Latvia’s State Revenue Service has issued guidance on the Controlled Transactions Report, covering filing thresholds, reporting requirements, valuation rules, electronic submission, and penalties for taxpayers from 2026.
Latvia’s tax authority, the State Revenue Service, on 18 September 2026, issued the methodological guidance covering transfer pricing controlled transaction report requirements.
These documents provide official guidelines from the Latvian State Revenue Service regarding the preparation and submission of the Controlled Transactions Report (KDP). Effective from 2026, this regulatory framework requires taxpayers to report transactions with related foreign entities or partners in low-tax jurisdictions that exceed EUR 250,000.
The manual explains how to document transaction types, values, and transfer pricing methods through the Electronic Declaration System (EDS) while excluding VAT from the calculations. It offers specific visual examples and a Q&A section to ensure that reported data accurately reflects the economic substance of business dealings.
The controlled transaction reporting rules entered into force on 1 January 2026 and apply to controlled transactions carried out in reporting years beginning during the 2025 calendar year.
Obligated taxpayers & covered counterparties
The reporting obligation applies to corporate income taxpayers that are Latvian residents or permanent establishments (PEs) of non-residents in Latvia. Taxpayers must prepare and file the report if they engage in controlled transactions with:
- Related foreign entities
- Related natural persons (individuals)
- Entities or individuals in low-tax or tax-free jurisdictions
Transactions carried out with related resident corporate entities within a supply chain are exempt from the report (unless the resident counterparty is a natural person).
Reporting thresholds & materiality rules
- Primary filing threshold: A taxpayer must prepare and submit the report if the total annual value of all controlled transactions across all parties exceeds EUR 250,000.
- De minimis / materiality exclusion: Taxpayers may exclude individual transaction types with a specific counterparty if their total annual value does not exceed EUR 90,000.
- Exemption nuance: If every individual controlled transaction type with each counterparty is EUR 90,000 or less, those transactions are deemed immaterial and do not need to be reported. Consequently, even if a taxpayer’s grand total of controlled transactions exceeds EUR 250,000, no report needs to be filed if all individual counterparty transactions remain at or below EUR 90,000.
Electronic filing requirements & deadlines
The Controlled Transactions Report must be filed electronically within 12 months after the end of the relevant reporting year through the Latvian State Revenue Service’s Electronic Declaration System (EDS). For example, for a financial year ending 30 April 2026, the report must be filed by 30 April 2027. Taxpayers can also submit the report by uploading an XML file that complies with the SRS technical specifications.
Required report fields & valuation principles
The Controlled Transactions Report must include taxpayer and counterparty details, transaction types and values, and key transfer pricing information, including the method used, data source, tested party, and arm’s length indicators.
Transaction values must be reported excluding VAT. Special valuation rules apply to loans, cash pools, and agents or commissionaires, with amounts generally based on principal and recognised interest, relevant balances and interest, or fees and commissions, respectively.
Specific transaction guidance (Q&A highlights)
- Use of category “Other”: Allowed only when the standard dropdown classifier lacks a specific transaction type or indicator. Taxpayers must provide a concise description of the economic essence (up to 50 characters). It cannot be used as a catch-all for combining unrelated transactions.
- Transaction aggregation/grouping: Similar transactions with the same type, direction, transfer pricing method, indicator, and counterparty may be reported as a single entry. Under the portfolio principle, transactions involving different counterparties must be reported separately.
- Third-party cost recharges: Cost recharges without a markup may use an arm’s length range of “0” or “0 to 0” and identify external comparable data as the source. Recharges with and without markups do not have to be reported separately.
- Equity transactions: Equity or share transactions are generally evaluated using the Comparable Uncontrolled Price (CUP) method, often supported by Discounted Cash Flow (DCF) analysis, with Equity Value in EUR used as the indicator.
- Reorganisations: Where one entity merges into another during the reporting year, the surviving entity assumes the reporting obligations and must include the merged entity’s relevant controlled transactions.
Penalties & audit risks
Failure to meet filing deadlines or provide required transfer pricing data may result in a fine of up to 1% of the controlled transaction amount, capped at EUR 100,000. Common compliance risks include omitted transactions, incorrect classifications, accounting discrepancies, inconsistencies with local transfer pricing documentation, and inappropriate transfer pricing methods or indicators.
