Costa Rica vs Nestlé, October 2013, Court of Appeal, Case No Nº 01365 – 2013 Case File 09-002823-1027-CA

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Nestlé de Costa Rica S.A. had been issued a tax assessment in which the taxable income for FY 2005 and 2006 was adjusted with an additional amount of ¢60,609,096.00 and ¢75,663,084.00.

According to the tax authorities, the sales made by Nestlé to its related companies located in Chile, Switzerland and Puerto Rico had a profit margin different from those made to third parties. The margin on the unrelated transactions was 88% whereas the margins on comparable related party transactions was only 7%.

The adjustments was determined based on internal CUPs.

Judgement of the Court

The Court dismissed the appeal of Nestlé.


“This Chamber agrees with the Tribunal, in the sense that the expert witness Luna Ramírez, during her testimony, does not manage to disprove the system applied by the Tax Administration, since she rejects the method used, however, she also states that it is difficult to resort to any other method. What is clear from this testimony is that in this process the plaintiff could not substantiate or justify the reason why it sold the same product at a lower price to its related companies.”

“According to the study made by the Tax Administration, which again was not contested by the plaintiff, the average profit on the standard cost of the products sold to independent companies was 87.87%, while with the related companies it was 7.17% for the tax periods at issue here. The difference is so large that it is not possible to explain reliably the reason for this disparity.”

Therefore, this Chamber endorses the Court’s position of upholding the criterion issued by the Tax Administration and collecting the differences due to the total non-payment of the tax.”


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Costa Rica vs Nestle October 2013org


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