More than 2,500 Costa Rican companies will face for the first time the obligation to file the Informative Statement of transfer pricing by 2025. This new reality arises as a direct consequence of the Costa Rica will become the 38th member of the OECD in May 2021, This has considerably strengthened the country's fiscal regulatory framework.
Companies that engage in related party transactions, whether local or international, must demonstrate that their pricing complies with the arm's length principle. Failure to comply can result in fines ranging from ₡1.5 million to ₡46 million, in addition to tax adjustments that can significantly impact financial statements.
This guide will provide you with everything you need to know to successfully navigate these new obligations. We'll cover everything from fundamental concepts to a detailed action plan, including OECD-approved valuation methods, required documentation, and proven strategies to avoid costly penalties.
What are Transfer Prices and Why do they matter in Costa Rica?
Clear and Practical Definition
The transfer pricing are the considerations agreed upon by two related companies to exchange goods, services or rights. Imagine a Costa Rican company that is part of a multinational group: when it buys raw materials from its parent company in the United States or when it sells finished products to its subsidiary in Panama, the price agreed upon in these transactions constitutes a transfer price.
The fundamental difference with a transaction between independent companies is that related parties may not have the same motivation to negotiate the best possible price. An independent company will always seek to sell at the highest price or buy at the lowest price, but when companies belong to the same group, they may agree on artificially high or low prices to shift profits between jurisdictions.
For this reason, tax authorities monitor these transactions to ensure that they reflect terms that would have been agreed to by independent parties in similar circumstances. This standard is known as the principle of free competition or "arm's length principle" in international terminology.
The Post-OECD Costa Rican Context
Costa Rica's membership in the OECD since May 2021 has accelerated the modernization of the national tax system. The country committed to implement international best practices in tax matters, including the OECD Transfer Pricing Guidelines.
This commitment was materialized in the amendment of the article 81 bis of the Income Tax Law and the issuance of the Decree 41818-H in 2019which replaced the previous regulations. According to estimates of the General Directorate of Taxation (DGT), approximately 2,500 Costa Rican companies could be subject to these regulations.
The new regulation applies not only to international transactions, but also to operations between related parties resident in Costa Rica, significantly broadening the scope of the regulation compared to other countries in the region.
Why You Can't Ignore This Regulation
The consequences of non-compliance go beyond financial penalties. The DGT has begun to intensify transfer pricing audits, with average adjustments exceeding ₡150 million per audited company between 2020 and 2024.
Specific sanctions include:
- Fines for lack of documentation: 2% of gross income, with a minimum of 3 base salaries and a maximum of 100 base salaries
- Adjustments for non-conforming prices: The DGT can adjust prices to the median value of the market range.
- Interest and surcharges: They are applied on the additional tax resulting from the adjustments
- Criminal penalties: In cases of significant tax evasion
Key Points:
- Prices should reflect market conditions between independent parties.
- Applies to both local and international transactions
- The burden of proof is on the taxpaying company.
- Fines can exceed ₡46 million depending on the size of the company.
New Regulation 2025: What Changed with Costa Rica's OECD Membership
Evolution of the Legal Framework
Transfer pricing regulation in Costa Rica has undergone an accelerated evolution in the last decade. Initially governed by Interpretative Guideline 20-03, whose constitutionality was questionable, the regulation was strengthened with Decree 37898-H in 2013 and finally consolidated with Decree 41818-H in 2019.
| Appearance | Guideline 20-03 | Decree 37898-H | Decree 41818-H (Current) |
| Legal basis | Interpretive | Regulatory | Income Tax Law + Decree |
| Methods | Not specified | 3 basic methods | 5 OECD methods |
| Documentation | Minimal | Basic study | Master File + Local File |
| Sanctions | Imprecise | Up to 50 salaries | Up to 100 base salaries |
| Informative Statement | There was no | Projected | Mandatory from 2025 |
The current decree is fully aligned with the 2017 OECD Guidelines, incorporating advanced concepts such as value creation analysis, special attention to transactions with intangibles, and the implementation of the BEPS (Base Erosion and Profit Shifting) Inclusive Framework.
