Costa Rica: COVID19: How Transfer Pricing is Affected

Written by:

Rafael Luna


The health emergency, now extended to the economic crisis, is putting strong pressure on local and international business groups, in many cases forcing them to make changes or even take drastic measures, to allow the maintenance or mere subsistence of the business. Many of these changes refer to imminent issues such as sensitive cash flow management, but others extend to medium- and long-term structural measures, which may even involve rethinking the company’s business model itself. Some of these changes may include, among many others

  • Reduction of working hours, suspension or even dismissal of staff
  • Line closure, reduction or cessation of production
  • Changes in the value chain, supply chain or product or service catalogue
  • Modification or termination of contracts for the sale or purchase of goods and services
  • Terms of any type of loan or financing scheme
  • Unilateral default or deferment of payments

When any of these changes occurs between related entities, they can have an impact on the functions assumed, the assets used and very especially, on the risks assumed by the company in relation to the group, that is to say, precisely all the factors that determine the characterization of the company, which implies a direct impact on the determination of the Transfer Prices, through the methods selected and the companies that are comparable, especially if it turns out that also many of them are now in a situation of decrease or losses.

However, as the OECD itself has recognized in the area of Transfer Pricing, “Business restructuring may be necessary to preserve profits or limit losses, e.g. in the event of productive overcapacity or economic downturn”.


In addition, it should be considered that according to the Transfer Pricing Guidelines from which our local regulation is derived, the economic environment must be taken into account in Transfer Pricing analyses, taking into account the temporary or permanent distortions that may be introduced in the dynamics of a company and that are not related to a claim of tax benefit, but merely to sustain the business.

Notwithstanding the above, when any of the above circumstances occur, it is necessary to take special measures regarding the adequate documentation of their justification and need, such as monitoring the evolution of the crisis and its impact on the economic situation of the company, news, reports, agreements and instructions to alleviate the situation, as well as all its correct documentation. In case you require assistance:

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