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Costa Rica Taxes – Frequently Asked Questions

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costaricataxquestionsCosta Rican Taxes – Frequently Asked Questions

1.   When Does the Fiscal Year End in Costa Rica ?

The fiscal year in Costa Rica begins on OCTOBER 1st and ends on SEPTEMBER 31st.  [Aritcle 4 Income Tax Law]

2.  Do the accounting books of the corporation have to be legalized ?

Yes.  The corporation must have a General Ledger, Daily Ledger and Inventory and Balances book.  All which must be legalized by the Legalization Department of the Ministry of the Treasury. [Resolution. Ministry of Treasury 09-2010]

3.  What is the fine for filing a late income tax return.

The fine is half of the salary of a government employee.  All fines in Costa Rica are based upon the base salary of a government employee categorized as “Oficinista 1” or “Administrative Assistant 1”  The Salary is adjusted every six months.   On January of 2011 that Salary was 316,200 Colones

4.   What is the fine for late payment of the tax due.

The outstanding balance will accure interest at the rate of 1% per month.  [Article 80 Costa Rican Tax Code]

5.  What is the Statue of Limitations for Tax Liability ?

The Statue of Limitations is 3 years.   The Statute of Limitations may be extended to 5 years if the individual or company was not registered as a taxpayer or if the taxpayer submitted false declarations.   [Article 51 Tax Procedures and Norms]

6.  I have income from activities carried outside of Costa Rica.  Do I have to declare that Income.

No.  Costa Rica uses the territorial concept of taxation which means that it applies taxes on income derived from Costa Rican sources.  [Art. 1 Income Tax Law No. 7092]

7.  Can the Taxpayer request an extension to file the income declaration ?

No.  Costa Rican tax law does not have any provisions to extend the filing deadlines.

8.    How do I find out if I have an oustanding balance with the Tax Department.

The taxpayer must appear in person with property identification and request a statement of account.  The taxpayer may confer an authorization to any third party to appear on their behald but the authorization must be autenticated by an Attorney.

9.   What is the amount of Tax due when paying dividends from Costa Rica to the home office of the corporation ?

All branches, agencies or permanent offices in Costa Rica of foreign corporations are subject to a 15% remittance tax on funds sent to the home office.  In these cases the local branch should reatain the 15% and pay it to the Treasury.   Those companies that are registered under the Free Trade Zone law are exempt from the foreign remittance tax.  [Article 19 Income Tax Law]

10.  Does Costa Rica Tax Stock Options given to Employees ?

Yes when the stock price given is below market value.  In that case the price difference that benfits the worker must be taxed with the flat tax above the earining received by the employee as salary.  This is considered a salary bonus and the retention rate applies is 15% of the gross income received which in the case of stock ptions woulde be the difference in the price of the share of the stock.


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