On 5 March 2020, the Latvian Official Gazette published the law implementing the directive on the mandatory automatic exchange of information in tax matters connecting to cross-border arrangements.
Any cross-border arrangement that falls under one of five distinct hallmarks needs to be reported by the intermediary or relevant taxpayer involved. Hallmarks concerning transfer pricing include the use of unilateral safe harbours; the transfer of hard-to-value intangible assets when no reliable comparables exist and the projection of future cash flows or income are highly uncertain.
The Latvian legislation is planned to take effect from 1 July 2020 and reports will retroactively cover arrangements where the first step is implemented between 25 June 2018 and 1 July 2020. The penalties for non-compliance with the reporting requirements are provided for in the amendments to the Law on Taxes and Duties of the Republic of Latvia which include a fine of up to EUR 3,200 for failing to comply.
