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Costa Rica Creates a Final Beneficiary Registry For Shareholders

by rpetersen

The regulations to create a registry of final financial beneficiaries for companies, trusts and third parties that manage funds has been issued by Decree signed by the President of Costa Rica.   The Regulations officially titled as “Regulations to create a registry of final beneficiaries for transparency” mandates the Central Bank of Costa Rica to create and manage a national registry containing all the information about the final beneficiaries of all companies, trusts, third party fund managers and non-profit organizations in Costa Rica.

The Central Bank shall work with the Costa Rican Department of Revenue and the Costa Rica Drug Institute to establish this registry.

Who Must Provide the Information ?

According to the regulations the following are the ones obligated to furnish information to the Registry of Final Beneficiaries:

a) For legal persons and other legal structures, the legal representative.

b) For trusts, the trustee.

c) For third- party resource managers, legal representative, agent or person exercising the powers of attorney with powers of administration.

d) For non-profit organizations, the president other person exercising the powers of representation.

What Information Must be Provided ?

To comply the obligated parties must provide all necessary information to identify the final beneficial owners of any shares, trusts, non-profit or third party fund managers.

When Does This All Happen ?

The regulations are currently in effect but you will not have to comply until such time as the Central Bank of Costa Rica has created and launched the Final Beneficiaries Registry platform. Once that registry is created then the report must be filed on a yearly basis to be in compliance.

Why are they doing this ?

Costa Rica has applied for membership in the OECD (Organisation for Economic Co-operation and Development) and part of their policy is the implementation of final beneficiary registries in member countries to combat corruption, tax evasion and money laundering.   The Group of Financial Action Task Force (FATF) has also issued recommendations to Costa Rica to combat money laundering which is consistent with the creation of final beneficiaries registry.

I have provided the full text of the Regulations translated to English below and you can view the original Spanish version here: Reglamento del registro de transparencia y beneficiarios finales


Regulations to create a registry of final beneficiaries for transparency
 

No. 41040 -H

THE PRESIDENT OF THE REPUBLIC,

THE MINISTER AND MINISTER OF THE PRESIDENCY

 

Based on the powers and powers granted articles 140 subsections 3) and 18) and 146 of the Constitution of 7 November 1949, Article 25 , paragraph 1), 28 , paragraph 2), paragraph b) of the Law No. . 6227, called General Law of Public Administration of May 2, 1978, as amended, and Law No. 4755, called Code of Tax Rules and Procedures of May 3, 1971 and Law No. 9416, called Law to improve the fight against tax fraud of 14 December 2016.

Considering:

I. That Chapter II of the Act to improve the fight against tax fraud, Law No. 9416 of December 14, 2016, raised the issue of transparency and beneficial ownership of legal entities and other legal structures, it requires rules and develop regulations requiring the content of its provisions.

II. That the recommendations of international organizations such as the Organization for Economic Cooperation and Development (OECD) and the Financial Action Task Force in Latin America (GAFILAT), agree that steps should be taken to make transparent the final beneficiary of legal persons and other legal structures in order to combat money laundering and terrorist financing, related crimes and meet commitments with other countries on international exchange of tax information.

III. The Group of Financial Action Task Force (FATF) has issued a series of recommendations which constitute an outline of measures that countries should implement to combat money laundering, terrorist financing and other related crimes, specifically recommendations 8, 24 and 25. These recommendations provide an obligation to identify the beneficial owners of legal persons and other legal structures including non-profit organizations, trusts and third – party resource managers, for that countries should ensure that competent authorities they can get timely access to appropriate and accurate information on the beneficial ownership and control of these structures.

IV. The Directorate General of Taxation requires access to information related to all shareholders, substantial holdings of legal persons and other legal structures, as well as the effective final beneficiaries or, in order to verify that these instruments are not used to conceal the true economic capacity of taxpayers, thus circumventing the management, control and collection of taxes.

V. That the GAFILAT has pointed the country in the Mutual Evaluation Report, the difficulties encountered when accessing, accurate and updated manner, basic information on the final beneficiaries of legal persons. On the other hand noted the absence of a register of trusts, which limits the accuracy and transparency of the persons who exercise effective ultimate control over these structures.

VI. The Organization for Economic Cooperation and Development OECD, the report Peer Review Phase 2, recommended the implementation of effective legal mechanisms to ensure the availability of relevant information to the final beneficiaries of legal persons, trusts and other legal structures, with a view to improving fiscal transparency and strengthen international mechanisms for information exchange.

