As of 1 January 2026, significant amendments to the transfer pricing framework have come into force in Latvia. This article summarizes the key transfer pricing changes in 2026, explains which companies are affected, and provides a practical perspective on how to apply these requirements in day-to-day operations.
Key Development – Controlled Transactions Report in the EDS
The most significant change in the transfer pricing area in 2026 is the introduction of the Controlled Transactions Report in a structured format within the Electronic Declaration System (EDS).
This means that:
- information on transactions with related parties is submitted in a standardized format;
- the State Revenue Service (SRS) gains the ability to compare data between companies more effectively;
- the role of data analytics in tax audits and tax control increases.
It is important to emphasize that the Controlled Transactions Report does not replace transfer pricing documentation but rather supplements it.
Transfer Pricing Documentation System in 2026
Today, transfer pricing documentation should be viewed as a unified system consisting of several elements:
1. CbCR (Country-by-Country Report) – A report on the allocation of income, profits, taxes, and economic activity by country within a multinational enterprise group.
2. Global Transfer Pricing Documentation (Master File) – Provides an overall view of the group, including its structure, business model, value chain, intellectual property, and transfer pricing policy.
3. Local Transfer Pricing Documentation (Local File) – A detailed analysis of a specific company’s controlled transactions and their compliance with the arm’s length principle.
4. Controlled Transactions Report – A structured report submitted via the EDS on controlled transactions carried out during the period.
5. Simplified Transfer Pricing Documentation – Applicable to certain transactions that do not reach the thresholds for full local documentation.
Who Is Considered a Related Party?
Transfer pricing requirements apply to transactions between related parties, and in practice this definition is broad. A relationship may arise if:
- one person owns more than 50% of the share capital or voting rights in another company;
- one person owns 20–50% of the share capital (in certain cases, especially in international structures);
- there are common owners, board members, or control;
- there is kinship up to a specified degree;
- transactions are carried out with persons in low-tax or no-tax jurisdictions.
Importantly, a relationship is not only a formal ownership issue but also a matter of actual control or influence.
Who Is Required to Prepare Transfer Pricing Documentation?
Transfer pricing documentation requirements apply to:
- related foreign companies;
- certain individuals;
- companies that conduct transactions with persons in low-tax or no-tax jurisdictions;
- companies whose volume of controlled transactions exceeds the specified thresholds.
The 2026 amendments clarify both the thresholds and the scope of transactions to be analyzed; therefore, it is essential for each company to assess its situation individually.
Practical Example: Different Prices for Related and Unrelated Parties
Let us consider a typical situation:
A company purchases goods from unrelated suppliers and sells them both to a related company and to unrelated customers. Slightly lower prices are applied to the related company.
In such a case:
- an appropriate transfer pricing method is selected (for example, the transactional net margin method);
- a functional and risk analysis is performed;
- data on comparable companies are used;
- the operating profit margin is analyzed as an indicator of arm’s length pricing.
The key point is to substantiate not the price itself, but the compliance of the result with the arm’s length level.
How Often Must Transfer Pricing Documentation Be Updated?
- The tested party’s financial indicators and comparable data are updated annually;
- Local transfer pricing documentation is updated once every three years, provided there are no significant changes in transactions or company functions;
- Global documentation is updated at the group level.
Transfer pricing is therefore not a one-time obligation, but an ongoing process.
Conclusions for Businesses
✔ Transfer pricing regulation is becoming more structured and data-transparent
✔ The Controlled Transactions Report enhances the SRS’s analytical capabilities
✔ Timely preparation significantly reduces tax risks
✔ High-quality documentation is the best defensive tool
In 2026, transfer pricing is not only a matter of compliance, but also a cornerstone of corporate tax risk management.
