New “Tax on Corporation” is approved by Congress.

This law reinstates the “Tax on Corporations” that had been eliminated in 2015 by the Constitutional Court. It will become into effect three months after the corresponding Bylaws (Reglamento) is published in La Gaceta.

 

This past March 21st, the Costa Rican Congress has given second debate and final approval the law that has reinstated the “Tax on Corporations” which had been eliminated by the Constitutional Court back in 2015. This new law has already been publish in La Gaceta (Official Newspaper) and it will become into effect three months after the corresponding Bylaws (Reglamento) is published in La Gaceta.

The “Tax on Corporations” (not to be confused with Income Tax on Corporations) is a tax that is assessed over all mercantile entities, such as corporations, limited liability companies, agencies of foreign corporations or companies, etcetera.

It is a yearly tax to be paid during the 30 calendar days following January 1st. For this year, 2017, the tax shall be paid during  30 calendar days following the date on which the new law becomes into effect.

The tax is calculated using as a basis the Base Salary paid in the public sector, which currently is equivalent to -426,200.00 colones (around USD$770.71 using an exchange rate of 553 colones per dollar)

The new brackets for this tax are as follows:

Condition of the corporation Tax to be paid (1)
Inactive (must be registered as inactive with the Tax Administration) 63,930.00 colones (around $115.61)
Active, with income per fiscal year less than 51,144,000.00 colones (around $92,484.63). 106,550.00 colones (around $192.67)
Active, with income per fiscal year between 51,144,000.00  colones (around $92,484.63) and 119,336,000.00 colones (around $215,797.47) 127,860.00 colones (around $231.21)
Active, with income per fiscal year over 119,336,000.00 colones (around $215,797.47) 213,100.00 colones (around $385.35)

(1) Exchange rate is estimated at 553 colones per U. S. dollar.

For the year 2017, the tax will be paid on a prorated basis for the period going from the date on which the law becomes into effect to December 31 of 2017.

Let’s review some of the main points of the new law:

1)- The tax has to be paid by all mercantile entities (whether “Sociedad Anónima”, “Sociedad de Responsabilidad Limitada”, “Sociedad en Comandita” o “Sociedad Colectiva”) as well as by the agencies or representatives of foreign corporations registered in the country.

2)- Micro and small business registered as such before the Ministry of Economy, Industry and Commerce (MEIC),  and the small and medium agricultural producers registered as such before the Ministry of Agriculture and Livestock (MAG) are exempted from the payment of the tax.

3)- In case of late payment, the typical penalties and late payment interests established in the national tax regulations will apply.

4)- If a corporation is in arrears in the payment of the tax, the National Registry will deny the issuance of certificates of good standing, representation certificates and literal information certificates of the corporation, and no transactions related to said corporation (such sale or purchase of properties or vehicles) will be processed or registered by the National Registry. Likewise, such corporation in arrears may not enter into contracts with the Costa Rican State or any governmental entity.

5)- Debts for this tax will create a preferred lien over the assets of the corporation for the payment of the tax. If a corporation does not pay the tax during three consecutive years, the National Registry will dissolve the corporation.

6)- The legal representatives and the stockholders of the entity now become liable for the payment of this tax if it is not paid by the entity and the Tax Administration may pursue the payment against assets of such legal representatives and stockholders of the entity.