The Costa Rica Corporation Tax is Coming Back
The Costa Rican legislature recently fast tracked the voting for the corporation tax bill. The current legislative bill 19.818 would become law as soon at the legislature approves it. The new law would reinstate the corporation tax which was charged to all active or inactive corporations that were registered in Costa Rica. In the even the law is passed in the next few months here is what you should know about it.
Brief Summary of the Old Law
The previous law was in effect from 2012-2015 but certain portions of the law were stricken by the Constitutional Court which invalidated the application of the tax for 2016. Those registered companies that did not pay the corporation tax for the past years are still liable for it. The Constitutional Court only invalidated the tax going forward but did not eliminate the obligation to pay the amounts past due.
The New Corporation Tax
When the new law is implemented it will reinstate the annual corporation tax.
How much will you have to pay ?
Article 3 of the proposed law provides that: Inactive corporations pay 15% of the base salary of a government employee. Active corporations will pay 25% to 50% based on a sliding fee schedule. The difference between active and inactive is if the corporation is registered with the Costa Rican Department of Revenue. Current base salary is 424,000 Colones ($771)
15% = $115.65 Inactive companies
25% = $192.75 Active companies with Gross income less than 120 base salaries.
30% = $321.30 Active companies with Gross income from 120 -280 salary.
50% = $385.50 Active companies with Gross income above 280 base salary.
The base salary changes every year based on government indexing so the tax amount will fluctuate yearly as well.
When will the tax be due ?
The proposed law indicates that the tax will be due on January 1st of each year.
What if you don’t pay ?
The law will impose fines and penalties for amounts outstanding. Also the National Registry will not issue any certificates of standing (certificaciones de personeria juridical o literales) for the corporation.
Any outstanding debt due for corporation tax can become a priority mortgage lien against the property owned by the corporation in favor of the tax department.
Failure to pay the tax for 3 consecutive periods is cause for the National Registry to administratively dissolve the corporation.
Other transitory dispositions.
The law will provide a 3 month grace period to corporations that have outstanding liabilities from 2012-2015. They can pay the outstanding amounts and the government will waive interest and penalties.
The law will provide a 12 month grace period from the payment of registry transfer taxes and stamps to those entities that transfer assets out of the corporation into the name of individuals or other corporations. This transfer will only be allowed once.
The law allows the members of the Board of Directors and Auditor of the corporation to file the resignation from the corporation. The resignation must be documented and recorded in the corporation section by a Notary Public.
Now is a good time to develop your strategy to deal with the dispositions of this law.