Importance of Intangible Assets in Multinationals

Intangibles are the principal driver of value creation and a major source of sustainable competitive advantage for most multinationals; technological transformation and the digital revolution have accelerated this phenomenon, allowing intangibles to play a key role in profit generation. 

Conversely, their intangible nature has significant challenges regarding valuation and location, which can generate considerable tax risks. 

Challenges in Appraising Intangibles

Appraising an intangible asset is complex due to its unique nature and lack of direct comparables, which require specialized methods and detailed analysis. Inaccurate appraisal can lead to discrepancies with tax authorities and Transfer Pricing adjustments, affecting the company’s tax burden. 

Management of Intangible Assets and Related Risks

The location of an intangible asset within the corporate structure is a strategic decision with potentially significant tax implications. Since intangibles generate considerable income, tax authorities may question the allocation of this income and the related costs, particularly if they consider the structure was designed to benefit from tax havens. The allocation of intangibles must reflect the economic substance and DEMPE (Development, Enhancement, Maintenance, Protection, and Exploitation) functions within the corporate group to avoid Transfer Pricing adjustments and tax disputes. 

Evolution of the International Regulatory Environment

In recent years, international bodies, such as the OECD, have intensified their efforts against tax base erosion and profit shifting, which resulted in implementing measures, such as the BEPS Action Plan, which intends to ensure the taxation of profits where real economic activities take place and value is created. 

Recommendations for Multinational Enterprises

In order to mitigate the tax risks related to intangible assets, multinational companies should have: 

• Comprehensive documentation: Maintain detailed records supporting ownership, appraisal, and location of intangible assets. 

• Periodic reviews: Regularly evaluate Transfer Pricing policies and ensure alignment with current market practices and regulations. 

• Application of the DEMPE approach: Address the tax effects of intangibles by focusing on the Development, Enhancement, Maintenance, Protection, and Exploitation (DEMPE) functions. 

• Expert advice: Have international tax experts who can guide you on best practices and regulatory amendments. 

Conclusion

Intangible assets are critical to value creation and sustainable competitive advantage in multinationals. Conversely, their unique nature and the absence of direct comparables in the marketplace hinder their proper valuation. This complexity can lead to disputes with tax authorities and Transfer Pricing adjustments, affecting the company’s tax burden. Therefore, they should support their cost and expense allocations with solid documentation to substantiate the allocation criteria used. These measures will help ensure compliance with tax regulations and reduce risks associated with intangible asset management. 

In Costa Rica’s current tax environment, compliance with transfer pricing regulations is no longer a formality but has become a cornerstone of any company’s tax strategy. With increasingly rigorous enforcement by the tax authorities, understanding the rules of the game is vital to mitigating risks and avoiding unnecessary penalties.

The Current State of the Regime

The fundamental principle continues to be that of Arm’s Length. This implies that all transactions between related parties (whether local or foreign) must be valued as if they had been agreed between independent companies under similar market conditions.

However, the current landscape presents specific challenges, from the correct identification of related parties to the technical justification of profit margins, especially in sectors that still face economic volatility.

Answers to Frequently Asked Questions

For companies operating in Costa Rican territory, recurring questions arise that need to be clarified:

• Who is required to file a return? Large national taxpayers, companies under the Free Trade Zone regime, and those that carry out transactions with related parties (national or international) for an amount exceeding 1,000 base annual salaries must file this return.

  
  

• What is the filing deadline? Within six months after the end of the taxpayer’s authorized fiscal period.

  
  

• How and/or on what form is it filed? The return is filed only through the TRIBU-CR system’s Virtual Office, using the form and instructions defined in the annexes to the resolution. Any other means will be considered invalid.

  
  

• What are the penalties for non-compliance? Total or partial non-compliance in the filing may result in penalties in accordance with Article 83 of the Code of Tax Rules and Procedures.

The Value of Prevention

Beyond complying with an annual obligation, properly managing transfer pricing allows companies to optimize their operational structure and project an image of transparency and compliance to authorities and strategic partners.

