Costa Rica has had a formal transfer pricing regime since 2016, when Article 81 bis was added to the Income Tax Law (Ley del Impuesto sobre la Renta, Law No. 7092) and further developed through Executive Decree No. 37898-H. For multinational groups with a subsidiary, branch or related entity in Costa Rica, this regime is not a theoretical concern — it directly affects how intercompany transactions are priced, documented and defended before the Tax Administration.
Who is affected
The regime applies to any taxpayer that carries out transactions with related parties, whether domestic or cross-border. “Related” is defined broadly and includes direct and indirect ownership or control relationships, common management, and transactions with entities located in jurisdictions considered low- or no-tax (non-cooperative jurisdictions). Companies operating under the Free Trade Zone Regime are also subject to these rules whenever they transact with related parties, including their own foreign parent company.
The arm’s length principle
Costa Rica follows the OECD Transfer Pricing Guidelines as an interpretive framework. The core requirement is that transactions between related parties must be priced as if they had taken place between independent parties under comparable circumstances — the arm’s length principle.
The methods recognized are the same five accepted internationally:
- Comparable Uncontrolled Price (CUP).
- Resale Price Method.
- Cost Plus Method.
- Transactional Net Margin Method (TNMM) — the most commonly used in practice.
- Profit Split Method.
Selecting the appropriate method requires a functional analysis of the transaction: which entity performs which functions, uses which assets, and assumes which risks (the FAR analysis), and, where intangibles are involved, an assessment of DEMPE functions (development, enhancement, maintenance, protection and exploitation).
Documentation requirements
Taxpayers whose related-party transactions exceed the thresholds set by the Tax Administration must keep a Transfer Pricing Study (commonly organized as a Local File, and, for groups meeting the relevant thresholds, a Master File) demonstrating that the pricing applied is consistent with the arm’s length principle. This documentation must be available upon request and, in practice, is what protects the company during a tax audit.
In addition, taxpayers meeting the applicable thresholds must file Form D-273, the annual informative transfer pricing return, disclosing related-party transactions to the Tax Administration.
Important
Not having a Transfer Pricing Study does not mean a company is exempt from the arm’s length principle — it only means the company has no documentation to defend its pricing if the Tax Administration challenges it. The obligation to price transactions correctly exists regardless of whether the study has been prepared.
Common intercompany transactions under review
| Transaction type | Typical issue reviewed |
|---|---|
| Intercompany services (management fees, shared services) | Whether the service was actually rendered and whether the fee reflects the benefit received |
| Intercompany financing (loans, cash pooling) | Whether the interest rate is consistent with market conditions for a comparable borrower |
| Purchase or sale of goods between related entities | Whether the price is consistent with comparable transactions between independent parties |
| Use or transfer of intangibles (brands, technology, know-how) | Which entity performs the DEMPE functions and is therefore entitled to the related return |
| Toll manufacturing / contract manufacturing arrangements | Whether the remuneration reflects the limited functions and risks assumed by the Costa Rican entity |
Risks of non-compliance
When the Tax Administration determines that an intercompany transaction was not priced at arm’s length, it can adjust the taxpayer’s taxable income accordingly, which typically increases the tax liability and can trigger penalties and interest. Because these adjustments often relate to transactions carried out in prior years, the exposure can accumulate significantly if the pricing policy has been applied consistently — and incorrectly — across several fiscal periods.
- Adjustments to taxable income, resulting in additional tax due.
- Penalties for late or incomplete filing of Form D-273.
- Penalties for failing to provide documentation upon request.
- Double taxation risk, when the Costa Rican adjustment is not mirrored by a corresponding adjustment in the counterparty jurisdiction.
Practical recommendations
- Review whether the group’s current related-party transactions with the Costa Rican entity exceed the thresholds that trigger documentation and filing obligations.
- Keep the Transfer Pricing Study updated annually, reflecting any change in functions, assets or risks assumed by the Costa Rican entity.
- Align the transfer pricing policy with the group’s overall value chain — a policy that is correct globally but not properly reflected locally is a common source of disputes.
- Coordinate the transfer pricing analysis with the accounting and tax teams so that intercompany invoicing matches what the study actually supports.
- Anticipate potential double taxation exposure and evaluate, where relevant, whether a Mutual Agreement Procedure (MAP) or an Advance Pricing Agreement (APA) could be appropriate for significant recurring transactions.
Conclusion
For a multinational group, transfer pricing in Costa Rica is not a compliance checkbox handled independently by the local subsidiary — it is a direct extension of how the group prices intercompany transactions everywhere else. The Costa Rican entity’s functions, assets and risks need to be properly reflected both in the global transfer pricing policy and in the local documentation that supports it.
The strongest protection in a transfer pricing audit is not simply having a study on file, but having a study that accurately reflects what the Costa Rican entity actually does, consistent with the group’s global value chain.
Main sources
This publication is based primarily on Article 81 bis of the Income Tax Law (Ley No. 7092), Executive Decree No. 37898-H, the OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, and the informative return Form D-273 issued by the Dirección General de Tributación.
Professional notice: This publication is general in nature and does not replace the legal, accounting and tax analysis of each taxpayer’s specific circumstances.
At HG Sertricon we support multinational groups in aligning their transfer pricing policy with Costa Rican requirements. If your group has a subsidiary or related entity in Costa Rica, contact us.
Versione italiana disponibile qui.