Accounting, Payroll, Tax & Legal since 1989

New reporting for groups of multinational enterprises

In April 2017, the Cabinet of Ministers reviewed draft amendment of the law ''On Taxes and Fees" which foresee an obligation of taxpayers to submit a report, it structure, explanation of terms used of groups of multinational enterprises (MNE Group) per each country to the State Revenue Service (SRS) and revision of preparation and submission procedures determined by the Cabinet.

Followingly, this article offers an insight to the law provisions currently setting an obligation to submit reports describing where and when it should be submitted.

Since 2008 Organization for Economic Co-operation and Development (OECD) (membership of Latvia since 2016), plans and tackles containment of aggressive tax planning. One of the most important measure is the countermeasure plan for the base of erosion of profit sharing (BEPS) which includes 15 different measures. One of the key point of major action plan is a control of transactions between related companies, summary of market prices or transfer prices and document check. It contains a number of measures to be performed by OECD members including MNE Groups [1] providing an obligation to submit an annual country - by - country report (CBC) to tax administrations as per Group companies by country.

Thus, the draft law is drawn up to carry out BEPS countermeasure plan of OECD and meet the requirements for the reporting as per EU Council Directive 2016/881 [2].

The Directive stipulates that the group reports should include key financial data by companies for the fiscal year including profits, income tax paid, share capital, number of employees etc. The Member States are obliged to transpose it in the national law until 4 June 2017.

Who is bound by the Directive? The requirement to provide statements concerns the Group if the total consolidated revenues exceed 750 million for the fiscal year. As per the Directive, an overview of the Group shall be submitted to the tax authority by reporting Group's entity that may include the Group's ultimate parent company, surrogate parent company or company belonging to the Group if the ultimate parent company cannot submit the report. The report applicant state tax authority has a duty to report information on Group’s companies in other countries directing relevant state to tax administrations.

The ultimate parent company is a company which directly or indirectly owns a sufficient participation in one or more  international groups and it company units requires to prepare consolidated financial statements in accordance with accounting principles generally applicable to the unit for tax purposes in line with selected residences jurisdiction or it is required if the said unit participation in equity would be traded on a public stock exchange for tax purposes by selected residence jurisdiction.

The surrogate parent entity is a company appointed by the Group as the sole ultimate parent replacement for submission of the report of each country on behalf of the Group.

Thus, the report of company within the Group needs not to be submitted if it is not considered as the Group's ultimate parent company and the Group does not impose an obligation to present the Group's report.

However, the Directive states that any entity within the Group or a fixed establishment at the latest by the Group’s last fiscal day of the year informs its tax administration of it status i.e., if it is the ultimate parent company or surrogate parent entity or entity with the Group and who is the Group's reporting entity and which is the tax country of residence.

How often and when report needs to be submitted? The first report of the Group if its consolidated revenue will exceed 750 million will be required for fiscal year beginning on 1 January 2016 or after the said date. The report to the tax office must be submitted once a year within 12 months following the last day of the fiscal year of the Group.

It should be noted that the Directive provides the Member States with the right to impose penalties in failure to comply with reporting requirements.

The Ministry of Finance has prepared a Cabinet regulations based on the provisions of the Directive that will soon be published and approved.

Other measures. BEPS countermeasure plan for other activities to be carried out by the members of the OECD:

1) The groups will have to provide general information (the key file) to the tax administrations for global business and transfer pricing policies.

2) Each State will determine the requirements for the type of detailed information for the group companies to be submitted to the tax authorities in respect of transfer pricing documentation (local file).

Currently, the Ministry of Finance elaborates draft law amendments to the Law ''On Taxes and Fees" regarding content and scope of transfer pricing documentation that need to be submitted to the SRS. The draft amendment has not yet been published, including specific deadlines for supplements to be adopted in the Parliament, are not yet known.


[1] A group of companies that include two or more companies which are resident for tax purposes in various jurisdictions (Directive 2016/881, annex III).

[2] The directive on the mandatory automatic exchange of information with regard tax matters.


Latest articles



International Payroll - Successfully operating globally with minimal...



Support for energy-intensive manufacturing companies



e-address -digital mailbox on the state portal


Email again: