January 28, 2015
By Decision (“Voto”) number 2015-1241, which was recently enacted by the Costa Rican Constitucional Court, this law has been declared null, but starting on 2016.
Threfore, taxes must be paid for 2015.
The whole judgement has not been published as of today, (Jan 29, 2015), so, we will have to wait for it to know all the details.
New Corporation Tax in Costa Rica
The New Corporation Tax was approved on December 27th, 2011 under the Costa Rican Law number 9024. According to the Article 11, the funds obtained from this New Tax will be given to the “Ministerio de Seguridad Pública” (or Ministry of Public Security), to be invested in Public Safety programs, and the fight against crime.
So… Who will have to pay this new tax?
This new tax will be affecting only the Business Entities, including the ones known as S.A (Anonymous Corporation), S.R.L (Limited Liability Corporation) and “E.I.R.L.” (Limited Liability Individual Company). It will also apply to any branch, subsidiary or entity representing any foreign corporation registered in the Costa Rican National Registry.
It will not affect nonprofit organizations like Associations or “Cooperativas”
Which is the Amount that I will have to Pay?
In order to answer this question, we first need to define the Base that will be used to determine the amount:
The law uses as a base the amount of wages that are paid to an administrative assistant of the Court during January of the respective year.
In 2012, the wages amount is of ¢360,468 colones. Using an Average exchange rate of ¢520 colones per US Dollar, the wages amount will correspond to an Average of $693 US dollars. Remember that this amount is just as a reference and will change according to the Exchange Rate for the US currency,
The law states that Corporations that are registered as active in Tax Administration Office, will have to pay 50% of such base (Aprox. US$347) and Corporations that are registered as inactive in the Tax Administration Office will pay 25% of such base (Aprox. US$173), then again, please remember that this amounts in US dollars are for reference, and will change according to the Exchange Rate for the US currency.
How can I know if my Company is Active or Inactive?
An Active corporation stands for a Company that is managing a business and declares the Rent and/or the Sale Tax at the Tax Administration office.
In the Other hand, Inactive corporations are the ones that do not have a business.
Both active and Inactive corporations are allowed to hold assets,
If you own a corporation that only holds land, or a car, is very likely that it will be an Inactive corporation, however; all will depend on how it was declared. To be 100% sure, it’s better to ask to the Tax Administration office
When I Have to Pay this Tax?
Existing Corporations must pay this tax during the first 30 natural days of every year (On or before Jan 30). Corporations that are in process of being registered will pay the tax during the registration process.
What happens if the Tax is not paid?
Besides the fines, If the Tax is not paid, the Corporation will not be able to obtain “Personerias Juridicas”, or Corporate Certificates from the Costa Rican National Registry. Since this document is a requirement to virtually all the corporate transactions, it will be not possible to use the company for any act, especially If the transaction involves Government Institutions.
The lack of payment of this tax for three years will cause the dissolution and cancelation of the corporation. A lien will be inscribed against all of the corporation assets, to guarantee that the tax will be paid. This lean will be considered as a legal mortgage on the assets.
I own many corporations or I have corporations that I do not use, What can I do?
The Following are only brief examples of how the process can be handled. Please remember that in order to determine the best option that suits your needs, your case will have to be studied individually
If you own many corporations with different assets like a house, a property and a car, and you determine that you need to keep all in separate companies, then your only option would be to pay the tax for each company. In the other hand, if you determine that you can keep all in one or less companies, you may choose to merge all the corporations in to one. This means that you will only have one company and all of the assets will be transferred to it. This way, you will pay the corporation Tax only for one corporation.
But… Will I have to pay Transfer Taxes and Registration Stamps for the transfer of all of the assets in to one company?
This new law determines on the Section V that “Since the effective date of this law and for a period of six months, for one time only, all the transfers of assets of corporations that have been inactive for at least 24 months prior the enactment of this law, will be exempt from the respective payment of transfer Tax and Registrations stamps”
If you own a corporation without any assets, and you are not planning to use that company in the near future, you may decide to dissolve that corporation. The law states on the section II that all the corporations that are dissolved within the next 3 months since the effective date of the law, will be excepted to pay the tax.
You may decide to transfer all the assets of the corporations into your personal name, and dissolve all the companies. Without holding a corporation, you won’t have to pay the corporate tax
Once again please let us remind you that the only way to determine your best option is to individually study your case. Many items will have to be taken in consideration like: if you have Active or Inactive companies, if you are planning to Start a Business, How many assets you have, Liability Issues, If you have Employees, if you have bank accounts, among others…
© Copyright CVFIRM S. R. L. Costa Rica.
Please Note: This material is for personal use only and is protected by Copyright Law. It is provided as general information only and does not constitute and is not a substitute for legal or other professional advice. Reliance on this material is solely at your own risk. Always consult your own legal or other professional advisors and discuss the facts and circumstances that apply to your specific case.
If you have any questions, or comments, or need assistance to pay the corporation tax, or an advice on how to proceed, please feel free to contact us, for us will be a pleasure to help you.
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