When interacting with the Costa Rican tax authorities it often requires designated representatives to act on behalf of companies or individuals. One crucial aspect of this process is the issuance of special powers of attorney, empowering specific individuals to represent the company in tax-related affairs. Recently, the General Tax Directorate responded to a letter, MH-DGT-DR-OF-0063-2023, dated May 2, 2023, seeking guidance on the validity of such powers granted by a shareholders’ assembly. In this blog post, we explore the importance of special powers of attorney in corporate tax matters and how they impact tax compliance.
The Factual Background:
The letter addressed to the General Tax Directorate stems from concerns raised by the Tax Administration of West San Jose. The central issue revolves around the criteria required to grant a Special Power of Attorney to obtain a Taxpayer identification number (NITE). The Tax Department had been accepting special powers of attorney granted by a company’s shareholders’ assembly through the certified protocolization of that shareholder meeting certified by a Notary Public. The letter also seeks clarification on whether a certified copy of a foreigner’s passport is required during the assignment of a Tax Identification Number (NITEI). Additionally, various other tax-related questions were raised, prompting a meeting with Collection Directorate officials on May 23, 2023, to address these inquiries comprehensively.
Opinion of the General Tax Directorate:
Before delving into the specific inquiry, the General Tax Directorate lays the groundwork by defining “mandates” as formal authorizations granted by individuals, either natural or legal, to allow third parties to act on their behalf. This authorization is documented in a “power of attorney.” The Directorate further categorizes powers of attorney into four types based on their scope:
- Poder Generalissimo: The broadest form of power, enabling the attorney-in-fact to conduct any legal business on behalf of the grantor, with a few exceptions such as personal acts or acts requiring a special power of attorney.
- Poder General: This grants the attorney-in-fact general administration powers related to specified businesses mentioned in the document.
- Poder Especial: This type is limited to specific acts as specified in the power and restricts the attorney-in-fact from exceeding defined limits. In cases where registration is necessary, it must be executed in a public deed but does not require registration in the National Registry.
- Poder Especialisimo: Extremely specific and limited in scope, typically addressing highly personalized matters.
Regarding the authority to grant these powers, the General Tax Directorate clarifies that in the case of legal entities, the shareholders’ assembly or shareholders have the authority to issue powers of attorney. The same applies to designated legal representatives. In contrast, for natural persons, only the individual themselves or a previously appointed attorney-in-fact can grant powers of attorney.
Impact on Costa Rica Company Tax Matters:
One of the critical issues addressed in the letter pertains to Tax Identification Numbers (NITE). According to Directive DR-DI-07-2014, NITE is exclusively issued to natural persons and cannot be assigned to legal entities. Therefore, only non-domiciled natural persons in the country can request NITE. If the interested party cannot personally carry out the procedure, they must grant a power of attorney to a designated individual to act on their behalf.
In conclusion, the response from the General Tax Directorate highlights the significance of special powers of attorney in corporate tax matters. Understanding the various types and scopes of powers of attorney is crucial for companies to ensure compliance with tax regulations. For tax matters involving NITE, the proper representation is essential, and the correct usage of powers of attorney can facilitate smooth tax operations.
Full text of the legal opinion is included below.
In response to the MH-DGT-DR-OF-0063-2023 letter dated May 2, 2023, submitted via email, requesting guidance on the validity of a special power of attorney granted by the shareholders’ assembly of a company, the following response is provided:
I. Factual Background The consultant explains that they are seeking guidance from the General Tax Directorate due to concerns raised by the Tax Administration of West San Jose regarding the criteria established by the Collection Directorate regarding the presentation of special powers of attorney granted by the shareholders’ assembly of a company through the protocolization of a meeting record. They also request clarification on whether a certified copy of a foreigner’s passport must be presented when processing the virtual or in-person assignment of a Tax Identification Number (NITEI). Additionally, they raise various other questions.
To address the different inquiries included in the consultation, a meeting was held with officials from the Collection Directorate (DR) on May 23 of the current year. During the meeting, the specific doubt was raised about the scope of the powers of the shareholders’ assembly or shareholders of a company to grant a special power of attorney allowing the legal representative of a company to request the NITE from the Tax Administration.
II. Specific Inquiry and Opinion of the Consulting Directorate Based on the meeting held on May 23, the Collection Directorate requests the General Tax Directorate to define whether a shareholders’ assembly or shareholders of a company can grant a special power of attorney on behalf of the legal representative of the company for a third party to request the NITE from the Tax Administration. The Collection Directorate believes that such authorization is not valid, but this opinion is not shared by the ATSJO (the consulting party). Therefore, the ATSJO requests the General Tax Directorate to define the correct criterion.
III. Opinion of the General Tax Directorate Before providing an answer to the specific topic of the inquiry, the General Tax Directorate finds it necessary to outline some important considerations related to the subject matter of the consultation.
