Taxes – Prueba

6 New Reasons to be a Resident in Costa Rica

Dec 25, 2022 | Financial Law, Inmigration Law, Taxes

Costa Rica is a small Central American country known for its beautiful beaches, biodiversity, and friendly locals. It is also a popular destination for tourists and expats alike, thanks to its low cost of living and high quality of life. With the approval of Law 9996, new incentives were created, which grant exceptional Costa Rica advantages never seen before. This article gives you an idea of how to get a Costa Rica residency and provides “6 new reasons to be a resident in Costa Rica“.

As general aspects first, the cost of living is much lower compared to many other countries, especially in terms of housing, food, and transportation. This means that you’ll be able to stretch your budget further and enjoy a more affordable lifestyle. Second, it has a strong healthcare system with private and public options. The country also has one of the highest living standards, clean water, reliable electricity, and a robust infrastructure. Third, it is known for its beautiful natural landscapes and eco-tourism opportunities. There is always something new to explore and appreciate, from the stunning beaches to the lush rainforests. Finally, becoming a resident allows you to immerse yourself in the culture and way of life fully. The locals are friendly and welcoming, and many ex-pat communities can help you transition.

Two new laws were recently approved to promote incentives to obtain your residency in Costa Rica, modify the pre-existing immigration law, and get a Costa Rica residency under particular conditions. Because of the interest of many people to come to live in Costa Rica, 6 new tax incentives and reduction of requirements were created for 3 categories of residents and thus promote foreign investment.

It is good to clarify that apart from this new Law and the advantages that we will comment on, a new law called the Law to Attract Remote Workers and Providers of International Services was also enacted, which promotes the entry of digital nomads into Costa Rica, that is, people who work remotely for companies that are located outside the country.

The tax advantages of Law 9996, which was created to ease the requirements to become Costa Rica, was recently approved by the Legislative Assembly and signed by the President of the Republic on July 14, 2021, giving a series of tax advantages for 10 years for those who want to be residents. In this beautiful country. This new Law, called the Law for the Attraction of Investors, Rentiers, and Pensioners, implements changes in 3 immigration categories: 1) Investor Resident, 2) Resident Rentier or Rentista 3) Resident Retired or Pensionado.

The advantages of new law 9996 are:

For the Resident Investor category, the investment in the country is reduced to US $150,000 US dollars
Exoneration of all import taxes one time on household items.
Exemption of all import taxes for a single time of two vehicles, land, sea, or air. The residents in these categories can import vehicles of any brand, yachts, boats, helicopters, airplanes, or any other means of transport, totally exempt from taxes.
Exemption from income tax on revenues in any of these migratory categories.
Exoneration of 20% of the property transfer tax you acquire while the Law is in force and under any of the above immigration categories.
Exemption from import taxes for instruments or materials for professional or scientific practice carried out by the person with the migratory category of investor, retired resident, or rentier resident.

On the other hand, it is good to clarify that these new benefits also extend to people who are dependents of the person applying for residency. Another important aspect is that the person who is residents a and wants to upgrade to an investor, rentier, or pensioner can do so without any problem and apply for the benefits of this Law.

To apply for the benefits of this new Law or get this special status for foreigners, you must apply within the first 5 years of the Law. The benefits of this unique opportunity will be up to 10 years from the moment the tax benefits are granted.

If you want to know the Law in detail, click on this link so that you can read it comprehensively.

Residency Requirements.

For any category, the Costa Rica residency requirements are:

Passport-size photograph.
Birth Certificate.
Criminal History or Lack thereof.
Fingerprints obtained at the police department in Costa Rica.
Register with the Embassy or Consular department of your country in Costa Rica.
Photocopy of your passport that shows the last entry.
Payment of government fees.
If you and your couple are applying for residency, you must provide the marriage certificate and proof of income.
If you are applying for the Costa Rica residency by investment, you must provide proof of your investment of USD$150,000.
If you are applying as a Rentista or Rentier on a fixed income, you will need to prove your monthly revenue of USD$2,500 per month or make a deposit of USD$60,000 in a Costa Rican Bank that will cover two years of revenue. This new category of rentista has recently been improved by the new Law 9996.
If you are applying as a retired or pensionado resident, you must prove an income of USD$1,000 per month.
To apply for any Costa Rican residency, all the documents shall be apostilled or duly authenticated by your country’s consulate.

All applications should take place once the foreigner becomes legal in the country; in other words, that visa has not expired.

