions should be assessed and reported for CIT purposes and how TP should be documented, with graphical details of parties treated as related and explaining how to complete the CIT return, including by visually identifying particular fields on the CIT return;
A functional support tool “Determination of TP requirements” answers certain questions, such as whether the company has any related-party transactions and what amounts are involved, so the taxpayer can work out total related-party transactions to be reported on the CIT return, and whether TP documentation must be prepared and filed with the State Revenue Service and what format should be used;
An overview with practical considerations crucial for understanding how transfer prices should be analysed and measured. This includes a summary of the TP documentation levels (formatting) and details to be given for each level.
To keep the Guide up to date and make its users aware of the latest TP amendments, PwC will constantly add new comments on TP treatment.
The Guide is freely available to all interested parties from PwC’s website. The site offers links to MindLink Flash News, in which PwC’s transfer pricing team provides comments with added value on topical TP issues.