Saturday, February 11, 2012

The New Corporate Tax YOU Need to Know About

 Costa Rica has approved an annual tax on all corporate entities registered in Costa Rica.  The  law comes into effect on April 1, 2012.  The amount of the tax is  180,330 Colones [US$ 357] for active corporations and  90,175 Colones [$178.50] for inactive corporations. The amount of tax to be paid is actually based upon the base salary of a government employee.  Active is 50% of base salary and inactive is 25% of base salary.  As such the amounts will change as the base is adjusted.  Also keep in mind the exchange rate as well.

An active company is one that is engaged in business transactions and registered with the tax company.   An inactive company is generally a holding company that holds title to a property or vehicle and does not carry out any commercial activities.

For 2012 the the tax will be due by April 1, 2012  and after that it will become due on January 1st of each year.  For 2012 the amount to be paid will be prorated.

Those of you with Corporations in Costa Rica have 3 options:

1.  Pay the Tax.

2.  Transfer the asset and dissolve the corporation.  For this purpose the law is exempting from transfer taxes and registration fees for a one time transfer to an individual or another corporation.   Likewise, corporations that are dissolved during the months of April, May and June will be exempt from paying the tax.

3. Resign as Officers and Directors.  To avoid personal liability the officers and directors with legal representation of the corporation will have one (1) year in which to resign from their positions and record the resignation in the corporate registry.

The Issue of Personal Responsibility of Corporate Officers and Directors
One of the hideous parts of the law is that it transfers to the corporate officer or director that has the legal authority over the corporation the liability for any outstanding annual tax fees.   The law allows these corporate officers or directors a period of one year - until April 1, 2013 to resign from any corporate positions they may be on to avoid the personal liability.  To do so they must first serve notice at the legal domicile of the corporation of their resignation. Then they must appear before a Notary Public to document the resignation and have the Notary record it in the National Registry.

Automatic Dissolution For Non-Payment
The law has a provision which imposes a mandate to the corporate registry to automatically dissolve any corporation which has three (3) payments (3 years) in arrears.  

Exemptions to the Tax
The law has an exemption for those taxpayers which carry out permanent productive activities as micro and small businesses which have been duly registered as such before the Ministry of Economy, Industry and Commerce (MEIC).

Voluntary Dissolution
The law provides for the voluntary dissolution of a corporation when there is a unanimous approval to do so by the corporate shareholders.  In the past the formal voluntary dissolution of a corporation was cumbersome and expensive and hence rarely done.  The law will allow a Notary Public to dissolve a corporation when requested to do so by all the shareholders of the corporation.

The Exemption from Transfer Taxes and Stamps to Transfer Assets
When you transfer real estate in Costa Rica you trigger a transfer taxes, registry fees and stamp of about 2.3% for vehicles that amount is about 3.3%.  The law will exempt a one time transfer for a period of six months the transfer of assets held in corporations which are transferred to an individual or another corporation.



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We would like to thank attorney Roger Petersen of CostaRicaLaw.com for his permission to reprint this article posted on his website.  

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