29.01.2026.
Starting from 1 January 2026, companies whose total volume of transactions with related non-resdient parties exceed €250,000 in the previous financial year are required to submit a Controlled Transactions Report to the State Revenue Service (hereinafter – SRS). At the same time, other significant amendments to the transfer pricing framework will enter into force, the purpose of which is to improve the requirements and reduce the administrative burden. Further information on these changes is available in the KPMG article: Amendments to the Law “On Taxes and Duties” on Transfer Pricing – How will the new amendments help reduce the administrative burden of complying with transfer pricing requirements?
The Controlled Transactions Report is already available in the Electronic Declaration System (hereinafter - EDS) by selecting, under the group of forms “Corporate Income Tax Documents”, the document “Kontrolēto Darījumu Pārskats”.
What should be considered when completing the Controlled Transactions Report?
The Controlled Transactions Report includes information on the reporting entity, the companies with which controlled transactions have been carried out, as well as detailed information on the transactions performed and their analysis, assessing whether the applied prices comply with the arm’s length principle.
Despite the fact that the number of fields to be completed in the EDS form is relatively limited, a comprehensive analysis to determine the arm’s length price range is still required. By submitting the Controlled Transactions Report, the company confirms that the information provided - including numerical indicators - is complete and accurate. In a situation where the SRS requests the submission of local transfer pricing documentation, the company must be prepared to substantiate in detail the choice of the transfer pricing method applied, as well as to describe the steps used to determine the arm’s length price range indicated in the report, including any comparability adjustments applied, where relevant.
How to prepare for the submission of the Controlled Transactions Report?
Although for most companies the deadline for submitting the Controlled Transactions Report for the 2025 reporting year is 31 December 2026, KPMG recommends assessing the potential content of the report in advance:
- firstly, identifying and determining whether the company is subject to the requirement of submitting a Controlled Transactions Report for the 2025 reporting year, i.e., whether the total amount of the company’s controlled transactions exceeds €250,000;
- secondly, if the total amount of the company’s controlled transactions exceeds €250,000, identifying specific types of transactions whose total value in the relevant reporting year reaches at least €90,000 (if the total value of a transaction is below €90,000, information on such transactions does not need to be prepared);
- thirdly, verifying whether the transfer pricing method and analysis applied in previous years for the relevant type of controlled transaction remain appropriate to the actual transaction circumstances and are sufficiently substantiated, including assessing whether the selection of external comparable data remains relevant and whether the financial data of comparable companies has been updated, etc.
Potential risks related to the current Controlled Transactions Report form
With regard to the Controlled Transactions Report form, it should be noted that its current version provides for several practical limitations, particularly in relation to the disclosure of the arm’s length price (value). Specifically, the form does not allow for the specification of the period to which the determined arm’s length price range applies, the type of interval used (minimum–maximum values or an interquartile range), or the comprehensive identification of the source of the comparable data used. In addition, the form does not include a separate field in which it would be possible to describe the comparability adjustments that were necessary to determine the arm’s length price range, or other material comments required to ensure adequate transaction context.
Due to these limitations, there is a higher likelihood that the information included in the report may be more difficult to interpret accurately, both for the company preparing it and for the SRS when assessing it. In addition, it should be noted that the form lacks a separate section for explanatory comments in which the company could clearly substantiate the choice of the method applied, the determination of the tested party, the indicators used and the positioning of results within the range, as well as explain compliance or non-compliance with the arm’s length principle. Consequently, it is recommended that such explanations be maintained in the local transfer pricing documentation and internal working files, ensuring a clear linkage to the information disclosed in the report.
Penalties related to the failure to submit the Controlled Transactions Report
If a company for which an obligation has arisen fails to submit the Controlled Transactions Report, or any other component of the company’s transfer pricing documentation, within 30 days of a request from the SRS, the SRS is entitled to impose a penalty of up to 1% of the value of the controlled transactions, capped at €100,000. The requirements relating to the submission of the Controlled Transactions Report apply starting from the company’s reporting year commencing in 2025.
Article author: Kārlis Lasmanis, Tax Advisor, KPMG in Latvia