Temporary Residency and Permanent Residency

Several types of residency status for foreigners are available in Costa Rica, including temporary and permanent residency. Temporary residency allows individuals to live in the country for a specific period, while permanent residence will enable individuals to live in Costa Rica indefinitely.

Visa Requisites

Nationals from the United States, UK, or Canada citizens, among many others countries, do not require an entry visa to Costa Rica. However, you must have a valid passport and a return ticket to exit Costa Rica within 90 days. The passport must be valid for one day before you enter Costa Rica.
To verify all entry requirements according to your nationality, please click on this link.
If your nationality is not enlisted and you cannot enter without a visa, you will need to hire immigration lawyers to help you.
In some cases, the visa must be applied before the Costa Rican consulate of the country where you live.

The Pura Vida Life

Are you considering a move to a tropical paradise? Look no further than Costa Rica, a small country in Central America known for its lush forests, stunning beaches, and laid-back way of life. Here, you’ll find a culture centered around the phrase “Pura Vida,” which means “pure life” in Spanish and expresses appreciation for the simple things in life.

But the Pura Vida lifestyle isn’t just about the great outdoors. Locals or Ticos are known for their laid-back attitude and appreciation for the simple things in life. Here, you’ll find a strong sense of community and a focus on family and friends. This country is also safe and stable, with a strong democracy and a low crime rate.

Becoming a resident is an excellent opportunity to enjoy a high quality of life at an affordable price; you’ll find a range of options for housing, from apartments in the city to sprawling mansions on the beach. As was said before, the cost of living is relatively low compared to other countries in the region, and the country’s healthcare system is top-notch. Living in paradise means embracing the Pura Vida way of life. It’s about enjoying the simple things in life, spending time with loved ones, and immersing yourself in the beauty of nature. Costa Rica is the perfect place to call home with its stunning natural beauty, warm climate, and laid-back culture.

If you’re considering moving, don’t hesitate to contact AG LEGAL, as reputable immigration lawyers compound many other specialties.

At AG LEGAL, we are more than eager for you to ask us for any details you want.

Re-registration of dissolved companies

Aug 1, 2022 | Commercial Law, Taxes

On Tuesday, May 31^st, 2022, through the Official newspaper, The Gazette Number 100, the Re-registration of Dissolved Companies Law was published. This recently approved bill aims to promote national economic reactivation because dissolved companies will be able to resume the lucrative activities for which they were created.

The present Law establishes that dissolved companies can re-register before the Legal Entities Registry of the National Registry to recover their legal status. Three circumstances can occur for the re-registration: 1) if the company was dissolved for not paying the Corporate Tax, 2) for the expiration of the company’s legal term (according to the Law of Corporate Tax), or 3) for the expiration of the company’s legal term as stipulated in the public deed of incorporation of the company, according to article 201 of the Costa Rican Commerce Code.

For the re-registration to proceed, Law Number 10255 indicates that a request must be made to the National Registry within a term not exceeding three years after the declaration of the company’s dissolution. The legal representatives must make this request of the dissolved company if payment of all the pending amounts is paid, the principal sum of the tax obligation, fines, sanctions, and related interest.

Another important aspect of this Law is the provisions of article 6, which adds article 7 bis to the Law of Corporate Tax. This reform establishes that if re-registration proceeds due to the payment of debts previously paid by the legal representative of the company, and it is dully re-registered in the Legal Entities Registry, the company must also comply with the Law to Improve the Fight against Tax Fraud (Law Number 9416), about submitting the Declaration of Shareholders Registry and Ultimate Beneficiaries within a legal period not exceeding two months.

Finally, according to the Transitional Provisions of this Law, it is established that the Executive Power must issue a regulation that includes the re-registration request within the next three months of the start of the full force of this Law. Also, if the companies were declared dissolved five years before the full power of this law, the legal representatives can request the re-registration if they comply with this law’s requirements. This regulation has not yet been published; therefore, this Law does not have the possibility of being applied until the respective code is issued.

This Law must not be confused with another law published in 2017, where the re-registration of dissolved companies by debts was allowed but having paid the Corporate Tax no later than December 15^th, 2017, once this date ended, the possibility of re-registration given by that law was no longer available. This new law, Law Number 10255, does not count with a specific term to comply with the payment, which means that almost all dissolved companies can be re-registered before the Legal Entities Registry.