VII. Under the agreement SUGEF 12-10 dated 3 December two thousand and ten, approved by CONASSIF, it was established that the obligors supervised by different Superintendents should ask their customers, who are legal persons, information on its shareholders in the percentage of participation, when this is equal to or greater than 10% of the shares of the client.

VIII. The International Standards on Combating Money Laundering and Financing of Terrorism and the proliferation issued by the Group of Financial Action Task Force (FATF), established by substantive involvement ownership shares and 25% as a minimum. In our country, the law to improve the fight against tax fraud Article 5 established a range of fifteen percent (15%) to twenty percent (25%) to determine the substantive participation with respect to the total capital of the legal person or structure, so that its fixing is done in this order.

IX. It is considered that the provision in Article 84a of the Code of Tax Rules and Procedures, reformed through Act to improve the fight against tax fraud, referring to the obligation of the National Registry not to register documents in favor of those fail to comply with the provision of the information is not applicable in the case of the presentation, qualification and registration of planes surveying own Cadastral Branch of the Land registry, as these are constituted as a pre-final registration step and they are not made in favor of a natural or legal person in particular, but to immovable property.

X. That Article 4 of the Citizen Protection Act of Excess Requirements and Administrative Procedures, No. 8220 of March 4, 2002, published in issue No. 22 to La Gaceta No. 49 of March 11, 2002 It provides that any procedure or requirement regardless of source regulations must be published in the Official Gazette.

XI. In compliance with Article 174 of the Code of Tax Rules and Procedures, the draft amendment was published on the website http://www.hacienda.go.cr in the “Proposals for public consultation” section, subsection “draft regulations tax “; in order that the bodies representing general corporate character or diffuse interests were aware of the project and may oppose its observations within following the publication of the first notice in the Official Gazette ten working days. Notices were published in the Gazette No. 125 of July 3, 2017 , and No. 126 of July 4, 2017 respectively.

This project was also published in the newspaper La Nacion on June 16, 2017, on page 20A. A second publication was performed by the same method given above, whose messages were published in the Gazette No. 241 of 20th December 2017 242 number of 21 December 2017, respectively. As the date of issuance of this order were received and attended projects observations indicated, being that this corresponds to the final version approved.

XII. The Ministry of Economy , Industry and Trade, through the Directorate of Regulatory Improvement, reviewed the present regulatory proposal and determined that it is not feasible to conduct a cost-benefit analysis, because most of the information required is in possession the managed. However, he noted that the general resolution that establishes requirements and procedures for recording information itself must go through prior control of the Directorate, as well as the overall resolution of the Costa Rican Drug Institute will eventually include new nonprofit profit as obligors.

XIII. That the drafting of this draft regulation a Task Force composed of officials from the Ministry of Finance, Instituto Costarricense on Drugs and the Central Bank of Costa Rica was appointed.

Therefore,

DECREE:

Regulations to create a Final Beneficiary Registry for Transparency

CHAPTER I

General disposition

Article 1. Scope. This Regulation regulates the mechanisms, operation, controls and access to the Registry   of Final Beneficiares and for Transperancy which have been established in the Law to Improve the Battle Against Fiscal Fraud and other aspects regarding the structure, technology and computer system security to be used.

Article 2. Definitions. For the purposes of these rules shall apply:

Tax Administration of the Ministry of Finance: The Directorate General of Taxation, Ministry of Finance.

Resource Manager third natural or legal person administering financial resources or assets on behalf or on behalf of another.

Administrator: The individual who exercises the legal representation of the legal person domiciled abroad.

Database: Repository shareholder information and final beneficiaries managed by the Central Bank of Costa Rica for the establishment of the Transparency Register and final beneficiaries.

Final beneficiary or effective natural person who exerts an indirect substantial influence or ultimate effective control, directly or legal persons or legal structures that have substantive participation or having the right to appoint or remove a majority of the governing bodies , direction or supervision, or having the condition monitoring under the statutes or exercises control through a chain of legal structures or through other means of control are not direct control, ie, exercise ultimate effective control over a corporation legal structure or chain of legal structures.

Legal chain structures: Association of legal entities among which there are participations or direct or indirect actions.

Total Capital: Totality of the units or shares that comprise 100% of the share capital.

Public consultation: Facility provided by the Transparency Register and Final Beneficiaries to see any individual personal information registered in your name.

Indirect control: Ability to have control over legal entities with participation in individual or national legal structure.

Control: Ability to influence the person or legal structure regardless of the degree of participation.

Due diligence: Actions designed to include taking reasonable steps, so that the legal representative identify and verify the beneficial owner , this must include knowledge of the structure of ownership, chain legal structure and control of the legal person, in order to fully identify the end of these beneficiaries.

Legal structure: A form of integration or partnership that merges your organization and exercise on legal grounds. It is including those that have not necessarily been formalized as legal persons but that do have capacity to act and take legal responsibility for their actions.

Public trust: that in which the trust estate comes from public resources and the settlor is an agency or entity. Resources can be state or borrowing from abroad.

Digital signature: Set attachment or logically associated with an electronic document, which verifies its integrity and unambiguously identifies its subscriber, linking both legally with the document.

Deadbeat list: Information generated by the Central Bank of Costa Rica in which the name and identification of subjects that violate the duty to provide information to the Transparency Register and Final Beneficiaries included.

Not – for-profit: In accordance with Article 6 of Law No. 9416 of December 14, 2016 is defined as that organization “whose activity is linked to the collection or disbursement of funds to meet charitable, religious purposes, cultural, educational, social, fraternal, or to carry out other types of “good works” including nonprofit organizations associated profit, understood these as foreign branches of international organizations non-profit. ”

Substantive participation: Corresponds to holding shares in a percentage equal to or greater than 15% (fifteen percent) of participation with respect to the total capital of the person or legal structure.

Software: computer instruction sequence, also known as source code, which is involved in the capture processes and consultation of confidential information in the registry system Transparency and final beneficiaries.

Transparency Register and Final Beneficiaries: System created and managed by the Central Bank of Costa Rica which aims to fulfill the obligations under the law to improve the fight against tax fraud and this regulation.

Legal representative: natural person who holds the position of President, Manager or Administrator of individuals or legal structures subject to these regulations. In the case of branches of foreign companies will be the generalissimo proxy.

Obligors: Legal persons or obliged to supply the information required by law to improve the fight against tax fraud legal structures.

CHAPTER II

Of the obligated parties and requirements to provide information

 

Article 3. Subjects which are obliged to supply information. It is the obligation of all individuals and entities that have been designated in Chapter II of the Law to Improve the Battle Against Fiscal Fraud (Ley para Mejorar la Lucha contra el Fraude Fiscal ) which are all corporate entities and other corporate structures located in the country as well as the administrators of funds from third parties, non profit organizations and any trusts that carry out activities in Costa Rica.

Article 4. Exclusions: The following are excluded from presenting the information set forth in Chapter II of the Law to Improve the Battle Against Fiscal Fraud:

a) Companies whose shares are traded on a stock market organized either domestic or foreign. In the joint resolution of general application referred to in Article 8 of this Regulation it shall specify the requirements for the application of this exclusion.

b) Public trusts.

c) In relation to its depositors, financial institutions supervised by the Superintendent of Financial Institutions, and legal entities, legal structures and resource managers from third parties authorized, regulated and supervised by the Superintendency of Securities or the Superintendent of pensions, which corresponds to its customers and investors.

d) The Executive, Legislature, Judiciary, Supreme Electoral Tribunal, centralized public entities, decentralized, autonomous, semi – autonomous and embassies.

Article 5. Responsible for providing information.  The individuals that shall be Responsible for providing the mandatory information is the physical person authorized by law to act in the name of those obligated, namely:

a) For legal persons and other legal structures, the legal representative.

b) For trusts, the trustee.

c) For third – party resource managers, legal representative, agent or person exercising the powers of attorney with powers of administration.

d) For non-profit organizations, the president or the person exercising the powers of representation.

For these purposes those designated as responsible representatives must have processed a valid digital signature certificate with an authorized digital signature authority in the country.

Article 6. Filing Information. To comply with the provisions of the Law to Improve the Battle Against Fiscal Fraud, those responsible for providing the information much  apply due diligence, for the information provided by:

a) Record the information necessary to identify all of the shares and final beneficiaries in the Final Beneficiaries Registry, the information provided will be for all legal purposes as an affidavit.

b) If within the information to be provided there is additional information about other parties domiciled in the country, then supplying all the information about the shares must be provided by the person responsible for providing information of the latter.

This does not exempt it from the obligation to perform due diligence in order to know and verify the final beneficiaries and retain supporting documentation.

c) If within the information declared by the respondent it is determined that it includes individuals or other domiciled legal structures located abroad, then it is the obligation to complete the information concerning all of the shares and the final beneficiaries of the latter. In the event that it becomes impossible to identify the beneficial owners then the provisions of Article 10 of this regulation shall apply.

