Today, commercial activity has become increasingly globalized, with many companies expanding their operations across international borders. When a company operates in multiple countries, a dilemma suddenly arises: where should its income be reported? Where should taxes be paid?
Every country has its own tax regulations, and, as per its sovereignty, a company may be required to pay taxes in the countries where it conducts its business.
It was in search of tax justice that the principle of double taxation was conceived and developed. This principle prohibits governments from taxing the same individual for the same concept or activity.
This predicament has led nations to establish various measures to avoid double taxation. Internal legislation has been enacted to regulate this issue, but faced with the impossibility of completely solving 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.