- Updated
- July 2021
- Sections
- 13
- Questions
- 33
Key Facts
Core Framework
Income Tax Law, Article 81 bis.
Costa Rica's domestic legislation makes explicit reference to the Arm's Length Principle in the Income Tax Law.
Costa Rica Tax law does not contain any reference to the OECD Transfer Pricing Guidelines. The TPG are considered as a reference and guidance in the application of Costa Rica’s transfer pricing rules.
Regulation to Income Tax Law, Article 69.
Article 69, Regulation to Income Tax Law contains provisions on the Comparability Analysis. Further, the TPG are used as guidance in the application of Costa Rica’s transfer pricing rules.
There is no stated preference for domestic comparables.
The tax administration does not use secret comparables.
Regulation to Income Tax Law, Article 69.
Article 69, Regulation to Income Tax Law establishes: “It is possible to apply the principle of free competition until a single figure is determined... However, in the event that there are two or more comparable prices or profit margins, the interquartile range must be constituted using the series of identified comparable data. If the price or margin of the analyzed transaction is outside the interquartile range... the median must be established as the free competition price…”
Documentation
Income Tax Law, Article 81 bis.
Costa Rican law allows such adjustments, but so far none have been made.
Income Tax Law, Article 81 bis.
Costa Rican law allows such adjustments, but so far none have been made.
Income Tax Law, Article 81 bis.
Costa Rican law allows such adjustments, but so far none have been made.
No other approach is specified.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
- Other
Selection: Most appropriate method
Dispute Resolution
Simplifications
Special Topics
There is not a specific regulation about intangibles, but general transfer pricing provisions in the tax law and regulations would apply. Costa Rica also follows the OECD TPG for these cases.
No other specific rules were identified.
Art 83 Tax Code
There are no specific penalties, instead, general penalties apply.
No safe harbour rules exist.
Full OECD Questionnaire
Legal ReferenceIncome Tax Law, Article 81 bis.
Costa Rica's domestic legislation makes explicit reference to the Arm's Length Principle in the Income Tax Law.
Costa Rica Tax law does not contain any reference to the OECD Transfer Pricing Guidelines. The TPG are considered as a reference and guidance in the application of Costa Rica’s transfer pricing rules.
Legal ReferenceRegulation to Income Tax Law
Article 68.- Definition of related parties.: “…For the purposes of this Regulation, related parties are those established in article 2 of the Income Tax Law and also those residents abroad or in the national territory, who participate directly or indirectly in the management, control or capital of the taxpayer, or when the same people participate directly or indirectly in the management, control or capital of both parties, or that for some other objective cause can exert a systematic influence on their decisions on the price. It is presumed that there is a relationship, in the terms of the Income Tax Law, when a taxpayer carries out transactions with a person or entity that has its residence in a non-cooperating extraterritorial jurisdiction..."
Legal ReferenceRegulation to Income Tax Law, Article 70.
Commodities Method, regulated by Article 70, Regulation to Income Tax Law.
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (provided)
Legal ReferenceRegulation to Income Tax Law, Article 70.
Article 70, Regulation to Income Tax Law: “…The determination of the price or margin that independent parties have agreed to incomparable operations may be carried out by any of the following methods. The most appropriate method that respects the principle of free competition will be applied…”
- Most appropriate method (selected)
- Hierarchy of methods (not selected)
Legal ReferenceRegulation to Income Tax Law, Article 70.
Costa Rica uses CUP, but alternatively, the commodities method can be used. Article 70 of the Regulation to Income Tax Law provides that, for goods with the international quoted price, the quoted price may be used as an alternative to the CUP method.
- Other (selected)
Legal ReferenceRegulation to Income Tax Law, Article 69.
Article 69, Regulation to Income Tax Law contains provisions on the Comparability Analysis. Further, the TPG are used as guidance in the application of Costa Rica’s transfer pricing rules.
There is no stated preference for domestic comparables.
The tax administration does not use secret comparables.
Legal ReferenceRegulation to Income Tax Law, Article 69.
