On 9 July 2019, Latvia published Cabinet Regulations No. 324 of 9 July 2019 in the Official Gazette addressing simplified transfer pricing provisions for intra-group low value-added services.
The Regulation provides that the general requirements for the performance of a functional and comparable analysis and the application of standardized transfer pricing methods for low value added services do not apply where the taxable person determines the market value in accordance with the new simplified rules. The new rules set out rules for the determination and allocation of the cost of low-value-added services provided between group members in accordance with the OECD Guidelines, including a generally allowed mark-up of 5% on costs for the determination of the market value.
The new provisions specify the services for which the simplified method for low value-adding services may be applied;
- Accounting and auditing services;
- Personnel management services, such as recruitment, hiring, staff appraisal, etc.
- Information technology and telecommunications services that are not part of the core business of a multinational group of companies, such as installation, maintenance, and updating of information systems required for business operations.
- Legal support provided by the internal legal service of commercial companies, such as drafting and evaluating contracts, drafting legal opinions and other legal documents.
- Internal and external communication services and public relations support services
The law also provides services that are excluded from the application of the simplified method including research and development services, manufacturing services, procurement services for raw materials and other material used in production, and insurance and reinsurance services.
The regulations entered into force on 18 July 2019.