The transfer pricing regime in Mexico is one of the pillars of the intragroup transaction control system. Mexican regulations, aligned with international standards promoted by the Organization for Economic Cooperation and Development (OECD) and particularly with the recommendations of the BEPS project, establish a set of documentation and reporting obligations that taxpayers who carry out transactions with related parties must comply with.

During the 2026 fiscal year, companies resident in Mexico or permanent establishments of foreign entities that enter into transactions with related parties must comply with various requirements related to the 2025 fiscal year. These obligations derive mainly from Articles 76, 76-A, 179, and 180 of the Income Tax Law (LISR), as well as from complementary provisions of the Federal Tax Code and the current Miscellaneous Tax Resolution.

Proper planning and compliance with these obligations is essential not only to avoid penalties, but also to mitigate risks arising from tax adjustments in audits by the tax authority.

Regulatory framework for transfer pricing in Mexico

The Mexican transfer pricing system is based on the arm’s length principle, according to which transactions between related parties must be agreed upon under conditions equivalent to those that would have been agreed upon by independent parties in comparable circumstances.

This principle is set forth in Articles 179 and 180 of the Income Tax Law (LISR), which establish that taxpayers must determine their cumulative income and authorized deductions considering prices, considerations, or profit margins comparable to those of the market.

In operational terms, compliance with this obligation involves the preparation of technical transfer pricing studies, as well as the filing of various information returns that allow the tax authority to assess the tax risk associated with intra-group transactions.

Mexico has also incorporated the three-level documentation approach, derived from Action 13 of the OECD’s BEPS project, which comprises: Local File | Master File | Country-by-Country Report

This system seeks to improve tax transparency and facilitate the international exchange of information between tax administrations.

Key transfer pricing obligations for the 2025 fiscal year

During 2026, taxpayers must comply with various obligations related to transactions carried out in fiscal year 2025. Among the most relevant are the following.

1. Transfer Pricing Study

Companies that enter into transactions with related parties must have supporting documentation demonstrating that such transactions are valued in accordance with the arm’s length principle.

This study must include, among other elements:

• functional analysis (functions, assets, and risks),

• description of intercompany transactions,

• economic analysis and selection of the transfer pricing method,

• identification of independent comparables.

Mexican law requires that such documentation be prepared no later than May 15 of the year following the corresponding fiscal year, even though it does not necessarily have to be automatically submitted to the authorities.

However, the Tax Administration Service may require it in the exercise of its verification powers.

2. Multiple Information Return – Annex 9 (transactions with related parties)

Additionally, taxpayers who enter into transactions with related parties must report such transactions using the Multiple Information Return (DIM), Annex 9.

This return includes information regarding:

• type of transaction (sales, purchases, services, financing, royalties, among others),

• amount of the transactions,

• tax jurisdiction of the related counterparty.

The filing deadline for fiscal year 2025 is May 15, 2026. This report allows the tax authority to identify risk patterns and select taxpayers for transfer pricing review.

3. Local File

The Local File is one of the components of the BEPS documentation scheme adopted by Mexico.

This report provides detailed information on the Mexican taxpayer and the transactions carried out with its related parties. Among the elements it must contain are:

• the taxpayer’s organizational structure,

• a detailed description of intercompany transactions,

• a functional analysis,

• financial information used in the comparability analysis,

• and an explanation of the methodology applied to determine market prices.

The obligation to file this return is provided for in Article 76-A of the Income Tax Law (LISR). The deadline for filing the Local File for the 2025 fiscal year is May 15, 2026.

In practical terms, this report is one of the most relevant instruments for the audit of intra-group transactions, as it provides granular information on the transfer pricing policy applied by the taxpayer.

4. Master File

The purpose of the Master File is to provide an overview of the multinational group to which the taxpayer belongs.

This report includes information on:

• the group’s organizational structure,

• a description of its main lines of business,

• global transfer pricing policies,

• the group’s intangibles,

• and intra-group financing activities.