Inactive Companies Income Statement

Jan 16, 2022 | Commercial Law, Taxes

On the 20th of December 2021, the Ministry of Finance issued a statement indicating that as of the 1st of January 2022, a simplified form will be available for the declaration of the Income Tax of Inactive companies.

This procedure will be carried out virtually through the Virtual Tax Administration (ATV) platform, which can be found on the official Ministry of Finance website. The document available to make this declaration is Form D-101 (Simplified Income Tax Declaration), in which information for the fiscal periods of years 2020 and 2021 will be declared.

The legal ground for this operation is indicated by the Law for the Strengthening of Public Finances (Law No. 9635) in article 2 subsection a). This regulation obliges all legal entities to comply with the Income Tax declaration, regardless of whether they carry out lucrative activities or not.

As stated above, inactive companies will be considered as taxpayers and will be assigned the code 960113, which is intended to identify companies that do not carry out income-generating activities in Costa Rica. These non-profit companies, which will now be considered as taxpayers, must comply by presenting the Form D-101.

Inactive companies are understood as those legal entities that do not carry out generating economic activities at a national level, in other words, companies that do not produce profits or generate income. Companies that only have the purpose of owning some asset, being a vehicle, a house, shares, or other types of assets.

Before making this declaration, interested legal entities may consult the tax situation of their companies to make sure they remain in order. This consultation can be done on the Ministry of Finance official website, in the Tax Situation Consultation section.

It is worth noting the term provided by tax authorities to present this declaration. According to the statement provided by the Revenue Office, inactive companies have a two-month and fifteen-day period to comply with this obligation, which will begin to be computed from 1st of January, 2022 and expires on the 15th of March of this year (2022).

At last, it is important to take into account that to carry out this operation, the information regarding the legal representatives and the registered offices of the inactive companies must be up to date. This means that the information can be verified by the Tax Administration and must be real, thus proceeding with the filing of the Simplified Income Tax Return for the aforementioned fiscal periods of the years 2021 and 2021.

An important aspect to consider is whether the company has active assets or non-registered assets or if these are only found in its accounting books. At this time, it is highly important to be updating the value of the company’s assets. While it is true that a person can make a statement with basic accounting knowledge, it is preferable always to be assisted by a professional.

This type of declaration should not be confused with other tax obligations such as the payment of the tax on legal entities, the declaration of real estate or the solidarity tax for the strengthening of housing programs (ISO) and the municipal taxes; For example, a person who has a house registered in an inactive company would be responsible for paying the following taxes: a) land taxes. b) municipal taxes. c) taxes of legal entities and d) in case its value is included within established law terms, it would also have to pay the solidarity tax for the strengthening of housing programs (ISO).

In case of having an inactive company whether having registered assets or not, do not hesitate to contact us. Our commercial partner AG BPO SERVICES can help you make the declaration.

Law for the Attraction of Investors, Rentiers, and Retirees

Aug 8, 2021 | Inmigration Law, Taxes

ARTICLE 1- Object of the law

The purpose of this law is to create the regulatory framework to encourage the attraction of investors, rentiers, and retirees, thus protected by Law 8764, General Law of Migration and Foreigners, of August 19, 2009, to contribute to the Costa Rican economic reactivation in a post-Covid-19 pandemic period.

ARTICLE 2- Scope

This law will apply to all those people who are authorized to enter our country under the immigration categories of investors, retired residents, or rentier residents.

ARTICLE 3- Declaration of public interest

This law is of public interest for the development of the attraction of investors, rentiers, and retierres to the national territory. For its fulfillment, the institutions of the Public Administration may include economic contributions to support the fulfillment of its purposes through the ordinary and extraordinary budgets of the Republic.

ARTICLE 4- Rectory

The governing body of what is protected in this law in the matter of migration will be the General Directorate of Migration and Foreigners, a body attached to the Ministry of the Interior and Police. Concerning tax matters will be the Ministry of Finance.

ARTICLE 5- Incentives

The people covered by this law will enjoy the following incentives:

a) Duty-free and all import taxes present only once, for the importation of household items. In the applications, they will be able to protect their dependents for immigration purposes. Household goods shall be understood as all new or used items of a reasonable nature and quantity and proportionally sufficient for the needs of the beneficiary of this law and the members of their immediate family nucleus, including, among others, home furnishings and electrical appliances. , home decor items, kitchen and bathroom utensils, bedding.

Suppose the beneficiary person transfers these assets within the validity period of the benefits granted by the provisions of the second paragraph of Article 12 of this law. In that case, they must pay the taxes from which they were exempted.