The New Mandatory Informative Declaration
The Transfer Pricing Informative Declaration represents the main novelty for 2025. Although its specific regulation is still under public consultation, the DGT has advanced the fundamental aspects:
Obligated taxpayers:
- Large National Taxpayers Category A
- Entities under the free trade zone regime with related operations
- Companies whose shareholders or directors are classified as Large Taxpayers
- Taxpayers that carry out transactions with related parties whose total amount exceeds 1,000 base salaries during the tax period
Information required:
- Detail of all transactions with related parties during the fiscal period
- Total amounts by type of transaction (goods, services, financing, royalties)
- Valuation methods used for each type of transaction
- Adjustments made to comply with the arm's length principle
- Country of residence of related parties
Filing deadlines:
- Companies with fiscal closing as of December 31: must file the informative declaration within six months following the end of the tax period.
- Companies with special tax closure: must be filed within six months after the corresponding fiscal year-end.
Implications for Free Zone Companies
Companies operating under the free zone regime must fully comply with the requirements of the free zone. transfer pricing obligationsensuring that transactions with related parties are carried out in accordance with the market conditions.
Although they continue to enjoy the tax benefits of the regime, they are subject to the same documentation and transfer pricing analysis rules as other taxpayers.
Special cases include:
- Maquiladoras: Must document that their profit margin is comparable to that of independent third parties.
- Service companies: Require detailed analysis of functions, assets and risks
- Distribution centers: Need specific benchmarking of merchandising margins
Key Points:
- First declaration corresponds to fiscal year 2024
- Maximum term: six months after fiscal year-end
- Free trade zone companies have full obligations despite exemptions
- The information must be supported by technical studies
Is Your Company Obligated? Application Criteria and Thresholds
Business Linkage Criteria
The determination of whether there is a linkage between companies is the first step to establish the applicability of the rules. Decree 41818-H establishes specific criteria that go beyond mere shareholding:
Participation-based linkage:
- A company owns directly or indirectly at least 25% of the capital stock of another company.
- Five or fewer people control both companies
- A natural person participates significantly in the management of both entities.
Linkage by control:
- Effective control over operational or financial decisions
- Systematic influence on pricing decisions
- Significant economic dependence between the parties
Special cases:
- Non-cooperating jurisdictions: Any transactions with entities in non-cooperative countries are presumed to be related to
- Tax havens: Specific list maintained by DGT
- Hybrid schemes: Financial instruments with different tax treatment in each jurisdiction
Economic Thresholds Triggering the Obligation
The transfer pricing obligation is triggered when both qualitative (linkage) and quantitative (thresholds) criteria are met:
| Type of Taxpayer | Main Criteria | Additional Threshold |
| Large Taxpayers Category A | DGT Classification | Related transactions |
| Free Trade Zone | Any amount | Related transactions |
| Other taxpayers | Not currently applicable | Operations >1,000 base salaries |
Calculation of the 1,000 base salary threshold:
- Base salary 2025: ₡462,200 per month.
- Annual threshold: ₡462,200
- The gross value of all related-party transactions for the period is added together.
Case Studies by Sector
Manufacturing sector in free trade zone: A Costa Rican textile company exports 100% of its production to its parent company in the United States. Although it operates in a free trade zone, it must demonstrate that its sales prices reflect margins comparable to those obtained by independent maquiladoras in the region.
Service companies with foreign parent company: A shared services center in San José provides administrative services to group subsidiaries throughout Latin America. You must document that your hourly rates are in line with independent providers of similar services.
Agricultural sector with exports: A pineapple company sells 80% of its production to its trading subsidiary in Europe. Prices should be comparable to those obtained by independent producers in exports to third parties.
Key Points:
- Review both shareholdings and transaction amounts
- The linkage may be indirect through third parties.
- Includes local and international operations
- The threshold is calculated as the sum of all the transactions in the period.
The 5 Valuation Methods Approved by the OECD
Comparable Free Price Method (CUP)
The Comparable Free Price Method is conceptually the most straightforward: it consists of comparing the price agreed between related parties with the price charged by independent parties for identical or very similar goods or services under comparable conditions.
