To deal with the Covid-19 crisis in 2020 and 2021, the governments have imposed tight restrictions, including travel restrictions, to contain the pandemic. Various exit and entry restrictions forced many people to stay in Latvia or another country. If you are performing your job duties in Latvia then you may need to consider tax treatment aspects. This article explores how Covid-19 affects the way tax residence is determined under Latvian law.
The legal form, meaning the contract between related parties and its provisions, has always been among the factors that come into play when assessing whether prices applied in controlled transactions are arm’s length. This article discusses why the legal form of a transaction is important, looks at a common approach to preparing intragroup contracts, and explores some rules that should be followed when drafting those contracts to mitigate transfer pricing risks.
The power of the State Revenue Service (“SRS”) to adjust the amount of tax due is primarily laid down by section 23(1) of the Taxes and Duties Act. The period open to review is limited to three years, and it is generally accepted that a person’s tax burden cannot be revised outside this period. Yet the SRS takes the view that a person’s obligation to pay taxes is not limited in time and is not really covered by the statute of limitations. We have encountered a practice in which, on finding an incorrect tax payment for a period outside the three years, the person was given the option of voluntarily filing the relevant tax returns and paying additional taxes. To stimulate this voluntary action, the person was warned that the SRS might pass their information to the Finance Police in order to decide on starting a criminal prosecution. This practice is now developing in such a way that a taxpayer’s mistake in filing tax returns for earlier periods is interpreted as voluntary performance of their obligation and an action that cannot be rectified.
Section 15.2 of the Taxes and Duties Act requires a taxpayer to meet requirements for the timeliness of information included in their transfer pricing (“TP”) documentation and for regular updates to reflect the present situation. During a period of calm in preparing and filing TP documentation, we asked the State Revenue Service (“SRS”) to answer some confusing questions about updating comparable data and revising financial data, including the scope for taking the roll forward approach.
PwC specialists share their experience on topical tax issues.
PwC offers a brief video on the impact of COVID-19 on Transfer Pricing in Central and Eastern Europe.
The annual survey of Baltic business leaders examines the mood and opinion of entrepreneurs about business challenges and development perspectives. In addition to the questions asked in the global survey, we asked the managers of the Baltic companies to answer some questions about the aspects of the local economy.