Article 69, Regulation to Income Tax Law establishes: “It is possible to apply the principle of free competition until a single figure is determined... However, in the event that there are two or more comparable prices or profit margins, the interquartile range must be constituted using the series of identified comparable data. If the price or margin of the analyzed transaction is outside the interquartile range... the median must be established as the free competition price…”
Legal ReferenceRegulation to Income Tax Law, Article 69.
Article 69, Regulation to Income Tax Law establishes: “2. That reasonable adjustments can be made to eliminate the material effects of such differences…”
There is not a specific regulation about intangibles, but general transfer pricing provisions in the tax law and regulations would apply. Costa Rica also follows the OECD TPG for these cases.
HTVI has not yet been regulated in Costa Rica.
No other specific rules were identified.
There is not a specific regulation about intra-group services, however, general transfer pricing provisions in the tax law and regulations would apply. Costa Rica also follows the OECD TPG for these cases.
There is no regulation about low value-adding intra-group services.
No other specific rules were identified.
There is not a specific regulation about financial transactions, but general transfer pricing rules in the tax law and regulations would apply. Costa Rica also follows the OECD TPG for these cases.
Legal ReferenceIncome Tax Law, Article 9 bis,
Costa Rica implemented the measures in BEPS Action 4 to limit interest deductions through Article 9 bis of Income Tax Law. Accordingly, taxpayers may only deduct financial expenses up to a maximum of 20% of their EBITDA. The measure came into effect in 2021. As a transitional measure, up to a maximum of 30% may be deducted in the 2021 fiscal year, 28% in 2022, with annual reductions of 2% up to a maximum of 20% in 2026, and thereafter.
Legal ReferenceRegulation to Income Tax Law, Article 74.
Article 74, Regulation to Income Tax Law establishes the power to enter into agreements, including cost contribution agreements.
Legal ReferenceRegulation to Income Tax Law; Master and Local File Regulation; CbC Report Regulation
Costa Rica requires Master file, Local file, and CbC reports consistent with OECD TPG Annexes.
- Master file (selected)
- Local file (selected)
- Country-by-country report (selected)
- Specific transfer pricing returns (not selected)
Legal ReferenceArt 264 General Law of Public Administration
Article 73, Regulation to Income Tax Law establishes the obligation to present Master and Local File, CbC Report. Master and Local File: The taxpayer has 10 business days to submit the Master and Local File, once it is required by the tax administration in a control action. All information must be delivered in Spanish. CbC Report: The taxpayer has 12 months to file the CbC Report, from the end of the corresponding fiscal period. There is no restriction on the filling language.
Legal ReferenceArt 83 Tax Code
There are no specific penalties, instead, general penalties apply.
Costa Rica does not provide any exemption or materiality threshold.
Legal ReferenceArticle 74, Regulation to Income Tax Law establishes the power to enter into agreements; Costa Rica’s MAP Profile
Costa Rican legislation allows unilateral, bilateral and multilateral APA, but currently, Costa Rica has not signed any. The rollback is not allowed at the moment. Costa Rican legislation allows MAP, but currently, Costa Rica has not signed any.
- Rulings (selected)
- Advance Pricing Agreements (APA) (selected)
- Mutual Agreement Procedures (selected)
No safe harbour rules exist.
No other simplification measures exist.
Legal ReferenceIncome Tax Law, Article 81 bis.
Year-end adjustments are applicable under certain circumstances. Costa Rica does not allow such adjustments if they result in lower taxation. Art. 81 bis Income Tax Law: “…This assessment will only proceed when the one agreed between the parties results in less taxation in the country, or a deferral in the payment of the tax…”
Legal ReferenceIncome Tax Law, Article 81 bis.
Costa Rican law allows such adjustments, but so far none have been made.
Costa Rica has not yet made any case of attribution of benefits to a PE. It is being studied how the attribution of these benefits could be applied in the tax treaties not containing the post-2010 version of Article 7 of the OECD Model Tax Convention. The answer 'All' was provided regarding the number of tax treaties where it is not followed.
No other approach is specified.
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