When it is most appropriate:
- Commodity products with transparent market prices
- Standardized services with known rates
- Simple transactions without single elements
Sources of information in Costa Rica:
- PROCOMER for export prices of agricultural products
- Chamber of Industries for sector benchmarks
- International databases such as Bloomberg o Reuters for commodities
Practical example: A coffee exporter sells coffee to its trading subsidiary in Germany. To apply CUP, compare its prices with:
- Exports of coffee of similar quality by independent producers
- International arabica coffee quotations adjusted for quality and origin
- Prices reported by ICAFE for similar exports
Limitations:
- Difficult to find truly comparable transactions
- Small differences in quality or conditions can generate large variations in price.
- Information from independent third parties not always publicly available
Resale Price Method
This method focuses on companies that purchase products from related parties for resale to independent customers. The transfer price is determined by subtracting a gross resale margin from the final sales price.
Basic formula: Transfer Price = Resale Price - (Resale Price × Comparable Gross Margin)
Application in distribution companies:
- Importers reselling products from their parent company
- Exclusive distributors of the group's brands
- Marketers who do not add substantial value to the product
Practical example: Farmacéutica Distribuidora del Pacífico imports drugs from its parent company for $1 million annually and sells them locally for $1.5 million. To validate the purchase price:
- Identifies similar independent pharmaceutical distributors
- Analyzes your average gross margins (finding 35% as benchmark)
- Calculate appropriate transfer price: $1.5M - ($1.5M × 35%) = $975,000
- Its current price of $1M is slightly above the range, requiring adjustment or further justification.
Necessary adjustments:
- Differences in functions (marketing, warranties, after-sales service)
- Different levels of inventory or credit risk
- Variations in market conditions or bargaining power
Cost Plus Method
Especially useful for companies that manufacture products or provide services to related parties, this method adds an appropriate profit margin to the costs incurred.
Formula: Transfer Price = Costs + (Costs × Comparable Markup Margin)
Ideal for:
- Maquiladora companies
- Intragroup service providers
- Manufactures with semi-finished products
Practical example: Maquiladora Textil San José produces shirts for its European parent company. Its annual costs total $2 million:
- Raw materials: $1.2 million
- Labor: $500,000
- Operating expenses: $300,000
To determine the appropriate markup, it analyzes similar independent maquiladora companies, finding margins between 8% and 12%. Applying 10% (median), its appropriate selling price would be $2.2 million.
Critical considerations:
- Precise definition of the relevant cost basis
- Exclusion of expenses not related to related activity
- Comparability of functions, assets and risks with independent companies
- Treatment of shared or allocated costs
Net Margin Methods (TNMM and PSM)
Transactional Net Margin Method (TNMM): It examines the net profit margin that a company obtains from related-party transactions, comparing it with margins of independent companies in similar activities.
Common financial indicators:
- Operating margin on sales
- Return on assets (ROA)
- Margin on operating costs
- Return on capital employed
Profit Sharing Method (PSM): It is used when related parties are so integrated that it is difficult to evaluate their transactions separately. It distributes the combined profit according to the value contribution of each party.
When to apply each method:
- TNMM: When a part performs simpler and more routine functions.
- PSM: For highly integrated activities with comparable value contributions
Selection of the Most Appropriate Method
Costa Rican regulations do not establish a rigid hierarchy among methods, but do require that the selection be technically justified. The main criteria include:
Reliability of the information: Prefer methods with more accurate and verifiable data.
Degree of comparability: Select the method that allows the best comparables.
Completeness of information: Consider data availability for both the linked transaction and independent comparables.
Functional analysis as a basis: The distribution of functions, assets and risks determines which method is most appropriate for each situation.
Key Points:
- There is no one-size-fits-all method for all situations
- The selection must be technically justified in the study.
