In the context of international tax enforcement and tax transparency, Transfer Pricing and Country-by-Country Reporting (CbCR) are key tools for tax authorities. In Costa Rica, its implementation follows the guidelines of the Organization for Economic Cooperation and Development (OECD), within the BEPS Action Plan framework.
What Is the Country-by-Country Report (CbCR)?
The CbCR (Country-by-Country Report) is an information statement that multinational groups must file, detailing the global distribution of:
- Revenue
- Profits
- Taxes paid
- Economic activities
Hence, the Tax Administration can assess Transfer Pricing risks, without directly determining tax adjustments.
Implementation in Costa Rica
In Costa Rica, the CbCR is regulated by the DGT (Dirección General de Tributación – General Directorate of Taxation), in accordance with the international standards promoted by the OECD.
Who Must File?
The following must file the report:
- Multinational groups with consolidated revenues of €750 million or more.
- The ultimate controlling entity resident in Costa Rica
- Or, in certain cases, designated local entities.
Filing Deadline
The report must be filed within 12 months after the end of the multinational group’s fiscal year.
Required Documentation
The CbCR filing must be within 12 months after the end of the multinational group’s fiscal year.
- Country-by-CountryReport
It includes aggregated information by jurisdiction on:
- Revenue (related and unrelated)
- Profits before tax
- Taxes paid and accrued
- Number of employees
- Tangible assets
- MasterFile
It contains group-wide information:
- Organizational structure
- Economic activities
- Transfer Pricing policies
- Intangibles and financing
- Local File
Focused on the entity in Costa Rica:
- Related party transactions
- Functional analysis
- Method selection
- Comparability study
Key Considerations
- The CbCR is a risk analysis tool, not a determining mechanism for taxes
- The information must be consistent with the Master and Local Files
- Automatic exchange of information among jurisdictions
Non-compliance Risks
Failure to comply adequately may result in:
- Financial penalties
- Higher likelihood of tax audits
- Challenges to Transfer Pricing Policy
Recommendations for Companies
- Verify whether the multinational group exceeds the revenue threshold
- Assess whether there is a local filing or reporting obligation
- Ensure consistency across the three levels of documentation
- Implement internal controls for information gathering
The Country-by-Country Report in Costa Rica is a key obligation under the BEPS framework, which requires multinational groups to provide a high level of transparency, traceability, and consistency in their tax information.
TPC Group is a specialized transfer pricing consultant that offers comprehensive advice by identifying risks, ensuring compliance with obligations, and structuring international transactions, thereby aligning with global standards and managing taxes effectively.
Source: OECD