In a continuous effort to enhance tax compliance and ensure financial transparency, the Costa Rican Tax Administration has introduced new criteria for utilizing information from the Beneficial Ownership and Transparency Registry. This latest development aims to strengthen the fight against financial impropriety and uphold international standards for transparency and accountability.
Starting in 2023 the Costa Rican Department of Revenue has issued criteria for utilizing the information contained in the Beneficial Ownership and Transparency Registry together with the new filing for the inactive companies D-195.
What is the Criteria used ?
- Timely Filing: Failure to submit the Beneficial Owner Declaration before its expiration (June 30, 2023) can lead to heightened scrutiny. Meeting deadlines is crucial to avoiding potential pitfalls and ensuring your business remains in good standing.
- Registered Names and Tax Status: Entities with a trade name registered in the Public Registry, but without proper registration as taxpayers with the Tax Administration, will be subject to closer examination. Proper alignment between registration and tax status is imperative.
- Associates in Tax Havens: Partners affiliated with entities reported in the Beneficial Owner Declaration Form, who are domiciled in “tax havens” or jurisdictions with limited cooperation and taxation, will come under increased scrutiny. This criterion seeks to uncover potential tax evasion strategies.
- Thorough Identification: Ensuring the comprehensive identification of individuals (both natural and legal) abroad with significant equity stakes (15% or more of the share capital) is pivotal. This step promotes accuracy and completeness in financial reporting.
- Individuals with Multiple Entity Ownership: Instances where an individual holds ownership in 50 or more legal entities warrant attention. This criterion helps monitor and address the potential concentration of influence and control.
- Unveiling Wealth Increase or High Patrimonial Status: Entities with assets registered in the Public Registry that indicate a “presumed increase in wealth” or reflect “high wealth” will be scrutinized further. This measure is designed to uncover any potential unexplained wealth or undue enrichment.
Navigating the Implications
These new criteria open the door to subjective interpretations and could result in arbitrary actions by the Tax Administration during potential audits of companies that own various assets registered in their name in the Public Registry.
As such if you are the owner of a Costa Rica company it is advisable to keep all your filings up to date and if you own multiple assets in your company to review them with your accountant or tax adviser in Costa Rica.