- Functional analysis is essential for proper selection
- The availability of comparable information is a determining factor
Fines, Penalties and How to Avoid Them
Scale of Penalties for Non-Compliance
The transfer pricing sanctioning framework is considerably robust, designed to ensure effective compliance:
| Type of Noncompliance | Base Penalty | Range in Colones (2025) | Considerations |
| Failure to file declaration | Art. 150 Tax Code | ₡1.5M - ₡50M | Based on gross income |
| Nonexistent documentation | 2% gross income | ₡1.5M - ₡50M | Min. 3 / Max. 100 salaries |
| Insufficient documentation | 1% gross income | ₡750K - ₡25M | DGT Criteria |
| Adjustments for inadequate prices | Tax + interest | Variable | Depending on the difference determined |
| Resistance to inspection | 50% tax omitted | ₡5M - ₡100M+ | Serious cases |
Aggravating factors that increase penalties:
- Recidivism in non-compliance
- Deliberate concealment of information
- Transactions with tax havens
- Significant adjustment amounts
Mitigating factors:
- Collaboration during audit
- Partial fulfillment of obligations
- Voluntary error correction
- Demonstrable inexperience in the subject matter
Effective Preventive Strategies
Internal audit previous: Before implementing a transfer pricing structure, perform:
- Independent technical review of the study
- Sensitivity analysis of results
- Benchmarking with multiple sources
- Mock internal audit
Advance Pricing Agreements (APA): Although not yet fully regulated in Costa Rica, article 74 of Decree 41818-H and the Resolution DGT-R-14-2021 contemplate them. They allow:
- Legal certainty on applied methodology
- Significant reduction of adjustment risk
- Valid for up to five years
- Possibility of bilateral agreements with other countries
Key Points:
- Fines can exceed ₡46 million for large firms
- Proactive preparation is significantly more cost-effective than sanctions
- DGT is stepping up inspections with stricter technical criteria
- Collaboration and transparency can result in penalty reductions
Frequently Asked Questions on Transfer Pricing in Costa Rica
What if my company is not sure if it is obligated?
The determination of enforceability can be complex, especially when there are sophisticated corporate structures or transactions at the limit of the established thresholds. The recommendation is to apply a conservative approach:
Recommended steps:
- Formal technical evaluation: Hire a specialized consultancy for a detailed analysis of the specific situation.
- Consult DGT: Use the mechanism of binding consultation to obtain official criteria
- Preventive documentation: In doubtful cases, prepare basic documentation as a precautionary measure.
Experience suggests that the cost of preparing preventive documentation is significantly lower than penalties for non-compliance. In addition, demonstrating good faith compliance can result in more favorable treatment during audits.
Can I file after the deadline?
Late filing is subject to automatic penalties according to article 150 of the Code of Tax Rules and Procedures. However, there are mechanisms to minimize the consequences:
Available options:
- Late voluntary presentation: Prior to any DGT requirement, it may result in reduced penalties.
- Causes of force majeure: Exceptional situations that prevented timely compliance
- Immediate correction: Correct the situation as soon as non-compliance is detected.
Penalties for late filing can range from ₡750,000 to ₡25 million, depending on the size of the company and the length of time overdue.
How does this affect companies in free trade zones?
Free zone companies maintain their traditional tax benefits but must fully comply with transfer pricing obligations:
Specific aspects:
- Income tax exemption: It does not eliminate the obligation to document which prices are market prices.
- Exports to 100%: Must demonstrate that selling prices reflect independent conditions
- Imports from parent company: Purchase prices also subject to analysis
- Intragroup services: Fees for technical, administrative or financial services must be documented.
The logic is that even if the company is not taxed in Costa Rica, its prices may affect taxation in other countries or create artificial competitive advantages.
Which databases to use for comparables?
The selection of appropriate sources is critical to the quality of the analysis:
Specialized international databases:
- Orbis (Bureau van Dijk): Financial information of private and public companies globally
- RoyaltyStat: Specializing in royalties and payments for intangibles
- ktMINE: Technology and service transfer agreements
Local and regional sources:
- PROCOMER records: For export prices of agricultural products
- Reports from business chambers: Sector margins and operating benchmarks
- Studies by local consulting firms: Specific analysis of the Costa Rican market
Selection considerations:
- Costa Rican or regional market representativeness
- Up-to-date information (preferably within the last 3 years)
- Sufficient level of detail for comparability analysis
- Cost-benefit of access vs. quality of information
How much does it cost to meet these obligations?