In highly qualified situations, where there is destruction or loss due to theft of household items, the beneficiary may acquire other assets for their replacement, also exempt from taxes. The regulation will develop the accreditation mechanisms of the circumstances in which these qualified exceptions proceed.

b) Beneficiaries may import up to two land, air, and/or sea transportation vehicles for personal or family use, free of all import, tariff, and value-added taxes. In case of loss of the vehicle due to theft, destruction by fire, flood, collision, or accident occurring during the term of validity of the benefits granted following the provisions of the second paragraph of article 12 of this law, the owner may import another vehicle free of the indicated taxes.

The beneficiary of this law, who has imported a vehicle under the conditions indicated in the previous paragraph, may sell or transfer it to third parties, in which case the provisions of article 10 of Law 7088, Tax Adjustment and Resolution, will be applied. 18th CA Tariff and Customs Council, of November 30, 1987.

c) The amounts declared as income to qualify for the benefits of this law will be exempt from income tax.

However, the income obtained in the national territory, resulting from the investments made in the country, will be taxed by income tax, according to what is provided in Law 7092, Income Tax Law, of April 21 1988.

d) Twenty percent (20%) of the total transfer tax will be exonerated on real estate that they acquire within the term of this law, provided that the beneficiary is the registered owner of the asset.

If the beneficiary person transfers these assets within the term of this law, they must pay the taxes from which they were exempted.

e) Exemption from import taxes for instruments or materials for professional or scientific practice, carried out by the person with the migratory category of investor, retired resident, or rentier resident. The person must demonstrate to the Ministry of Finance that what is imported corresponds to his economic activity and has criteria of proportionality and reasonableness.

ARTICLE 6- Tax residence

Foreign persons classified as investors, retired residents, or rentier residents, according to this law and who invest in Costa Rica, will not be automatically considered tax residents under Law 7092, Income Tax Law, of April 21, 1988, and its regulations, being subject to due diligence processes for the exchange of information with other jurisdictions under an international agreement, following article 106 quarter of the Code of Tax Standards and Procedures. The status of tax resident will be obtained only when the requirements of the final paragraph of Article 2 of Article 7092, Income Tax Law, of April 21, 1988, and Article 5 of the Income Tax Regulations are met.

ARTICLE 7- On the resignation or cancellation of the condition of investor, rentier resident, or retired resident

If the beneficiary person renounces his condition of “investor,” “pensioner resident,” or “rentier resident,” or if the General Directorate of Migration and Foreigners cancels his immigration status for having incurred In any of the cases contemplated in article 129 of Law 8764, General Law of Migration and Foreigners, of August 19, 2009, within the term of this law, you must pay the taxes from which it was exempted.

ARTICLE 8 Investors

For the category of investors, for the term established by this law, a new investment range is established, with a capital of not less than one hundred and fifty thousand US dollars (US $ 150,000.00), according to the official sale exchange rate. determined by the Central Bank of Costa Rica, whether in real estate, registrable assets, shares, securities, and productive projects or projects of national interest. In those cases where special laws regulate the investment, it will be analyzed individually.

In addition, beneficiary investors for this law may be considered those who invest in venture capital funds or sustainable tourism infrastructure projects.

ARTICLE 9- Processing

The Ministry of the Interior and Police, through the General Directorate of Migration and Immigration, in attention to the criteria for simplifying procedures, will have a specialized service window for the categories provided in the second article of this law, regulated in Law 8220, Protection of Citizens from Excess Requirements and Administrative Procedures, of March 4, 2002.

In addition to the requests dealt with directly at the window in question, the Ministry of Appointment may open a window under the same conditions of service at its different locations or dependencies.

ARTICLE 10- Falsification of documents

Whoever alters or falsifies documents to obtain any of the benefits provided in this law will be sanctioned with a fine equivalent to ten percent (10%) of the taxes that were exonerated. Additionally, you must proceed with the immediate payment of the full amount of the taxes that were exonerated. The foregoing is without prejudice to other administrative and criminal penalties that may apply.

The respective sanctioning procedure will be carried out by the General Directorate of Migration and Immigration, by the provisions of article 189 of Law 8764, General Law of Immigration and Immigration, of August 19, 2009. For its part, according to the provisions of this law, the Ministry of Finance will supervise and sanction following the corresponding legal framework.

ARTICLE 11- Regulations

The Executive Power will regulate this law within the sixty days following the date of its entry into force.

