Transfer Prices in Costa Rica, regulations and formal obligations demanded by the DGT
Legal Basis; Executive Decree Nº 37898-H on 5 June 2013, published by the Direccion General de Tributacion (DGT) (General Direction of Taxation)
Compulsory Taxpayers: The Costa Rican taxpayers will have to present to the DGT the informative statement and the study of transfer prices annually, those who are under the following situations:
1. The ones who perform national or cross-border operations with connected companies, and
2. The ones who are classified as big taxpayers or large territorial companies, or people or entities that are under the free trade zone regime
Date of Presentation: This informative statement will be mandatory presentation, being the deadline the last working day of June of every year, beginning in 2017 with the presentation of the data of the fiscal years 2015 and 2016. At the same time, the presentation will be carried out by electronic means. In this sense, the Tax Direction will inform through the WEB page of the Ministry of Farm and on a written media with nationwide diffusion in advance, not less than 3 months before the presentation of the first statement in June 2017, the necessary technological means to perform the electronic broadcast of the data.
In the case of the study of transfer prices, there is not a date to present the documentation but it must be available in case of an audit from the Authority or as requested.
Technical Study of Transfer Prices:
All the taxpayers who perform operations with connected companies, will have to keep for the period of time foreseen in the article 109 of the Regulation Code and Taxation Procedures, the documentation that backups the way in which their transfer prices adjust to the prices of independent operators, as well as the documentation that permits to know and understand how the economic group is structured. Through the directive 16-2017 which was published on Friday, April 21 2017, it was added the information that this documentation must contain. Some of these relevant aspects are:
. A diagram that illustrates the organizational structure and patrimony participation of the ones that compose the economic group, as well as their geographical location. . Microeconomic facts that contribute with the business development the most. . A list with a brief description of the most important contract services. . A functional analysis in which it is described the main contributions to the value creation given individually by the entities of the group, specifying the functions performed, the risks assumed and the assets used. . A general description of the strategy followed by the economic group for the development, property and use of the intangible assets. . A general description of the transfer Price policies, related to the financial contracts among the companies of the economic group.
Local Enterprise information:
• A description of the local entity administrative structure, an organization chart of the local entity, point out who the local managers report and mention the countries where the reported people are.
• A detail of the business strategy.
• A list of the most important competitors.
• The amount of the transaction for the type of operation and country.
• A comparability analysis.
• Point out the selected method of transfer prices.
• A summary of the assumptions performed when applying the methodology of transfer prices.
• Explanation of the multiannual analysis results.
. Natural people, legal entities and others resident in Costa Rica and abroad that take part directly or indirectly in the taxpayer’s direction, control or capital, or when the same people take part directly or indirectly in both taxpayers’ direction, control or capital, or for any other objective reason, can have a systematic influence over their price decisions.
. Presumed connection with the residence in no-cooperative jurisdictions that do not exchange information.
. 25% of social capital or voting stock.
. 2 or more control or have 25% of both entities.
. Principle of the same decision unit between companies and two with a third party.
. 25% of the results or profits of a contract.
. Agents and distributors abroad.
. Permanent establishments abroad.
INFRACTIONS AND PENALTIES:
The unfulfillment of presenting the informative statement opportunely and correctly, will be penalized in accordance with the article 83 of the Code of Regulations and Taxation Procedures. The penalty to those who unfulfill with the information supply to the DGT IS 2% of the gross income in the period of the income tax prior to the one when the infraction occurred, with a minimal of ten basic salaries, c/ 4’000,000 (four million colones) approximately and a maximum of one hundred basic salaries c/40’000,000 (forty million colones) approximately.
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