Article 7. Determination of the final beneficiaries. The Central Bank of Costa Rica shall develop a Registry of final beneficiaries which will allow to automatically identify who the final beneficiares are of the those obligated to disclose, by way of the sworn statements provided by those responsible. Substantive based on the statements made by those responsible for providing the   information.

In strict compliance with the provisions of the law to improve the fight against tax fraud, until the chain of legal structures related is complete and settle the final beneficiaries, you will have none of the obligors of the supply chain has fulfilled with its obligations under articles 5, 6 and 7 of that Act.

Once the final beneficiaries have been identified, the Central Bank of Costa Rica through the Final Beneficiaries Registry shall provide confirmation to the party responsible that they are in compliance with the law.

Article 8. Joint Resolution of general application. The Directorate General of Taxation and the Costa Rican Drug Institute by   joint resolution of general application shall establish the requirements and procedures   whereby the information required in Articles 5, 6 and 7 Law must be provided to the Central Bank of Costa Rica. Likewise   the date on which the obligation to provide information must be provided and necessary for the application of the exclusion provided for in Article 4 of this regulation.

The Central Bank of Costa Rica will define with the Directorate General of Taxation and the Costa Rican Drug Institute the format, features, technical requirements and security in the filing of information to be included in the Final Beneficiaries Registry.

Article 9. Deadline for providing information. Those obligated to provide information under the law must do so an annual basis in accordance with the date established in the   joint resolution of general application in Article 8 of these Regulations.

The obligors that are formed after the date of annual compliance must provide the information within 20 working days of its formation, subject to the provisions of the preceding paragraph.

When it meets or exceeds the limit of substantive participation, those responsible for providing information must update the information within 15 working days from the date of entry in the Shareholder Registry.

The Final Beneficiaries Registry must issue proof of submission of the information.

Article 10. Participation of foreign legal entities or corporate structures domiciled abroad. In the case of legal persons or legal structures domiciled in Costa Rica, and whose  substantive participation of capital belongs to legal entities domiciled abroad the information about the Beneficial ownership of all the  shares of these companies and the powers granted to Costa Rica and the development of the activity of the company must be included in the Final Beneficiaries registry.

Where it is impossible to identify the final beneficiary of that legal person domiciled abroad, having exhausted all means to obtain information, it is presumed that the final beneficiary is the administrator of the company or legal structure.

The local representative is obliged to demonstrate, through an affidavit, the impossibility of identifying all of the shares of the legal entity domiciled abroad and that they have verified the records maintained by the society.

The affidavit must be completed directly on the Transparency Register and final beneficiaries and should include any of the following documents:

1) In those countries that have a Final Beneficiaries Registry or equivalent, must provide a certificate issued by the competent body showing that the record does not have such information or that social capital is composed of titles to the carrier.

2) Copy of incorporation of the company domiciled abroad duly certified by the competent authority to enable state that are bearer shares or partnership agreement for the modification of bearer shares.

3) Any other certified document issued by competent person or authority with public faith, which demonstrates the impossibility of identifying the final beneficiaries.

Documentation supporting the affidavit, must be kept in the original by the obligated parties should be required by the competent authority. All documents issued abroad must be duly consularized or apostille and no more than sixty days authorized.

CHAPTER III

Required information

Article 11. Corporations and other national legal structures. Legal persons and other legal structures must be registered in the Final Beneficiaries Registry also should include information to identify each of the shares and their final beneficiaries.

If the shares are associated with a chain of legal structures then those responsible for providing information must provide the information to identify each entry and the final beneficiaries in accordance with the stated in Article 6 of these regulations.

The resolution of general application referred to in Article 8 herein, the detail of the information to supply is established.

Article 12. General Information. All required parties must provide the information for the individual who   exerts a substantial influence or control, directly or indirectly on the legal person or   legal structure and, where appropriate:

1. Composition of the voting shares

2. Information on the person or persons that have the right to appoint or remove a majority of the administrative, management or supervisory body.

3. Information on who or who have control of the corporation according to the by laws.

4. Composition of shares.

Article 13. Trusts. Private and foreign trusts carrying out activities in the country should also be registered in the Final Beneficiaries Registry, including information   on the subject of the contract, the settlor, the trustee or fiduciary, trustee , or   trustees and other beneficiaries.

