This special article was provided to South Pacific Costa Rica Real Estate, courtesy of attorney Rosario Araya. For more on Rosario and her practice, scroll to the bottom of this page.
Tax on Corporations in Costa Rica Has Returned
WHAT? WHEN DID THIS CORPORATE TAX HAPPEN?
Beginning in September 2017, corporations in Costa Rica will once again be required to pay taxes. After certain articles in the previous corporate tax law were declared unconstitutional in 2015, the presumption was that it would be rewritten, which it was. The new version, Law #9428, was passed into law on March 22, 2017, and went into effect September 1, 2017. If you’d like to read more about this law and its “reglamento” in Spanish, you can find a PDF of the law here.
HOW DO I KNOW IF I NEED TO PAY THIS CORPORATE TAX?
All Costa Rica corporations – whether active or inactive – will be required to pay this corporate tax, but the amount of tax paid will be lower for inactive corporations. As a general rule, active corporations are those running a business and that are required pay taxes in addition to the annual corporate tax. Inactive corporations are those which exist to be the owner of property such as a real estate asset or a vehicle.
INACTIVE CORPORATIONS NEED A SPECIAL FORM
All inactive* corporations which want to remain inactive will need to fill out a D-140 form stating that they wish to remain inactive. (*Inactive in this case means the corporation is not in a business which requires ongoing income reports and payment of income taxes.)
The law states that this D-140 form must be signed by a representative of the corporation, the signature of the representative must be authenticated by a notary or a lawyer. In South Pacific Costa Rica and this coastal region, that form must be turned in at the office for Tributación in San Isidro de Perez Zeledon. We are currently looking into how this will best be handled for those who are not in the country.
WHEN IS THE CORPORATE TAX DUE?
On September 1, 2017, Costa Rica corporations will pay an amount prorated for the remainder of 2017, and will need to make this payment prior to the end of 2017 to avoid interest charges.
The corporate taxes for 2018 will be due in full by January 30, 2018.
HOW MUCH WILL THE CORPORATE TAX BE & HOW DO I PAY IT?
The corporate tax will be calculated using a certain percentage of the base monthly salary for a judicial administrative assistant, which is currently reported to be 426,200.
NOTE: The following table shows expected payments for both active and inactive corporations, including dollar amounts calculated using an exchange rate of 550 colones.
The corporate tax (which will be approximately $48 (26,640 colones) for 2017) can now be paid using online banking sites for Costa Rican banks, and it can also be paid in person at the bank, specifically at Banco Nacional or Banco Costa Rica.
TAXES ARE DUE DEPENDENT ON YOUR CORPORATION ID NUMBER
Due to the enormous amount of corporations in Costa Rica, the government is asking that corporations file their D-140 form in a specific month in order to alleviate the workload impact at the Tributación office.
The appropriate month depends on the last number of the corporate I.D.:
- For corporate I.D. numbers ending in 1 or 2, the form must be done in the month of October 2017.
- For corporate I.D. numbers ending in 3 or 4, the form must be done in November 2017.
- For corporate I.D. numbers ending in 5 or 6, the form must be done in December 2017.
- For corporate I.D. numbers ending in 7 or 8, the form must be done in January 2018.
- For corporate I.D. numbers ending in 9 or 0, the form must be done in February 2018.
ARE NEW CORPORATIONS REQUIRED TO PAY?
New corporations will be required to pay the tax within 30 working days after their initial inscription in the Public Registry.
WHAT IF I DON’T WANT MY CORPORATION ANYMORE?
This new law is allowing corporations which have been considered inactive for at least 24 months prior to the passage of Law 9428 to have a one-year exemption from paying the transfer tax in order to allow time for those corporations to transfer their assets either to a private individual or to another corporation, and then be dissolved.
While the usual government tax applied to transfers will not be charged, you will have to pay your legal fees for executing the transfer. So, if you have a corporation for owning your car and decide you would rather transfer ownership of the car into your personal name rather than pay the annual corporate tax – make this transfer and dissolve your corporation within one year of the law going into effect, and you will not have to pay the new corporate tax or the usual taxes associated with transferring an asset. The legal cost for dissolving the corporation will be your responsibility.
NOTE: Many people start a Costa Rican corporation in order to hold their assets as a way of protecting themselves from liability. Before you decide to dissolve your corporation, consider whether or not you still want that protection.
WHAT IF I OWE PAST CORPORATE TAXES?
If you paid some but not all of the corporate taxes due during the 2012 to 2015 timeframe, the new law allows you to pay your past-due amounts within three months of the law going into effect without having to pay late fees or interest. (That timeline would be between Sept 1 – Dec 1, 2017.)
Bear in mind that past-due corporate taxes in Costa Rica have the same legal implications as if the government held a mortgage on your corporation (for the tax amount). If you did not pay any of the corporate taxes due for three consecutive years (when the previous law was in effect in 2012 to 2015), you need to know that the public registry is currently exercising its legal right to dissolve those corporations and place a lien on their assets, based on Article 6 of Law 9024. It is important to keep in mind that this can also happen in the future with the new law since Article 7 of Law 9428 states the same: if you do not pay corporate taxes for three years in a row, the public registry is within its right to dissolve the corporation and place a lien on its assets.
IMPORTANT: If you failed to pay corporate taxes for three years in a row during the 2012 to 2015 timeframe, your corporation could be at risk of being dissolved and having its assets seized. Meaning now would be a good time to contact someone for help.
If your corporation has been dissolved due to the non-payment of corporate taxes for a consecutive three year period, that DOES NOT MEAN that your corporate tax debt has been forgiven or erased. The officers of the corporation could end up being held accountable by the government and required to pay the past due amounts. It would be an extremely good idea to take advantage of the opportunity to pay any past-due corporate taxes during the first three months that Law #9428 is in effect because during this timeframe you will ONLY be required to pay the past-due taxes themselves, NOT any interest or late fees.
WHAT IF THE CORPORATION DOESN’T HAVE ANY ASSETS TO GO AFTER FOR COLLECTING THE TAX PAYMENT?
The old law, 9024, states that the representatives or officers of the corporation can be deemed personally responsible for the payment of the past-due corporate taxes. The new law, 9428, adds that also the shareholders can be held responsible.
WHAT IF I WANT TO RESIGN AS A REPRESENTATIVE, OFFICER, MEMBER OF THE BOARD OF DIRECTORS, OR FISCAL OF A CORPORATION?
Legal representatives, officers, members of the Board of Directors and the fiscal arm of a corporation can unilaterally decide to resign their positions through an “Acta,” which requires a legal document to be drawn up by a notary and then filed with the government.
In order for someone to resign their position from a corporation – the corporation must be up to date on corporate taxes and their resignation must take place within 24 months after Law 9428 goes into effect.
IF YOU DON’T PAY THIS TAX, BE ADVISED…..
Corporations that are not current on this corporate tax payment will not be able to have any documents inscribed in the Public Registry, nor will the corporation be able to obtain a certified copy of the Personería Jurídica (document listing the legal representatives of the corporation) until the corporate taxes are up to date.
HOW IS THE MONEY RAISED BY THIS COSTA RICA CORPORATE TAX ALLOCATED?
- 90% of the tax receipts will be used for public security.
- Five percent will be used for the prison system.
- Five percent will be used for the organized crime task force.
Special Thanks to Rosario Araya for Sharing this Article with Us!
Have further questions? Feel free to Contact Us and we’ll put you in contact with Rosario, the author and attorney here on the South Pacific Coast with whom we work. She can help you with setting up a corporation, paying your corporate tax, managing your corporation’s annual affairs, real estate closings, evaluations and much more. We highly recommend her!