Latvian transfer pricing (TP) rules provide that a company’s transactions with related parties must be arm’s length, whether the parties are Latvian or foreign tax residents. The arm’s length principle dictates that a company making comparable transactions under comparable conditions must receive comparable revenue, whether the transaction is with a related or an unrelated party. Basically companies know and understand this, yet there are various facts and circumstances that make this requirement difficult to enforce in real time. This is because before or during the transaction, companies often lack sufficient information on arm’s length prices that unrelated parties apply in comparable transactions. This is where companies can use a TP adjustment, which is not always so painful as it might originally seem. This article explores what TP adjustment a company can make by adjusting its taxable base for corporate income tax (CIT) purposes.

Taxpayers involved in cross-border transactions with related parties widely use globally recognised methods of analysis to show that their prices match market values. Selecting the most accurate method depends on the economic substance of a transaction and on the availability of credible information. Having limited access to a comparable data set often becomes an insurmountable obstacle to applying a particular method. This article explores some problems with data use, as well as international practice and potential solutions where the comparable uncontrolled price (CUP) method is used.

In November the OECD published the 2021 statistics for the mutual agreement procedure (MAP) covering 127 jurisdictions and practically all MAP proceedings around the world. This article explores global MAP trends in 2021, looks at Latvian statistics and analyses how last year’s statistics in Latvia compare to global trends.