In the event that the settlor, the trustee, trustees or beneficiaries are a legal entity or legal structure, responsible for recording information must supply the Final Beneficiaries Registry, the data in accordance with the rules set out in Article 6 of this regulation.

The resolution of general application referred to in Article 8 herein, the detail of the information to supply is established.

Article 14. Administrators of Third Party Funds. In the event that the parties are a legal entity or legal structure, which is administering third party funds then they are responsible for   providing information to the Final Beneficiaries Registry, the   data in accordance with the rules setout in Article 6 of these regulations.

The resolution of general application referred to in Article 8 herein, the detail of the information to supply is established.

Article 15. Nonprofit Organizations. The non-profit organizations and their branches or subsidiaries of foreign organizations   international non-profit, must be registered in the Final Beneficiaries Registry. Responsible for providing information shall provide information   under Article 6 of the Act to improve the fight against tax fraud.

In cases where donors and recipients or beneficiaries of contributions or donations are a legal entity or a national legal structure, it will be sufficient data to identify them .

Where appropriate a legal person or legal structure domiciled abroad, the obligation to report in accordance with the rules of Article 6 of these regulations.

The resolution of general application referred to in Article 8 herein, the detail of the information to supply is established.

The Costa Rican Drug Institute shall define other non-profit organizations, national or international, which are obliged to meet the requirements set forth in the preceding paragraph. This appointment shall be made by a resolution by reference to an assessment of sector risks relating to money laundering and terrorist financing.

CHAPTER IV

Duties and powers of the Central Bank of Costa Rica

Article 16. The functions of the Central Bank of Costa Rica as administrator of the Final Beneficiaries Registr. The Central Bank of Costa Rica defined by internal procedures issued for   these purposes, technological and organizational structure, characteristics, access, operation and other conditions by which perform their duties   administration and operation of the Transparency Register and Final Beneficiaries, strictly   attachment to the responsibilities for the authenticity, integrity, reliability, confidentiality,  traceability and security, identified by Improvement Act Combat   Fiscal fraud.

Also you have the responsibility to define audit trails in order to provide traceability to the actions carried out in the Transparency Register and final beneficiaries. The Directorate General of Taxation and the Costa Rican Drug Institute, using security protocols established by the Central Bank, will define which units will have access to audit trails.

Article 17. The obligation to provide information to the Central Bank of Costa Rica. Public entities or any other responsible public institution must supply   information on the identification of natural or legal persons designated in Article 8   Law to Improve the Battle Against Fiscal Fraud, they must be provided as  Automated to the Central Bank of Costa Rica the data it requires in order to  verify, in real time, the identity of individuals and any other information   required for Transparency Register and Beneficial. In addition it should warranty that the information provided to the Central Bank of Costa Rica is delivered in formats,   structure and the characteristics that it shall define for this purpose.

In order to ensure the authenticity, integrity, reliability, confidentiality, traceability and information security, the Central Bank of Costa Rica establish the relevant requirements to be met by obliged to supply information institutions.

Article 18. Requests for information. The Central Bank of Costa Rica, through the Final Beneficiaries Registry, will provide functionality that allows the Ministry of Finance and the Instituto Costarricense  Drugs to request access to information authorized in the law to improve the fight against Fiscal fraud. For these purposes it shall be required that users have a valid digital signature certificate issued by a national certification authority.

 

For the attention of requests the Central Bank of Costa Rica must verify compliance with the requirements set out in Articles 9 and 10 of the Act to improve the fight against tax fraud and any breach shall reject the application.

Article 19.- Safety Requirements. To have the information included in the Final Beneficiaries Registry, the Ministry of Finance and the Costa Rican Drug Institute shall establish  guidelines for information security to ensure the integrity, reliability,   confidentiality, traceability, audit trails in compliance with the standards of the Banco Central de Costa Rica. To this end the Bank shall remit to the Tax Department and the Costa Rica Drug Institute the security procedures that must be implemented according to internationally recognized standards of confidentiality and whose compliance shall be verified by an external audit.

Article 20. The Statement of the Information Registry of Obligated Parties. Once the time frame established in Article 9 of this regulation for compliance by all obligated parties to the Final Beneficiaries Registry then the Central Bank shall supply the Tax Department with a report of all the sworn declarations that were filed indicating if they have complied with the law or not. This report shall be issued by way of a system to be developed by the Central Bank of Costa Rica and which the Tax Department shall have access.

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