Feb 9, 2026
From an OECD perspective, a CSA is not a services agreement and should not be treated as a routine cost recharge. It is a transfer pricing arrangement that must comply with the arm’s length principle, particularly the benefit test, which requires that each participant’s contribution be aligned with the benefits it reasonably expects to receive.
In Costa Rica, there is no specific CSA statute. However, CSAs are analyzed as related-party transactions and must comply with local transfer pricing rules, consistent with OECD guidance, and be defensible in the event of a tax audit.
What is a CSA in practical terms?
In practical terms, a CSA is an agreement under which multiple entities within the same group jointly invest in a project that none would typically undertake alone because the outcome will be used across the group. Rather than one entity bearing all costs and charging the others through service fees, each participant directly bears a share of the costs based on the expected benefits derived from the project.
The key distinction is straightforward: participants are not purchasing a service; they are co-investing in a shared initiative.
Practical example with simple numbers
Assume a multinational group with three operating companies:
One entity in the United States
One entity in Mexico
One entity in Costa Rica
The group decides to develop a regional digital platform to manage customer data, sales processes, and analytics. All three entities will use the platform in their day-to-day operations.
The total development cost for the year is USD 100,000.
Before executing the CSA, the group assesses expected usage and determines that a reasonable allocation key is the expected volume of transactions processed by each entity through the platform.
Based on that analysis, expected usage is estimated as follows:
United States: 50%
Mexico: 30%
Costa Rica: 20%
Under a properly structured CSA consistent with OECD guidance:
The U.S. entity bears USD 50,000
The Mexican entity bears USD 30,000
The Costa Rican entity bears USD 20,000
Each entity records its share of the cost without a profit markup, because there is no provider–customer relationship. Instead, the entities are co-participants in a joint development effort.
From a Costa Rican perspective, the local entity recognizes either an operating expense or an intangible asset subject to amortization of USD 20,000, provided it can demonstrate that:
The platform is actively used in its business.
The allocation key reasonably reflects expected benefits.
The project supports the generation of taxable income in Costa Rica.
If these conditions are met, the cost is generally deductible under the arm’s length standard.
What a CSA is not
One of the most common implementation errors is treating a CSA as an intragroup services arrangement, by adding a markup or charging profits. For example, if the U.S. entity were to invoice Costa Rica for USD 20,000 plus a margin, the arrangement would likely be recharacterized as a service rather than a CSA, increasing audit exposure.
Another frequent issue is including entities as CSA participants when they do not actually use or benefit from the outcome, solely to spread costs. This fails the benefit test and is typically an early focus area in transfer pricing audits.
How Costa Rican tax authorities typically assess CSAs
In a transfer pricing review, Costa Rican tax authorities generally focus on whether:
The Costa Rican entity derives a real and measurable benefit from the project.
The cost allocation methodology is reasonable, consistent, and economically supportable.
The allocated costs are connected to income-generating activities in Costa Rica.
The CSA agreement, accounting treatment, and transfer pricing documentation are aligned.
When these elements are consistent and well documented, CSAs are generally defensible under the OECD Transfer Pricing Guidelines, which Costa Rica uses as a technical reference.
A properly structured Cost Sharing Agreement can be an effective tool for multinational groups, but it is not a simple cost-splitting exercise. It requires upfront planning, a clear contractual framework, supportable allocation methodologies, and evidence of actual use and benefit.
In Costa Rica, the key question is not whether a CSA exists in form, but whether it operates at arm’s length in substance. When implemented proactively and consistently, a CSA can be efficient and defensible; when implemented casually, it often becomes an unnecessary tax and compliance risk.
References
OECD — OECD Transfer Pricing Guidelines, Chapter VIII (Cost Contribution Arrangements)
Costa Rica Ministry of Finance / General Tax Directorate — Transfer pricing guidance
OECD — Pillar Two: Global Minimum Tax – Side-by-Side Package (released January 5, 2026)