High quality comparables are crucial when it comes to setting an arm’s length price in a transfer pricing (TP) analysis. A key factor in this process is making an informed choice about the dataset size, i.e. using comparable financials for one year or multiple years. This article explores key risks and factors to consider in setting an arm’s length price of transactions and using comparables for one or more years. We will be referring to the general rules of Latvian law and the TP guidelines issued by the OECD, with an example from case 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.

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.