Unlike the Local File, the Master File focuses on the global context of the business group and not only on the operations of the Mexican taxpayer. The deadline for filing the Master File for the 2025 fiscal year is December 31, 2026.

5. Country-by-Country Report

The Country-by-Country Report (CbCR) is a tool designed to provide tax authorities with an overview of the distribution of income, profits, and economic activities within a multinational group.

This report includes aggregated information by jurisdiction regarding:

• group income,

• pre-tax profits,

• taxes paid,

• number of employees,

• tangible assets.

The obligation to file this report applies mainly to multinational groups with consolidated revenues above the threshold established by Mexican law. The deadline for filing the Country-by-Country Report for the 2025 fiscal year is December 31, 2026.

Consequences of non-compliance

Failure to comply with transfer pricing obligations can lead to various tax and administrative consequences.

Among the main ones are:

• fines for failure to file or incorrect filing of information returns,

• adjustments to income, deductions, or tax losses resulting from audits,

• increased likelihood of electronic reviews,

• restrictions on entering into contracts with public sector entities.

Penalties for failing to file information returns can be significant, in addition to generating a higher level of scrutiny by the tax authority.

Finance Bill 2025-26 contains changes to the UK transfer pricing framework that most practitioners haven't fully absorbed yet. Several take effect from 1 January 2026.

The Diverted Profits Tax is gone. In its place: Unassessed Transfer Pricing Profits (UTPP) a new charge embedded directly into the corporation tax framework. Same intent, different mechanism, and a different dispute process.

UK-to-UK related-party transactions are now excluded from transfer pricing where there's no risk of UK tax loss. Long overdue a genuine compliance saving for domestic groups.

The big new burden: the International Controlled Transactions Schedule (ICTS), mandatory from January 2027. Every cross-border related-party transaction above £1 million must be disclosed in a standardised schedule filed with your tax return. HMRC has been explicit that this data feeds directly into its risk-scoring system.

HMRC recovered nearly £2 billion from TP and DPT activity in 2023-24. With better data, that number will climb.

Three things happened in US transfer pricing in 2025 and each one matters.

The IRS lost nearly 25% of its workforce. Enforcement is slower, but the case pipeline hasn't gone away. Facebook v. Commissioner (May 2025) confirmed the IRS's methodology on intangible CSA valuations these disputes will keep moving.

The US formally rejected BEPS 2.0. No Pillar One. No Pillar Two. That's now settled law domestically whatever the rest of the world does.

And from January 2025, the IRS introduced the Amount B Simplified and Streamlined Approach (Notice 2025-04) as an elective safe harbour for routine distribution arrangements. Less benchmarking, more certainty if the other jurisdiction accepts it.

The issue nobody is talking about enough: tariffs. New US tariffs at up to 200% change your cost base overnight. Three-year average TNMM benchmarks don't capture that. Many groups' existing pricing is technically out of arm's length and they don't know it yet.

National Bureau for Revenue (NBR) of Bahrain issued the Executive Regulations for the Domestic Minimum Top-up Tax (DMTT). These regulations complement Decree-Law No. 11 of 2024, issued in September, introducing an overall minimum tax of 15% for large multinational enterprises (MNEs) operating in Bahrain. 

Summary of Pillar 2 and DMTT

The Pillar 2 rules, developed by the OECD, set a global minimum tax to ensure that MNEs pay a minimum effective tax rate of 15% on profits in all countries. If an MNE has an effective rate lower than 15%, a top-up tax applies, which can be collected through: 

• Domestic Minimum Top-up Tax (DMTT): A 15% local tax on large MNEs within the jurisdiction implementing this measure.

• Income Inclusion Rule (IIR): The main collection mechanism under Pillar 2 rules, where the ultimate parent entity (SPU) accounts for the complementary tax in its own jurisdiction.

