In order to create funds to improve public safety and fighting crime, last Agust 11th, 2011; the Costa Rican Congress approved in second reading the draft of the Tax for Juridical Persons Act, which shall be in force three months after its publication in the Official Gazette. This tax shall be paid by all those juridical persons already registered on the National Register for the period 2011, on a pro rata basis, within thirty calendar days following its entry into force. It is estimated that said tax will be paid this year only for the month of December.
This tax is applicable to all corporations, including branches of foreign companies or their representatives and individual limited liability companies which are registered or hereafter enrolled in the National Register and must be paid during the first thirty days of each calendar year. The only companies exempt from this tax are those who are registered with the Ministry of Economy, Trade and Industry as micro or small businesses.
Companies that register after the enactment of this law must pay the tax for the first time with the other registration fees when filing the company in the National Register. In the case of companies that are active in the Tax Administration, the tax is equivalent to 50% of one monthly base salary, currently approx USD $300 and in the case of inactive companies, 25%, currently approx $150. These amounts will not be considered a deductible expense on income tax.
One of the most important aspects to consider regarding this new law is that the representatives of companies shall be jointly and severally liable for this tax. Due to this liability, the same law establishes the possibility, for a period of twenty-four months from its entry into force, to waive an appointment by written communication to the registered social domicile. This communication must then be notarized and registered with the Registry of Legal Entities of the National Registry.
In case of non compliance, the law establishes penalties such as the non issuance of certificates of good standing or cancellation of documents submitted to the National Registry of a company that is not up to date with this payment. Additionally, failure to pay the tax for three consecutive terms implies the dissolution of the company. Also, the fines same imposed by the Code of Tax Rules and Procedures shall apply.
Given the fact that it is a Costa Rican custom to create companies for all types of business needs, the law provides the possibility to re-structure their companies so as to minimize the impact of this tax. In fact, the law provides that companies that are dissolved within three months from the entry into force of this law will not pay this tax and also exempts from taxes and stamps the transfer of personal property and real estate from an inactive company to a person or entity in the six months following the entry into force of this law.
As part of our legal services, we can help you establish a corporate structure that will help minimize the impact of this tax, either by dissolving companies that are not in use or by merging them with others, transfers of assets and other acts necessary to unify or consolidate some of your companies if applicable.
If yu have further questions don’t hesitate to ask Nexia Costa Rica, emailing us at jccamacho@nexiacostarica.com