Mandates, as defined in the Civil Code, are formal authorizations granted by a person, whether a natural or legal person, to allow a third party to act on their behalf. The document in which the granted authorization is recorded is called a power of attorney.
According to the definition of the mandate, as expressed by BRENES CORDOBA in “Tratado de los Contratos” (1998, Editorial Juricentro, page 207), a mandate is a form of contract that arises from the need to entrust someone with the performance of matters that, due to absence, incapacity, or unsuitability, one cannot attend to personally. It also arises from the feeling of trust that others’ probity usually inspires. Thus, a mandate is a contract in which one person represents another in a specific business or matter.
In a mandate contract, there are at least two correlative parties: the mandator (or grantor) and the mandatary (or attorney-in-fact). The mandator is the one who grants the mandate, while the mandatary is the one who must carry out the authorized mandate.
There are various types and scopes of mandates, and the Civil Code establishes the following types of powers of attorney:
a. Poder Generalisimo: This is the broadest type of power of attorney, where the grantor authorizes the attorney-in-fact to carry out any type of legal business on their behalf, including but not limited to selling, mortgaging, alienating, or encumbering all kinds of property; accepting or renouncing inheritances; managing matters judicially or administratively; entering into all kinds of contracts; and executing all other legal acts that the grantor could do, except those acts that, according to the law, must be executed by the owner in person (personal acts), or acts for which the law expressly requires a special power of attorney.
b. Poder General: This power grants the attorney-in-fact broad and general administration regarding the business or businesses mentioned in the document, allowing the attorney-in-fact to carry out the actions established in article 1255 of the Civil Code.
c. Poder Especial: In this case, the attorney-in-fact is only authorized to perform the specific acts specified in the power, and they must act on behalf and in representation of the grantor. However, they cannot exceed the limits defined in the power. If the power is intended for registration purposes, it must be executed in a public deed, but it does not need to be registered in the National Registry.
d. Poder Especialisimo: This is a very specific and limited power that applies only to the act for which it was granted, usually a highly personal matter.
It is important to consider that general and generalissimo powers must be granted in writing and must be registered with the National Registry to be effective against third parties, with the effects taking place from the date of registration.
Now, concerning who is authorized to grant these powers, as mentioned above, the grantor or the party that requires representation for a specific act or business, whether a natural or legal person, must expressly grant the mandate.
Thus, the Commercial Code, in articles 89, 91, 93, and 94, specifically refers to Limited Liability Companies (S.R.L) and states that the shareholders have the competence to appoint one or more managers responsible for carrying out their administration. These managers may have general or generalissimo powers, which take effect after being registered, and they can only be delegated if the company’s articles of association expressly permit it. Similarly, in the case of Joint Stock Companies (S.A.), the administration will be directed by a board of government or a board of directors (president, secretary, and treasurer) elected by the company’s shareholders. The representation, both judicial and extrajudicial, is assigned to the president or the person determined in the articles of association, as stipulated in articles 181 and 182 of the mentioned code. Additionally, regarding the powers of the shareholders’ assemblies of an S.A., the Commercial Code, in article 152, defines them as the supreme body of the company expressing the collective will in matters within its competence.
Therefore, from the aforementioned regulations, it is evident that, in the case where the grantor is a legal person, the shareholders’ assembly or shareholders are authorized to issue powers of attorney. The same applies to designated legal representatives. Thus, both the legal representative and the shareholders’ assembly or shareholders can grant powers of attorney for a third party to act on behalf and on behalf of the company.
However, if the grantor is a natural person, only that person or a previously appointed attorney-in-fact can grant powers of attorney for a third party to act on behalf and on behalf of the natural person.
Based on the above information and in response to the specific topic consulted, when requesting a Tax Identification Number (NITE) from the Tax Administration, it should be considered that, according to Directive DR-DI-07-2014, the NITE is exclusively issued to a natural person, and it is not registered or assigned to legal persons. Therefore, the NITE can only be requested by a non-domiciled natural person in the country, and if the direct interested party does not carry out the procedure personally, they must grant a power of attorney to the person who will perform the procedure on their behalf.
In conclusion, the General Tax Directorate asserts that although the shareholders’ assembly or shareholders have the authority to issue a
Therefore, the General Tax Directorate concludes regarding the specific consultation that, although the shareholders’ assembly or shareholders are authorized to issue a mandate, it only allows the attorney-in-fact to carry out specific actions on behalf of or in representation of the company and not on behalf of any natural person, such as the legal representative. In the case where the legal representative of a company is a non-domiciled individual in the country and requires the issuance of an NITE, it is specifically the legal representative, as a natural person, who must personally carry out the procedure or authorize a third party through the respective power of attorney.
With this response, the raised consultation has been addressed.
Sincerely, [General Tax Directorate]