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Costa Rica – Transfer Pricing (2025)

Costa Rica’s domestic tax framework references the Arm’s Length Principle in its domestic law, specifically in Income Tax Law, Article 81 bis. While the Income Tax Law does not explicitly incorporate the OECD Transfer Pricing Guidelines by reference, the Guidelines are considered a reference and guidance for the application of Costa Rican transfer pricing rules. The domestic regulatory framework is further developed in the Regulation to Income Tax Law, which contains detailed provisions on key concepts and procedural obligations.

The rules apply to transactions between related parties as defined by domestic law and regulation, and they extend to transactions involving residents and their permanent establishments (PEs), as well as to PEs located in the country and their foreign parent companies.

Arm’s Length Principle and the role of the OECD Guidelines

Article 70 of the Regulation to Income Tax Law provides that “The determination of the price or margin that independent parties have agreed to in comparable 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…”. Although the tax law itself does not contain a direct reference to the OECD Transfer Pricing Guidelines, Costa Rica uses the Guidelines as guidance for applying its domestic rules, and Article 69 of the Regulation to Income Tax Law contains provisions on comparability analysis that are supplemented by the OECD’s Chapter III guidance.

Related parties are defined in the Regulation to Income Tax Law, Article 68. The regulation states: “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.” The regulation further presumes a relationship where transactions are carried out with persons or entities resident in a non-cooperating extraterritorial jurisdiction, defined in part by conditions such as jurisdictions with an equivalent income tax rate lower by more than forty percent (40%) of the rate established in paragraph a) of Article 15 of the Income Tax Law, or jurisdictions with which Costa Rica lacks an information exchange or double taxation agreement including an information exchange clause.

The Regulation expressly lists specific situations considered as related parties: a party that directs or controls another or that directly or indirectly owns at least twenty-five percent (25%) of its share capital or voting rights; situations where five or fewer persons direct or control both legal entities or possess collectively at least 25% of capital or voting rights in both entities; and cases where legal persons constitute the same decision-making unit. A decision-making unit is presumed where one legal person is a partner or participant of another and, for example, holds the majority of voting rights; has the power to appoint or remove the majority of the board; may have the majority of voting rights by virtue of agreements with other partners; has appointed the majority of the board exclusively with its votes; or when the majority of the board members of the controlled entity are members of the board or senior executives of the controlling entity or of another entity controlled by it. For these purposes, the regulation treats ownership of shares or voting rights as including interests held directly or indirectly by a spouse or persons related by consanguinity up to the fourth degree or by affinity up to the second degree.

The regulation also includes as related parties those that participate in a business collaboration contract or joint venture where any contracting party participates directly or indirectly in more than 25% of the contract’s result or profit, a resident person and their permanent establishments abroad, and a permanent establishment located in Costa Rica and its foreign parent company, another permanent establishment of the same company or a related person.

Methods and applicable criteria

Costa Rica’s Regulation to Income Tax Law, Article 70, recognises the standard transfer pricing methods: Comparable Uncontrolled Price (CUP), Resale Price, Cost Plus, Transactional Net Margin Method (TNMM) and Profit Split, and it also regulates a commodities method. The selection criterion is the “most appropriate method” that respects the arm’s length principle, considering facts and circumstances of the particular transaction.

For commodity transactions, Article 70 provides that for goods with an internationally quoted price the quoted price may be used as an alternative to the CUP method. Thus, Costa Rica accepts the CUP method, but allows the commodities method where quoted international prices are available and applicable.

Comparability and ranges (preference for comparables, adjustments, ranges)

Article 69 of the Regulation to Income Tax Law addresses comparability analysis and states that it is possible to apply the arm’s length principle until a single figure (price or comparable profit margin) is determined. When two or more comparable prices or margins are available, the interquartile range must be constituted using the identified comparable data. If the tested price or margin falls outside the interquartile range (between the first and third quartiles), it is considered not to reflect conditions of free competition and the median must be established as the arm’s length price. Article 69 also allows for reasonable adjustments to remove the material effects of differences between the tested transaction and the comparables.

There is no statutory preference for domestic comparables over foreign comparables. The tax administration does not use secret comparables for transfer pricing assessments.

Documentation and reporting (Master, Local, CbC, thresholds, language, deadlines, forms)

Costa Rica requires taxpayers to prepare a Master File, Local File and Country-by-Country (CbC) Report consistent with Annexes I, II and III to Chapter V of the OECD Transfer Pricing Guidelines, as set out in the Regulation to Income Tax Law and Article 73. There are no specific transfer pricing return forms annexed to the tax return; the obligation relates to documentation.

