Investment funds have recently become more active in Latvia. Foreign non-resident investment funds often invest in the share capital of Latvian companies. The Corporate Income Tax (CIT) Act is silent on the CIT or personal income tax treatment of a non-resident investment fund paying income to its non-resident members from the sale of shares in a Latvian-registered company. Following the “Advise First!” principle of the State Revenue Service (SRS), PwC has prepared an application on behalf of a client seeking an advance tax ruling on how to proceed in this case.

With advanced technology and improved international cooperation, people are becoming less and less tied down to a particular residence. Many relocate from Latvia to live abroad indefinitely. Since this is a new experience for most people, this article summarises key tax aspects a Latvian tax resident should consider in the case of relocation.

In statutory cases, the taxpayer is liable to prepare transfer pricing (TP) documentation and file it with the State Revenue Service (SRS). An examination of TP documentation helps the SRS monitor the correctness of corporate income tax (CIT) payments because the difference between a controlled transaction’s value and market price must be included in the taxable base under the CIT Act. If the taxpayer defaults on the obligation to prepare and file TP documentation, then in addition to the opportunity to start an audit and assess the correctness of the CIT calculation, the SRS may start a data assesment in the field of tax revenue risks and charge a hefty fine on the company if an offence is found. This article explores what offences relating to TP documentation permit the taxpayer to be fined outside an audit and how the SRS should evaluate and justify the size of fine.