Costs vary significantly depending on the size and complexity of the company:
Medium-sized companies (revenues ₡1,000M - ₡5,000M):
- Transfer pricing study: $8,000 - $15,000
- Informative return filing: $2,000 - $3,000
- Annual maintenance: $3,000 - $5,000
Large companies (revenues >₡5,000M):
- Full initial study: $15,000 - $40,000
- Annual updates: $8,000 - $15,000
- Master/Local File Documentation: $10,000 - additional $20,000
Complex multinational companies:
- Comprehensive Studies: $40,000 - $100,000+
- Automatic monitoring systems: $25,000 - $50,000
- Ongoing consulting: $20,000 - $40,000 per annum
These costs must be compared to potential fines that can exceed ₡46 million, making the investment in compliance highly cost-effective.
Should I hire an external specialist?
The decision depends on several factors, but technical complexity generally warrants specialized support:
When it is advisable to outsource:
- Companies with no prior transfer pricing experience
- Complex transactions (intangibles, specialized services, financing)
- Multinational groups with multiple jurisdictions
- Situations with high audit risk
Criteria for selecting a consultant:
- Specific experience with DGT and Costa Rican regulations
- Relevant sectorial knowledge
- Access to specialized databases
- Verifiable references of successful cases
- Team with international certifications (CPA, CTA, OECD specialists)
Internal alternatives:
- Training of internal fiscal team
- Combination: consultant for complex analysis, in-house maintenance team
- Review services to validate internal work
What to do if DGT initiates an audit?
Transfer pricing audits can span 12-24 months and require careful strategy:
First steps:
- Designate a single coordinator: Person responsible for all communication with DGT
- Assemble multidisciplinary team: Include legal, accounting and technical aspects
- Review documentation: Verify the completeness and consistency of all information.
During the audit:
- Proactive collaboration: Provide requested information in a timely and organized manner.
- Technical communication: Explain methodologies and conclusions in an accessible way.
- Additional documentation: Prepare complementary analyses when necessary.
- Technical defense: Maintain positions when they are well founded.
Taxpayer's rights:
- Access to administrative file
- Right to present pleadings and evidence
- Assistance from a specialized representative
- Appeal for reversal against adverse decisions
Experience shows that well-documented and actively collaborating companies tend to obtain more favorable results.
A fundamental change in the corporate tax landscape
The implementation of the transfer pricing in Costa Rica represents a fundamental change in the corporate tax landscape. With more than 2,500 companies potentially obliged to comply with these requirements from 2025, early preparation becomes critical to avoid penalties that can exceed ₡46 million.
Key points to remember:
Costa Rica's membership in the OECD as of May 2021 has significantly raised tax compliance standards. Companies can no longer consider transfer pricing as an optional or future obligation: it is an immediate reality that requires urgent attention.
The five OECD-approved valuation methods offer flexibility, but also require rigorous technical analysis. The selection of the appropriate method and the quality of the benchmarking will largely determine the success of compliance and the reduction of the risk of adjustments by DGT.
Documentation is not only a formal requirement: it is the main defense mechanism against audits. Companies with technically sound studies and complete documentation experience more efficient audit processes and more favorable results.
Recommended next steps:
If your company has not yet started the evaluation process, start immediately with an applicability diagnosis. Time is the scarcest resource at this time, and companies that procrastinate will face schedule pressures that can compromise the quality of compliance.
For companies already in process, focus on the technical quality of the analysis and the selection of robust comparables. The DGT has demonstrated increasing sophistication in its audits, and only studies of high technical quality will stand up to regulatory scrutiny.
Also consider the implementation of continuous monitoring systems to maintain compliance year after year, beyond the initial 2025 obligation. The transfer pricing are not a one-time project but an ongoing obligation that requires sustained attention.
The initial investment in compliance, while significant, represents a tiny fraction of the potential costs of non-compliance. More importantly, the implementation process may reveal operational and fiscal optimization opportunities that generate value in excess of compliance costs.
Start your assessment and compliance process today. Companies that act early will not only avoid costly penalties, but will develop sustainable competitive advantages in an increasingly demanding and sophisticated tax environment.