• Under-Taxed Profits Rule (UTPR): It backstops the IIR by allocating the right to collect the top-up tax to other entities in the group according to a proportion based on the number of employees and the value of tangible assets in their jurisdictions. 

Key Aspects of the DMTT Executive Regulations in Bahrain

• Revenue Test: MNEs are subject to the DMTT if their consolidated revenue exceeds €750 million in at least two of the previous four fiscal years. The regulations specify that these revenues must be determined according to the MNE’s consolidated financial statements, with certain adjustments, such as including unrealized gains from investments and extraordinary or non-recurring items. 

• Excluded Entities: The decree-law identifies entities excluded from the DMTT, such as government bodies, international organizations, and non-profit organizations, thus following the OECD recommendations. The regulations provide detailed definitions for these entities and the criteria to be met to be considered excluded. 

• Permanent Establishments: The regulations include a definition of permanent establishment and detail the calculation of the allocation of income and expenses, following OECD standards and principles. It ensures that branches of foreign entities in Bahrain are properly considered within the DMTT’s scope. 

• Qualified Domestic Minimum Top-up Tax (QDMTT) and Safe Harbor: If the DMTT implemented by Bahrain meets certain requirements, it is a QDMTT. It would enable the application of safe harbors for MNEs, reducing compliance burdens by deeming the top-up tax due in Bahrain to be zero for purposes of Pillar 2 rules. 

Relationship Between the DMTT and Transfer Pricing

Implementing the DMTT in Bahrain significantly implies MNEs’ Transfer Pricing policies. Companies must ensure that their related-entity transactions comply with international standards to avoid tax adjustments that may increase their tax burden to document Transfer Pricing methodologies properly and assess their effects on compliance with the DMTT. 

Implications for Multinational Enterprises in Bahrain

The introduction of the DMTT in Bahrain reflects a commitment to OECD initiatives to establish a global minimum tax and align the country with international tax trends. MNEs operating in Bahrain should assess the effects of these regulations on their tax burden and compliance obligations. Companies should review their tax structures and consider possible adjustments to ensure compliance with the new regulations and optimize their regional tax position.

Transfer Pricing, in addition to being more than a tax requirement, can be strategic to boost the success and sustainability of your business. Aligning these policies with your business goals will allow optimizing resources, improving financial management, and complying with international regulations. 

1. Definition of Strategic Goals

It determines how Transfer Pricing can contribute to your overall goals. For example, you might seek to optimize the tax burden, protect intangible assets, improve the competitiveness of a specific subsidiary, or ensure the efficient flow of resources among group entities. 

2. Understanding Value Chains

It analyzes how intercompany operations generate value within the group. It identifies which subsidiaries perform key functions, manage significant risks, or own essential assets. This analysis should be reflected in pricing policies to remunerate each entity appropriately and/or respect the Arm’s Length Principle. 

3. Design of Consistent Internal Policies

It develops clear and documented Transfer Pricing rules supporting your business model. These policies should be flexible to adapt to economic and regulatory changes. Conversely, they should always ensure that transactions comply with the Arm’s Length Principle. 

4. Regular Monitoring and Adjustments

It periodically reviews transfer prices to ensure aligning strategic objectives and current regulations. Economic changes, such as inflation, cost structure, or the emergence of new rules, may require adjustments. 

Aligning Transfer Pricing with business strategy reduces tax risks, strengthens your company’s competitive position, promotes better financial decision-making, and optimizes resource allocation within the group. 

The United Kingdom has decided to implement measures similar to those implemented by the European Union and Australia on public Country-by-Country reporting. It is a commitment to increase tax transparency and combat tax avoidance. Hence, we will address this regulation, its implications, and the preparation of companies.

Country-by-Country Reporting Implications

The Country-by-Country Report (CbCR) requires multinational companies to publish data on their transactions and tax contributions in each jurisdiction where they operate. This approach aims to:

• Increase tax transparency.

• Identify potential risks of tax base erosion.

• Promote responsible tax practices.

