Transfer pricing (TP) documentation is necessary for companies doing business with related foreign companies to demonstrate that prices applied in their transactions are arm’s length. The preparation of TP files can be either centralised or decentralised. Each approach has its advantages and disadvantages, and the choice between them depends on the structure and specific needs of the group. In this series of articles, we will look at the pros and cons of the two approaches, which you need to consider when it comes to selecting the best approach to preparing your TP documentation.

October 27 was the last day of a public consultation on proposals the Ministry of Economy (MOE) has drawn up for amending the State Aid for Startup Operations Act. The proposals delete references to the de minimis aid rule and authorise the MOE to enter into participation agreements with organisations representing startups to simplify the process of awarding EUR 400,000 in state aid. This article explores what we see as key changes.

Europe has been looking for ways to improve its gender equality indicators in recent years, including the pay gap between men and women and their participation in top management. One of the latest initiatives provides for securing a gender balance on the boards of listed companies. In this article, we explore these changes because the new rules apply to Latvia too.

The role of employer image in attracting and retaining talent is becoming more and more important. However, the dynamics of trust are changing, with people putting more stock in personal suggestions and recommendations, as clearly demonstrated by social media. The same message on a company’s social media and an employee’s private profile will have a different tone, reach and contribution. On average a personal post created by an employee can achieve a level of engagement twice or three times as much as a corporate post, thanks to personal contacts and more trust.

On 30 September 2024 the Latvian Supreme Court issued Ruling No. A420226518 after hearing a Latvian company’s appeal against a decision from the State Revenue Service (SRS) and a ruling from the Regional Administrative Court. The dispute was over the results of a tax audit that questioned the company’s right to deduct input VAT when acting as intermediary in cross-border transactions. The SRS viewed the transactions as fictitious because the original seller (two unrelated Latvian companies) and the end buyer (a related Lithuanian company) had allegedly entered into a secret agreement. The SRS said the company was aware of that agreement and engaged in documenting the transactions as an intermediary to reduce the amount of value added tax (VAT) and corporate income tax (CIT) payable to the government.

The integration of e-invoicing into your finance function can significantly improve its efficiency and accuracy. However, this digital development brings with it some new risks, particularly in the area of fraud. The growing role of technology in financial transactions causes organisations to strengthen their security systems and focus on modern fraud detection solutions. In this area, artificial intelligence (AI) has become a crucial tool that provides organisations with advanced methods for detecting, preventing and minimising fraud. In this article we explore how AI can detect fraud in e-invoicing systems and how organisations can benefit in practice.

As stakeholders increasingly expect organisations to demonstrate their commitment to sustainable and ethical operations, organisations are relying on innovative digital tools to make it easier for them to achieve their sustainability goals. Electronic invoicing (e-invoicing) is one of such tools. While e-invoicing may seem a merely technical function, it has a surprisingly important role to play in the sustainability space, helping organisations improve their sustainability and strengthen their governance.

For over a year we have been living with the new system the State Revenue Service (SRS) uses for checking individuals and entities. Amendments to the Taxes and Duties Act outline a different approach to tax administration aimed at simplifying and improving current checks in favour of the individual. This approach provides for only three stages: enquiry (obtaining information), tax control, and audit. These are not always consecutive steps and there may be different combinations. For example, enquiry can go straight into audit, tax control can move into audit, and enquiry may well end your communication with the SRS. Our experience suggests that carefully preparing your response to an SRS information request can reduce their interest in you and prevent the enquiry stage from changing into a more serious tax review.

In early 2024, Parliament amended the National Cadastre Act to change how cadastral values of real estate (RE) are set from 1 January 2025. Two cadastral values will be calculated and recorded for each cadastral item on a temporary basis: fiscal and universal. Fiscal value will be equivalent to the current cadastral value and used to assess real estate tax (RET) and other duties. Universal value is to be used in accounting records, financial statements and land rent calculations.

Passed by the Latvian parliament on 31 October 2024 in their final reading, amendments to the Accounting Act require Latvian invoices to be issued as structured electronic invoices (‘e-invoices’). These changes will apply to all businesses when invoicing government agencies (B2G) from 1 January 2025. E-invoicing will become mandatory between businesses (B2B) from 1 January 2026.

In September 2024 the Court of Justice of the European Union (CJEU) definitively ruled on the case involving the European Commission (EC) against Ireland and Apple. The CJEU confirmed that Ireland’s two tax measures allowed Apple to use transfer prices in its intragroup transactions that were not arm’s length, constituting illegal state aid under Article 107(1) of the Treaty on the Functioning of the European Union (TFEU). Apple enjoyed tax advantages over the period from 1991 to 2014 and must now repay EUR 13 billion in unpaid taxes to the Irish state. This is the largest amount of illegal aid in history to date.

We have read conflicting opinions from the State Revenue Service (SRS) on how financing from the State or EU funds affects value added tax (VAT). Persons receiving such funding should consider this issue carefully and may have to seek SRS approval for VAT treatment. To help you navigate this complexity, we will offer some guidelines based on the assessment made by the Court of Justice of the European Union (CJEU) in its ruling C‑87/23 of 4 July 2024. The case involves a dispute between the Latvian Information and Communications Technology Association (LICTA) and the SRS.

Amendments to the Accounting Act will mandate the use of structured electronic invoices or e-invoices between businesses and government agencies (B2G) from 2025 and between businesses (B2B) from 2026. The amendments introduce structured e-invoices that will significantly change the accounting and payment processes in organisations. To ensure a seamless transition to e-invoicing and to avoid misunderstandings or conflicts, organisations will have to amend their business contracts. In this article we will look at key aspects and contractual amendments that are necessary to meet the new requirements and guarantee a smooth exchange of e-invoices.

The growing job market requirements both locally and globally are forcing employers to identify HR policy improvements capable of attracting and retaining today’s workforce. Yet strategies for attracting talent, adopting GenAI tools, understanding and satisfying workers’ needs are only the tip of the iceberg. With increased challenges to reduce staff turnover and create an inclusive and growth-oriented working environment, organisations should be putting more effort into identifying the current market trends and building their value proposition. In this article we will present the findings of ‘Workforce Radar’, a PwC US study of organisations across the PwC network, and the findings of ‘Hopes and Fears 2024’, a PwC survey of more than 20,000 employees, business leaders and HR leaders.

In August we wrote about the State Revenue Service’s plans to begin sending out notifications in September asking people to review their income and report it in full. This is one of the steps the SRS is taking as part of the plan to fight the shadow economy. In this article we will look at how this initiative is happening in practice and what is worthy of attention.