ARTICLE 12- Validity of the law

Investors, rentiers, or pensioners who opt for the benefits granted in Article 5 of this law may do so only during the first five years from its entry into force.

Investors, rentiers, or beneficiary pensioners who opted for said benefits during the first five years of the law’s validity will keep them for ten years from the date they were granted.

Governs from its publication.

Tax Crime in Costa Rica

Jan 26, 2021 | Criminal Law, Taxes

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The current COVID 19 situation has left us with a lot of unprecedented changes and has forced us to adapt to a series of unimagined personal and social changes. At this juncture, the fulfillment of obligations had a series of variations and innovations that are hard and necessary to adapt. The above, because we could be exposed or incur in an administrative or criminal sanction from the fiscal point of view. Under this perspective, it is important to define in which scenario we would be facing a tax crime.

As a first instance, we cannot forget that the tax legislation has the following objectives: a) create taxes, b) modify taxes, c) extinguish taxes, d) exonerate taxes, e) control the tax compliance and f) the tax collection. Additionally the Tax Authority has the faculty to inspect such compliance in a way that it can satisfy the needs of the State and its institutions. In our opinion, this type of legislation does not have as its main objective to apply a sanction to t taxpayer. Consequently, the tax legislation does not pursue in itself pecuniary or punishments that restricts freedom against the taxpayer. However, there is no doubt that Tax Administration has to proceed with further efforts, in order to be effective in the tax collection and that is why, the State is allowed to apply tax sanctions to the taxpayers that fails to comply with such requirement. A Reliable proof of the abovementioned situation is that the main purpose of the State is not the sanction itself, instead, it is constituted by the legal excuse, indicated in article 92 of the Code of Tax, which states as follows: “It would be deemed as a legal excuse, the fact that the taxpayer complies with the tax obligation, without the requirement from the Tax Authority” In order words, this means that the taxpayer can repair the damage without being criminally prosecuted as long as it proceeds with the economic repair without having been warned by the Tax Administration.

In our legal system, tax crimes are regulated in the Code of Tax, Regulations and Procedures, specifically in Title III “Tax Illicit Acts”. Following Article 65.- Unlawful tax acts are classified into (i) administrative infractions and (ii) tax crimes. The Tax Authority will be the main entity to enforce the sanctions for administrative infractions. They will consist of economic fines and business closures. On the other hand, the Prosecutor Office and the Criminal Courthouse will be responsible of dealing with tax crimes through the entities designated for such purpose. The sanctions that apply in case they are responsible for tax crimes are: a punishment which restricts freedom and additionally with the payment of the pending economic sum not received by the Tax Administration.

In the case of administrative offenses, we can indicate, for example, article 78.- Omission of the declaration of registration, modification, or deregistration; Article 79.- Omission of the tax returns filing, Article 80.- Late payment of the tax determined by the Tax Administration, as well as the omission of issuing invoices. On the other hand, when we talk about Tax Crimes, we normally tend to think about Tax Evasion, however, there are various crimes that can be committed, that punish not only the obligated parties but also public workers related to Tax Administration, in which we can state, the following articles: Article 95.- Improper management of information systems: It will be sanctioned with three to five years in prison, who, without authorization of the competent authority, seizes, uses, copies, destroys, disables, alters, conserves or transfers, by any means, information systems or database or information contained through them, which is used by the Tax Administration and provided that they have not been declared by resolution for public use. Article 96.- Facilitation of passwords and code of access: Whoever provides their assigned password and/or code of access, in order to enter the tax information systems, will be punished with three to five years of prison. Article 98 bis. — Criminal liability of a public servant due to an act of willful default: It will be sentenced with one to three years of prison plus the in-habilitation of ten to twenty years to hold public positions, the public servant that due to recklessness, negligence, or inexcusable carelessness in the exercise of his functions, enables or helps the obligated parties with the noncompliance of the tax requirements and/or with the investigations of such failure.