Concerning the UK, this measure follows the guidelines previously adopted by the EU and Australia, establishing more strict disclosure standards for large corporations.

Main Regulatory Requirements

The UK legislation establishes that companies must:

1. Report revenues, pre-tax profits, and taxes paid by the country.

2. Disclose the number of employees and tangible assets by jurisdiction.

3. Ensure that this information is publicly available.

It is a significant change in how companies handle their transparency obligations, requiring them to adjust their reporting systems and internal policies.

Effects on Companies

Multinational companies operating in the UK must be prepared to comply with these new requirements. Key challenges include:

• Need to ensure consistency and accuracy in published information.

• The implementation of internal processes to facilitate data gathering and analysis.

• The management of reputational risks related to public disclosure.

In addition, authorities should intensify audits to ensure regulatory compliance.

Preparation for These Amendments

In order to comply with the new provisions, it is essential:

• To have a specialized tax compliance team.

• To implement solid data management systems to report accurately.

• To keep up to date on the specific guidelines of the regulations.

Companies in advance of these amendments will be better positioned to avoid penalties and protect their reputation.

Background

The Singaporean authorities have updated their Transfer Pricing guidelines, requiring domestic-related party loans to comply with the Arm’s Length Principle in their interest rates. It reinforces the need for multinational companies to review their Transfer Pricing practices to ensure compliance with the new regulations.

New Guideline Requirements of Singapore

The recent update to the Transfer Pricing guidelines in Singapore states that related company loans in Singapore must have market-value interest rates. It implies that loans cannot have preferential rates, given that they must reflect terms similar to those available among unrelated parties.

The Arm’s Length Principle in Related Party Loans

Due to this new regulation, the authorities intend to ensure that related party loans comply with the Arm’s Length Principle, thus avoiding manipulating rates to reduce the tax burden. Companies must support the interest rates applied in these transactions against tax adjustments and possible penalties.

Effects on Multinational Companies and Their Financial Strategies

These amendments to the Transfer Pricing guidelines force companies to structure their internal loans thoroughly. Multinationals with transactions in Singapore must ensure that their domestic related-party loans comply with the new regulations, which may entail changes to their financial strategies.

The Significance of Transfer Pricing Documentation and Compliance

In order to comply with the new guidelines, companies must maintain solid documentation supporting the interest rates charged on their related party loans. Otherwise, tax adjustments and penalties can negatively affect a company’s profitability.

Conclusion

The review of Transfer Pricing guidelines in Singapore underscores the importance of transparency and compliance in related party transactions. Companies should take proactive measures to adapt to these new requirements and avoid potential tax risks.

Sustainability and Environmental, Social, and Governance (ESG) criteria have evolved from a trend to an indispensable requirement for global companies. In this context, the new international regulations, such as International Reporting Financing Standards (IFRS S1 and S2), along with regulatory incentives such as the EU Omnibus Package, are shaping a regulatory framework directly affecting Latin American companies. This region has a single opportunity to excel in corporate sustainable management but must face considerable challenges requiring immediate strategic action. 

Impact on Sustainability: Rhetoric vs Reality

• Least Strict Federal Policies: Donald Trump dismantled key environmental regulations, such as the retirement of the Paris Agreement in 2017. In 2025, he signed an executive order reaffirming his pro-fossil fuel policies. Conversely, despite these regressive federal policies, the U.S. private sector is still committed to sustainability. According to a Bloomberg study, over 75% of CFOs in the U.S.A. plan to maintain or increase their investments in sustainability, regardless of political situation. 

• Increasing ESG’s Investment: Although federal policies have loosened, the U.S. private sector maintains its solid commitment to sustainability.  Indeed, 77% of CFOs plan to increase their investments in this scope in 2025, according to a specialized survey performed this year by a recognized professional services company. This information reaffirms that sustainability is still crucial for corporate leaders, investors, and consumers. 

