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Market Value Principle - What is it?

The Market Value Principle is the value that a good or service has because of supply and demand within a region, i.e., what a buyer would normally pay for a product or service under normal market conditions (without discounts, seasons [such as Christmas or Valentine's Day that trigger toy or rose sales respectively] or hyperinflation).

Market value fluctuates depending on circumstances such as inflation, the economic situation, the abundant supply of a good or service, etc. It is also subjective since the decision on the purchase and sale price of a good or service is not usually the result of an examination of objective data.

In Costa Rica, the Market Value Principle is associated with the possibility offered by the Tax Administration of valuing a taxpayer's accounting and tax transactions according to the market price for each good or service. Below is an example of how to apply this principle:

TERUMA has a property of 3,000 m2 located in the EASTERN sector of the country (near the main shopping centers, supermarkets, and hospitals, an ideal location), which has been registered, for accounting purposes, with a value of $250,000 (cost per m2 $83.33) until 2021. TERUMA has no economic activity, and its only asset is this property.

For the beginning of the 2022 period, TERUMA's partners decide that it is necessary to declare the property's real value to fill the Income Tax Return for Inactive Companies. For years, the value was kept at $100,000 for accounting, but, given the increased value per m2 in the area, they know that the value has increased, so they hire an appraisal company for its corresponding calculation and adjustment.

The appraisal result shows that, according to the market value in the area, the value per m2 for similar properties is, on average, around $100. If we compare this value per m2 with the current one, we get a price difference of $50,000 (appraised price: $300,000; current price: $250,000).

Therefore, to fill the TERUMA Income Tax Return for Inactive Companies, it is necessary to adjust the property's value in the company's financial statements to show the economic reality based on the Market Value Principle.

Since "market value" is, as we explained in the first part of this article, a subjective concept relative to the local context and the application of certain tax, financial, and legal rules, it is necessary to have some certainty so that we are not defenseless. Since it would be excessive to make an official appraisal every time we buy something subject to the Transfer Tax, whether it be movable or immovable, we must file and back up every calculation, review, appraisal, analysis, and comparison of values to defend ourselves in case we are targeted for audits or other financial or tax reviews.


At DFV Asesores Empresariales, we are here to help you in every stage of tax compliance. Contact us at 4010-1076 or

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