Service
Transfer pricing studies in Costa Rica
We document that your company's transactions with related parties —parent company, subsidiaries, companies in the same group— are agreed at market value, as required by the arm's length principle.
When two entities of the same group sell goods, provide services, charge royalties or finance each other, the Costa Rican Tax Administration may review whether the agreed price is the one two independent companies would have agreed. If it is not, it may adjust the taxable base and apply penalties.
A transfer pricing study is the technical defense of those prices: it analyzes the transactions and the functions and risks of each party, and compares them with transactions between independent parties using the methods recognized by Costa Rican law, aligned with the OECD Transfer Pricing Guidelines.
Who does it apply to?
- Costa Rican subsidiaries of multinational groups.
- Free trade zone companies with related-party transactions.
- Local groups with several companies that invoice each other.
- Companies that transact with entities in low- or no-tax jurisdictions.
Who must file the transfer pricing informative return and keep a study is defined by the Income Tax Law, its regulations and the resolutions of the General Directorate of Taxation in force for each period.
Deliverables
What does the service include?
- 01
Functional analysis
Functions, assets and risks of each party in each type of transaction.
- 02
Method selection
Comparable uncontrolled price, resale price, cost plus, profit split or transactional net margin, as appropriate.
- 03
Search for comparables
Selection and screening of comparable companies or transactions, with the interquartile range documented.
- 04
Report and return
A written study ready to submit to the Tax Administration, and support with the informative return.
Frequently asked questions
What is the arm's length principle?
It is the rule under which transactions between related companies must be agreed on the same terms that two independent companies would agree in comparable circumstances.
How often does the study need to be updated?
The analysis is prepared for each tax period, because transactions, amounts and comparables change. When the business does not change much, the update is simpler than the first study.
What happens if prices are not at market value?
The Tax Administration may adjust taxable income to what it considers market value, with the corresponding interest and penalties. The study makes it possible to anticipate that risk and correct it beforehand.
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Shall we talk about transfer pricing?
What do you need? We will send you a written proposal with scope, timelines and a fee estimate.