There is no doubt, that the tax crime that occupies more the attention of the taxpayers , is “Article 92.- Fraud to the Public Treasury: Anyone who, by action or omission, defrauds the Public Treasury with the purpose of obtaining, for himself or for a third party, a patrimonial benefit, in which defaults the payment of taxes, amounts withheld or that should have been withheld, or income on account of remuneration in kind or unduly obtaining returns or enjoying tax benefits thereof form, provided that the amount of the defrauded quota, the amount not paid from the withholdings or the income on account or from the refunds or the tax benefits unduly obtained or enjoyed exceeds five hundred base salaries, will be punished with five to ten years of prison

As it can be seen, this is a crime, that contains a boundaries of actions, that can be considered criminal. Therefore, some important aspects must be taken into account: 1) that the amount of five hundred base salaries that will be considered an objective condition of punishment, It must be related to what is indicated in article 2 of Law No. 7337 which refers to The denomination “base salary”, (…), corresponds to the amount equivalent to the monthly base salary of “Clerk 1” that appears in the list of positions of the Ordinary Budget Law of the Republic, approved in the month of November prior to the date of consummation of the crime.

In accordance with the previously stated, the base salary established in the year (2021) is ¢ 462,200.00, which means that the actions described in the aforementioned criminal type, in order to be investigated as such, evasion must exceed the amount of 231,100. 000 (two hundred thirty-one million one hundred thousand exact colones). 2) Another aspect of relevance and that always generates doubt, is that this amount should not include interest, fines, or any other penalties. This is an aspect that has been previously discussed, as it is consider by some colleagues that this tax crimes should be modified, so that more tax criminals could be taken to the criminal courthouses due to their evasive actions. This is a thesis which we do not share. The above, because in our opinion, what is relevant is not the criminal sanction, instead, we think that the possibility of using existing mechanisms is the way to increase tax collection and as a last resource criminal proceedings.

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Legal and Tax Implications for Inactive Companies In Costa Rica

Jan 19, 2021 | Commercial Law, Taxes

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In past years it was very common to use inactive companies as a legal structure to protect assets. The foregoing, because it was a corporate figure that was exempt from certain tax requirements, unlike those that develop a commercial activity.

Because of the entry into force of the Law on Strengthening Public Finances (Ley de Fortalecimiento de las Finanzas Públicas) in 2018, the benefits of using an inactive company as a corporate vehicle for the protection of assets, undergoes a significant shift. The above, because it converts this type of companies into taxpayers and it forces them to comply with 5 tax requirements, which are the detailed as follows:

FILING OF D-140 FORM: Once an inactive company is dully incorporated before the Costa Rican National Registry, it must file before the Tax Authority an update of the information regarding its legal representative or representatives and its tax address. Additionally, the company must be registered under the economic activity of “Legal persons incorporated in the country that does not carry out economic activity of a Costa Rican source”, which is governed by code 960113. It is important to consider that in the event of non-compliance with this first post-incorporation requirement, the company is exposed to a sanction. Lastly, this requirement must be complied within the period of 10 business days from the incorporation of the company.

CORPORATE TAX: This is a tax must be paid annually, during the month of January of each year. The amount to be paid varies from year to year and can be paid from any digital platform of the banks registered in the national financial system. The amount to be paid varies depending on whether it is an inactive company or an active company.

EDUCATION AND CULTURE STAMP: This tax It is included with the legal expenses at the incorporation of the company. Subsequently, this tax must be paid annually between the months of February and March of each year. The net capital reported in the Income Tax return of the immediate prior fiscal year, is used as the basis for calculating such tax.

ULTIMATE BENEFICIARY OWNERSHIP DECLARATION (UBO): This declaration is filed annually during the month of April before the Central Bank of Costa Rica. The purpose of this declaration is to indicate who is the final beneficiary (physical person) who is owns company. The omission this requirement carries out several sanctions to the company, such as a pecuniary fine, the non-issuance of good standing certifications and the non-registration at the Costa Rican National Registry of documents in relation to the company.

INCOME TAX RETURN (FORM D-101): One of the most important modifications that are introduced with the aforementioned law, is the filing of the Income Tax Return, in which the capital stock, assets and liabilities of the inactive company must be stated. This declaration will be taken as the basis for the calculation of the Corporate Tax, Education and Culture Stamp and other future tax liabilities. The failure to submit this declaration form entails financial penalties and in the face of an audit by the Tax Authority, the company would be exposed to an additional penalty for the increase of the corporate assets without justification. This requirement must be submitted annually and expires on March 15.

In conclusion, with the introduction of these new tax requirements that all inactive companies must fulfill, this promotes to maintain the corporate information updated. The above, because these companies stopped being simple holders of assets and from now on, they are subjected to a meticulous tax inspection. Therefore, the only way to avoid this type of sanctions is to keep everything in order and in compliance as if the said company, would be developing a commercial activity like any company called “active”.

