Legal Ease – Annual Tax Over CR Corporations

Legal Ease – Annual Tax Over CR Corporations

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The Costa Rican government recently published Law 9428: “Tax over legal entities” to be enacted on September 1, 2017.

Law 9428 states that all corporations, subsidiaries, and limited liability companies that are currently registered before the National Registry, as well as all entities incorporated in the future, will be subject to pay an annual tax. This tax must be paid on or before January 30 of each year.

The objective of this law is to increase funding for the Ministerio de Seguridad, Justicia y Paz (Ministry of Security, Justice, and Peace) as well as the Organismo de Investigación Judicial (Judicial Investigation Bureau).
There will be a fixed fee for inactive corporations and a progressive rate for active corporations depending on their income. As of today, the fees will be as follows:

Type of corporation Rate* and fee
Inactive before CR Tax Office and/or with economic activity but without reported income 15% of base salary

(¢63,930) (~$115)

With economic activity and gross income under ¢50,880,000* 25% of base salary

(¢106,550) (~$190)

With economic activity and gross income between ¢50,880,000 and ¢118,720,000* 30% of base salary

(¢127,860) (~$230)

With economic activity and gross income over ¢118,720,000* 50% of base salary

(¢213,100) (~$380)

**Estimates based on the base salary of an administrative assistant in the Judicial Sector in 2017. The base salary and the gross income amounts will be adjusted yearly

Do I need to pay in 2017?
Yes, but only the prorated amount corresponding to the time left in 2017 from the moment the new law is enacted (September, October, November, and December). Starting in 2018, the fee will correspond to the full 12 months of the year.
How will the payment be made?
The procedures and conditions for payment will be established by the CR Tax Office. The tax will not be a deductible expense when determining income tax. For corporations that are already registered, the tax will be applied beginning on January 1. These corporations will have to pay within the first 30 days following January 1 of each year. For corporations registering during the fiscal year, the tax will apply at the moment the deed is presented before the National Registry. These corporations will have to pay within the first 30 days following the date of registration with the National Registry.
What happens if I do not pay?
Sanctions and penalties established in the Código de Normas y Procedimientos Tributarios (CR Code of Taxation Rules and Procedures) will apply. Additionally, the National Registry will not issue, certify, or register any documents for the corporation. Furthermore, overdue corporations will not be able to contract with the government or any public institution. If the tax is not paid for three consecutive years/periods, the corporation will be dissolved. The CR Tax Office will create a database that can be consulted electronically so that the public can verify whether tax payments are up to date or outstanding.
At GM Attorneys, we will be more than glad to analyze with you the best course of action on your specific scenario.