Posted on April 14, 2021
New 2021 Obligations for Corporation Holders in Costa Rica
By Allan Garro
During the next weeks, all those Expats who have a corporation in Costa Rica will have to fulfill some obligations that are relatively recent, making important to take them into account in order to avoid problems and headaches. Certainly, having a corporation is no longer as simple as it was a few years ago, but it still offers advantages, and it is a matter of organizing yourself with the fulfillment of the new obligations. Here we mention some important aspects whose compliance must be properly verified.
Tax on Corporations. Since 2017 there is an annual tax named Impuesto a las Personas Juridicas or Tax on Corporations. This tax was due in January of this year. The amount to pay was approximate 69,000 colons (around US$118 at present time) for Inactive corporations. It increases for Active corporations depending on their annual sales. Not paying this tax for three years in a row will cause that the government proceeds dissolving it. It also generates a small delinquent interest calculated on a daily basis.
Final Beneficiary Report. During April 2021 it is mandatory to perform again the Final Beneficiary Report to Central Bank. This report is to disclose the stockholders of each corporation. In case the stock belongs to another corporation it is necessary to disclose who are the stockholders on that other corporation, until persons are reached. All registered corporations must make the report, which includes corporations or SAs, Limited Liability Corporations or Limitadas, Civil Companies and Foreign Companies’ branches.
Although the information provided will not be publicly accessible, it will be for the Tax, Judicial, Public Security and other related authorities to prevent fiscal fraud, money laundering and similar activities. Every time the stock changes ownership it is necessary to proceed updating the information. Here it is important to take into account that, when more than fifty percent of the capital stock is transferred, the tax authorities can consider this as a transfer of the existing properties and collect the respective transfer tax.
The persons obligated to make the report are: The President in Corporations or SAs, the Manager on Limited Liability Companies or Limitadas, the appointed Proxy in branches of Foreign Companies and the Administrator in Civil Companies. To make the report, a digital signature certificate is required. It is a gadget similar to a credit card with a chip. This creates a problem for legal representatives who speak a different language, do not know how to use computers or do not have a DIMEX identification number.
As a way to solve the issue, it is authorized to grant a special power to another person who has a digital signature and understands Spanish to make the report. This power must be registered by a Notary Public, for which the Central Bank authorized access for notaries using their own digital signature. Failure to comply with the report has the consequence that the National Registry does not issue certifications on legal representation -Personerias- nor register documents in favor of delinquent companies, plus fines apply.
Tax Returns for Inactive Corporations. All Inactive corporations will need to file tax returns, and also report the amount of capital stock as well as any assets held by the corporation. This might sound illogic, because if the corporation is inactive the rent tax is zero. However, there is something behind this, it is a way to control capital gains. For example, if an inactive corporation sells three lots that can be considered a business activity subject to capital gains and rent tax.
Most inactive corporations have a basic amount of capital stock, but also have acquired assets like real estate property with a higher value, paid with capital contributions from the stockholders. In this case it is advised to proceed adjusting the capital stock according to the value of new assets acquired. This will help preventing tax authorities assuming that the differences in value might represent an “unjustified increase of patrimony”. Still, the Tax Man might appear checking the origin of funds used to buy any existing assets.
Initially, the deadline for filing tax returns expired March 15 2021. However, a few weeks ago the tax authorities agreed to prepare a new form, indicating that from that moment there will be an additional term of two and a half months to comply. As of this date, the form has not been issued but it is foreseeable that it will soon be ready. Important to be expecting for the new due date, which will be sometime near the middle of this year. It is time to start looking for an accountant who can assist with this new obligation.
Municipal Property Taxes. It should be remembered that the first quarter of property taxes is due. It must be paid in the local Municipality, covering from January to March. Second quarter is due starting April 1st. Since property taxes in Costa Rica are not very high, it is advisable to pay the full year in advance if possible, instead of doing it every three months, as a way to skip any applicable fines for late payment. Some Municipalities even offer discounts for prepayment.
In this way, the most relevant things that must be fulfilled in relation to all existing corporations is informed. Surprises and problems can always be avoided. One more point that is important to review is that the identification number that appears recorded for the legal representatives remains valid. This because foreigners usually when obtaining a new passport also obtain a new number that would then be different from the one registered in the corporation. It is always better when it matches properly
About the Author: Allan Garro was incorporated as a lawyer and public notary in 1996. He specializes in Litigation, Corporate, and Real Estate Law. He has also acted as an external legal consultant to Congress. He has been the author of more than 100 published English Language articles and can be reached at [email protected]