UE Omnibus Package: Streamlining and Competitiveness

The UE Omnibus Package aims to streamline the regulatory burden but requires transparency in disclosing non-financial information. Specifically, the Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD) will directly affect Latin American companies operating or intending to enter the European market. In Peru, approximately 16% of exports are for Europe, which implies a lot of Peruvian companies aligning with these new regulations. 

In this regard, Peruvian exporters, particularly mining and agro-industrial, will have to fit these standards due to the increased transparency required by Europe in sustainability and supply chain reporting. 

IFRS S1 and S2: Global ESG Disclosure Standard

The IFRS S1 and S2 of the International Sustainability Standards Board (ISSB) provide a standardized framework for disclosing sustainability and climate reporting. These rules align with approaches such as the Task Force on Climate-related Financial Disclosure (TCFD) and the Sustainability Accounting Standards Board (SASB), making them the most relevant standards for companies aiming to attract sustainable investments.  

According to the IFRS Foundation report, over 30 jurisdictions have adopted or are in the process of adopting these standards in their regulatory frameworks. These regions account for approximately 57% of the Gross Domestic Product (GDP) worldwide and over 50% of global greenhouse gas emissions. 

This environment displays global markets are swiftly progressing in implementing these standards, and companies not aligned with the latter will risk being left behind in an increasingly competitive and regulated environment. (IFRS Sustainability Consultant Content Programme, 2024) 

Latin American Sustainability Regulations: Chile, Mexico, Brazil, and Colombia

These countries, such as Brazil, Costa Rica, El Salvador, Chile, and Mexico, have adopted regulations aligning their non-financial reporting with the IFRS S1 and S2 Rules for listed companies. 

For other type of businesses, Mexico has adopted the NIS (Normas de Información de Sostenibilidad – Sustainability Reporting Standards) recently due to the CINIF (Consejo Mexicano de Normas de Información Financiera – Mexican Financing Reporting Standards Board), which requires private companies, either SMEs or large, operating in Mexico to disclose their financial statements, including 30 Basic Sustainability Indicators (BSI) in their notes. 

Colombia has required listed companies since 2021 to report under the SASB and TCFD standards. This March, voluntary sustainability reporting has been proposed for companies with a turnover above US$10 million (External Circular 100-000002). 

What Should Regional Companies Do as a Strategy?

• Adopt international standards: As regulations in the main global markets align with IFRS S1 and S2, Latin American companies must adopt them to ensure competitiveness. Adapting to these standards is a regulatory obligation and an opportunity to improve transparency, trust, and market perception. 

• Integrate sustainability into the core strategy: Reporting isolated sustainability data is no longer enough. Sustainability must be strategic for innovation, enhance corporate reputation, and increase financial resilience. Companies must incorporate these principles into their organizational culture and long-term goals. 

• Train teams and strengthen governance: In order to comply with sustainability standards and ensure accurate disclosure, companies must have specialized teams, solid measurement systems, and explicit commitment from senior management. In addition, they must ensure that ESG reporting is an integral part of their annual financial reporting. 

• Leverage sustainable financing: The issuance of green and social bonds has reached record levels, and companies can access finance at more competitive rates for projects primarily promoting climate change mitigation, as well as the growing interest in climate adaptation and nature. According to a report by Moodys, global issuance of sustainable bonds should amount to US$1 billion by 2025, similar to 2024, opening up new financing opportunities for Latin American companies. (2025 Sustainable Finance Outlook) 

• Promote forward-looking competitiveness: In an increasingly globalized business environment, regulatory requirements must be anticipated. Companies adopting ESG standards today can access cheaper capital, attract quality talent, and differentiate themselves from less sustainable competitors. 

Conclusion: A Path Full of Opportunities

Latin American companies have a unique opportunity to lead in sustainability globally. Regulatory progress and new international standards, such as IFRS S1 and S2, are creating a transparent and more demanding framework for companies in the region to further this agenda. Adopting these standards ensures competitiveness and access to international markets and represents a strong business strategy for the future. Companies must act now, leading sustainability to be the best positioned eventually.