TAX OBLIGATIONS INACTIVE COMPANIES	DUE DATE
FILING OF D-140 FORM	10 business days from the incorporation of the company before the CR National Registry,
CORPORATE TAX	January 31st
EDUCATION AND CULTURE STAMP	From February to March
UBO	April 30th
INCOME TAX RETURN (FORM D-101)	March 15th

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Registry of Shareholders of Legal Entities is Mandatory in Costa Rica

May 10, 2020 | Commercial Law, Taxes

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The Law to Improve The Fight Against Tax Fraud (Law N° 9416) obliges legal entities, third party resource managers, nonprofit organizations and private trust, to register all the shareholders or final beneficiaries in the Registry of Transparency and Final Beneficiaries managed by the Central Bank of Costa Rica (BCCR). Said obligation applies as of September first of 2019, the compliance of this obligation will be carried out gradually, taking into account the last number of the registration ID number.

Las digit of the registration number	Registry month
0 and 1	September 2019
2 and 3	Octuber 2019
4 and 5	November 2019
6 and 7	December 2019
8 and 9	January 2020

Excluded from this requirement are companies whose shares are listed on the stock market, whether domestic or foreign; public trusts (those in which the State participates); financial entities; legal entities; third-party resource managers and legal structures supervised by the General Superintendency of Financial Entities (SUGEF), General Superintendency of Securities (SUGEVAL) or by the General Superintendency of Pensions (SUPEN), regarding to its depositors, clients and investors; the Supreme Powers, the Supreme Electoral Court; centralized, decentralized, autonomous and semiautonomous public entities; and the embassies.

The person responsible of providing this information is the person authorized by law to act on behalf of the obligated parties. If it’s a legal entity, the representative; if it’s a trust, the trustee; for the managers of third-party resource, the manager; in non- profit organizations, the president or the person how exercises the representation. The person responsible must have a valid digital signature certificate. The following alternatives are offered for the foreigners who do not have a Costa Rican residence card, and as a consequence, cannot opt for a digital signature:

Another person that can opt for a digital signature can be appointed as a representative.

Granting of a special power of attorney by public deed. It must be granted by digital testimony with the indication of the validity of the power granted.

In order to have a digital signature card, an appointment must be requested at any of the offices authorized by the BCCR. The information of the cost, hours of attention, geographical location and telephone numbers, can be consulted in the Services Section, Digital Signature, of the Central Bank page, which can be consulted at the following address: https://www.bccr.fi.cr/seccion-firma-digital/firma-digital/oficinas-de-registro.

Those responsible for providing the information must register the necessary information to identify all the participations and final beneficiaries, the information provided will have for all legal purposes the effects of an affidavit. If there are legal entities domiciled abroad, information must be provided concerning all the participations and final beneficiaries, otherwise it is presumed that the final beneficiary is the administrator.

The information that must be provided is the following:

Data of the person who exercises an influence of 15% or more of the total capital or control direct or indirectly on the legal entity.

Composition of voting rights.

The data of the persons who have the right to appoint or dismiss most of the administrative or supervisory boards.

The data of the persons that have the control condition according to the constitutive pact.

If it’s a trust: the object of the contract, the trustor, trustees and beneficiaries.

Branches or foreign agencies of international non-profit organizations must also be registered. In case the donors and recipients or beneficiaries of the contributions are a legal entity, the data that identify them is sufficient.

In order to comply with the declaration of the shareholders and final beneficiaries, the person in charge must previously register on the platform called “Central Directo”, at the following address: www.centraldirecto.fi.cr. Once the legal representative subscribes to this platform, they can proceed to make the respective declarations. Once the declaration is submitted the BCCR will notify compliance with the declaration to the email address indicated as means for notifications.

The updating of data is done ordinarily once a year, between the first and the thirty of April. Extraordinarily within 15 business days from the day of the annotation in the respective book. Upon the expiration term, the General Tax Administration will notify the compelled that the information was not provided so that they can fulfill their duty. In accordance with the article 84 bis of the Tax Rules and Procedures Code, will grant them a 3 business days period to correct the situation, otherwise the respective pecuniary penalty will be applied

“Article 84 bis: (…) an equivalent pecuniary fine of two percent (2%) of the gross income of the legal entity, of the period prior to that in which the infringement occurred, with a minimum of three base salaries and a maximum of one hundred base salaries (…)”

The access to the information of the platform will be controlled by the BCCR. The institutions authorized to review the information are the Ministry of Finance and the Costa Rican Institute on Drugs (ICD), with the prior authorization of the BCCR. Additionally, the BCCR will develop a platform for citizen consultation so that any individual can know if it was included or not in the Registry, for which a digital signature certificate will be necessary. People who consider that the information is not current, true or accurate, may request corrections, either asking the person in charge of providing the information to make the corrections or go before a Contentious Administrative Judge and request that the corrections are made.

