New Corporate Tax Law in Costa Rica

One of the law offices I trust most in Costa Rica helped provide this latest update on the new corporate tax.  Below you will find a complete breakdown.  If you need assistance or have additional questions regarding real estate and/or corporate taxes in Costa Rica.  Please contact and I’ll assist more....................

In the latest days of December a new tax applicable to legal entities such as corporations (S.A.) and Limited Liability Companies (S.R.L. or LLC) as well as to any Branch of International Companies or its representative has been approved by the Costa Rican government.

Tax amount:

According to this new law, taxes are based on a basic salary of a government employee. Active legal entities (registered before the Taxes Authorities) which are currently registered as tax payers are subject to a yearly tax of 50% of such basic salary, which as of this date is approximately US$357. Inactive legal entities (not registered before the Taxes Authorities) will pay 25% of said basic salary, which as of this date is approximately US$179.

Tax payment:

Taxes have to be paid during January every year. When registering a new legal entity the tax will be paid at the moment of submitting the documents to the Public Registry. This year (2012) taxes will be paid on April in a proportion to the months left in the year (approximately 75% of the tax).

Liability:

This new law makes the legal representatives joint and severally liable for the payment of this new tax. Therefore, it is very important to keep all legal entities up to date.

Actions that can be taken:

The new tax law provides several temporary actions for people who own many companies and/or corporations or wish to make changes in them:

• Dissolving or terminating the legal entities.
• Resigning of their officer positions.
• The law allows transferring assets to other legal entities or individuals exempt of the transfer tax, for a six month period starting on April 1st, 2012.
• Legal entities can also be merged with others.

All these actions have to be made with the assessment of a Notary Public and duly recorded at the Public Registry.

Consequences of not taking action:

The non-payment of the tax has several consequences:

• Automatic dissolution of the legal entity.
• Should the legal entity has any assets, the government may put a mortgage lien against those assets for the taxes owed.

·         If there is any payment pending pursuant to this tax changes or modifications  on those legal entities cannot be made in the Public Registry nor get certificates issued by the latter.