Timing and submission rules are as follows: Master File and Local File must be submitted within 10 business days after being requested by the tax administration in a control action, and all Master and Local File information must be provided in Spanish. The CbC Report must be filed within 12 months from the end of the relevant fiscal year. There is no restriction on the language for CbC filing. The rules are noted as consistent with BEPS Action 13 and the profile refers to Article 264 of the General Law of Public Administration with respect to procedures.

Costa Rica does not provide exemptions or materiality thresholds that relieve taxpayers from documentation obligations. There are no specific transfer pricing penalties; instead, general penalties contained in the tax code apply (Art 83 Tax Code).

Safe harbours / exemptions / materiality

Costa Rica does not have safe harbours or other listed simplification measures for transfer pricing. There is no simplified approach for low value-adding intra-group services.

APAs and MAP; procedures and timing if specified

The domestic law contemplates the possibility of Advance Pricing Agreements (APAs) and Mutual Agreement Procedures (MAP). Article 74 of the Regulation to Income Tax Law establishes the authority to enter into agreements, including cost contribution agreements and, by extension, APAs. The legal framework allows unilateral, bilateral and multilateral APAs; however, to date Costa Rica has not concluded APAs of those types. Rollback is not currently permitted, although amendments are being worked on to enable rollback in the future. Costa Rica allows MAPs, but it has not signed MAP outcomes to date. The country profile does not provide specific procedural timing or forms for APA or MAP processes.

Penalties and other considerations (secondary adjustments, re-characterisation, year-end adjustments, PEs)

Costa Rican law permits year-end adjustments under certain circumstances. Income Tax Law, Article 81 bis, governs aspects linked to adjustment and the arm’s length principle. The profile notes that year-end adjustments are applicable under certain conditions and states that Costa Rica does not allow such adjustments if they result in lower taxation in the country. The cited text reads: “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…”, which indicates that practical application requires careful compliance with statutory limits.

Secondary adjustments are permitted under domestic law pursuant to Article 81 bis, although no secondary adjustments have been made in practice so far. The tax authorities may re-characterise transactions if the facts and circumstances warrant it, consistent with general tax law principles.

Regarding profit attribution to permanent establishments, Costa Rica has not adopted the Authorised OECD Approach (AOA) for PE profit attribution and does not apply it in its treaties; the country is studying how to apply attribution of profits in treaties that do not contain the post-2010 version of Article 7 of the OECD Model Tax Convention. No practical cases of PE profit attribution have been reported.

Other relevant aspects: intangibles, intra-group services and financial transactions

Costa Rica does not have specific domestic guidance dedicated to the pricing of transactions involving intangibles; general transfer pricing rules and the OECD Guidelines are applied to such cases. There are no specific measures addressing hard-to-value intangibles (HTVI). ## Intra-group services are likewise governed by general transfer pricing provisions without a simplified low-value services regime.

On financial transactions, there is no transfer pricing-specific regulation, but Costa Rica implemented BEPS Action 4 measures via Income Tax Law, Article 9 bis, which limits interest deductibility to a maximum of 20% of EBITDA. This measure took effect in 2021 with a transitional rule allowing up to 30% deductibility in fiscal year 2021, 28% in 2022, and annual reductions of 2 percentage points until reaching 20% in 2026 and thereafter.

Cost contribution arrangements are permissible under the Regulation to Income Tax Law, Article 74.

Conclusion

Costa Rica’s transfer pricing framework is composed of specific domestic provisions in the Income Tax Law and the Regulation to Income Tax Law together with reliance on the OECD Transfer Pricing Guidelines for interpretative guidance. The rules provide a detailed definition of related parties with quantitative thresholds and prescriptive presumptions, list accepted transfer pricing methods while applying a “most appropriate method” criterion, require Master, Local and CbC documentation with specified deadlines and language rules, and establish a structured approach to comparability analysis including interquartile ranges and median adjustment. APAs and MAPs are legally available but have not been materially implemented to date; rollback is not currently allowed but legislative change is under consideration. There are no safe harbours or documentation exemptions by materiality threshold, and penalties are generally the standard tax code sanctions rather than transfer pricing-specific fines. For complex areas such as intangibles, intra-group services, and financial transactions, the domestic framework is limited and the OECD Guidelines serve as the primary interpretive resource.

References

For further information and the OECD country profile: https://www.oecd.org/en/topics/sub-issues/transfer-pricing/transfer-pricing-country-profiles.html

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