The National Registry will not be able to issue certifications of good standing and will not register documents in favor of the obligated subjects that are in the list of non-compliers. The Notaries Public that issue documents to the obligated subjects must verify the list of non-compliers and if they are included, they must record this condition in the document.

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Double Taxation

May 9, 2020 | Taxes

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Nowadays, commercial activity has become globalized and many companies have extended their operations across borders. When a company operates in several countries the dilemma suddenly arises: where should income be reported? where should taxes paid?

Every country has its own tax regulations, and per their sovereignty, a company could be required to pay taxes in the countries where it conducts its enterprises.

It was looking for tax justice, that the principle of double taxation was conceived and developed. This principle prohibits governments from taxing the same individual for the identical concept or activity.

This predicament has led nations to establish various measures in order to avoid double taxation. Internal legislation has been enacted to regulate this issue, but faced with the impossibility to completely solve the problem; countries have resorted to international treaties in order to reach a more integral solution.

Costa Rica has joined this initiative and currently has signed treaties with Spain, United States and with some Central American countries.

The existence of these agreements in order to avoid double taxation is essential to promote foreign investment, as they provide legal security to investors and reduce taxation to such investments, and ultimately avoid for investors, disadvantageous scenarios for competitiveness.

Currently, the potential admission of Costa Rica to the Organization for Economic Cooperation and Development (OECD), will further impulse this initiative, since one of the objectives of the entry of Costa Rica to this organization is to improve the business climate within the country and ensure the security of the investments made in national territory.

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Important Aspects of the Corporate Taxes Law N°9428 (Costa Rica)

May 2, 2020 | Commercial Law, Taxes

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Field of application

To all corporations, to the representatives or branches of foreign corporations and to LTDA/SRL companies; it applies to both the corporations that are already registered as well for the ones that are going to be registered in the Mercantile National Registry.

Payment

Each tax period will be counted from January 1° to December 31° of the same year.

For the entities that are already registered, the tax will generate on January 1° of each year and the payment has to be done during the next 30 days counted from January 1° of each year.

As for the entities that are set up during the year, the taxes have to be paid in the next 30 days counted from the day of submission of the public deed of Constitution of the Corporation before the National Registry. The rate has to be proportional to the time left between the date of submission of the deed and the end of the tax period. The discount stated in the Law of Taxation of the National Registry will not apply.

The tax is paid through the means, forms and conditions stablished for this purpose by the National Tax Office.

Rates

The law lists four scenarios under which the rate that must be paid is established:

The corporations that are registered in the Registry of Corporations, but not in the Unique Tax Registry of the General Directorate of Taxation, must pay an amount equivalent to 15% of a monthly base salary (office worker 1) according to the second article of the Law N°7337.

Taxpayers of the utility tax who have declared a gross income lower than one hundred and twenty base salaries regarding the utility tax of the last period, must pay an amount equivalent to 25% of a monthly base salary.

Taxpayers of the utility tax who have declared a gross income between a hundred and twenty and two hundred and eighty base salaries regarding the utility tax of the las period, must pay an amount equivalent to 30% of a monthly base salary.

Taxpayers of the utility tax who have declared a gross income equal or superior than two hundred and eighty base salaries regarding the utility tax of the last period, must pay an amount equivalent to 50% of a monthly base salary.

The legal representatives of the corporations are jointly responsible for the neglect of payment of the taxes stablished in the Law.

Sanctions

In case of non-compliance, the Code of Rules and Procedures of Taxes.

The National Registry will not be able to issue certifications, nor register any document in favor of taxpayers who are not up to date with the payments of this tax. Notary Public that issue certifications to the overdue taxpayers must record this condition in the respective document.

The overdue taxpayers cannot contract with the Government or any public institution.

The debts derived from this tax will constitute preferential legal mortgage or preferential liens on the corporation assets.

The neglect of payment for 3 consecutive periods is cause of dissolution. The National Tax Office will send to the National Registry a report of the taxpayers that did not payed the taxes, so that the National Registry can proceed with the cancelation of registry and asset annotation.

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