December 9, 2016 by Pacific Coast Law
When Law 9024 went into effect on December 23, 2011, it established a tax for commercial companies, branches of foreign companies or their representatives, corporations, and individual corporations with limited liability which were inscribed in the National Registry. This tax had two rates: one for entities which were registered as active before the Tax Authority, meaning the Ministry of Finance, and another for those who did not carry out commercial activities and were registered as inactive. The exact amount of the taxes varied slightly, but for example in 2015 this tax came to about $380 annually for active corps, and $190 for inactives, assuming of course prompt payment with no penalties or interest. It had to be paid each year in one of the nationwide branch offices of Banco de Costa Rica within the 30 calendar days following the 1st of January; which is to say no later than the 31st of January.
The proceeds from the collection of this tax were destined to finance the following items:
- 5% to the Ministry of Justice and Peace to finance the proper administration, management, oversight and collection of the tax by the National Registry and to support the financing of the General Directorate of Social Adaptation.
- 95% to the Ministry of Public Security for investing in its public safety programs and to fight against crime.
However, articles 1, 3, and 5 of Law 9024 Taxes on Legal Entities were declared unconstitutional by Constitutional Court Resolution No. 1241-2015 on January 28, 2015, suspending the collection of the tax on corporations, which included: Limited Liability Corporations, Limited Partnerships, Privaty Equity Partnerships, Individual Limited Liability Corporations, and also every branch of a Foreign Company or its representative.
The Constitutional Court timed the declaration of unconstitutionality the way it did to avoid serious tax or fiscal consequences to the country, and for that reason all the corporations had to pay the tax up through the fiscal period of 2015. However, as of fiscal year 2016, they did not have to pay it.
In spite of this situation, to date a large number of corporations owe taxes from one or more of the fiscal periods between 2012 and 2016, when the law was in place. Because of this, the National Registry is authorized to comply with the provisions of Article 6 of Law 9024 Taxes on Legal Entities which states:
Article 6.- Dissolution and cancellation of registration. Failure to pay the tax established in this law for three consecutive periods shall be grounds for dissolution of the corporation, individual limited liability corporation or branch of a foreign corporation or its representative (emphasis added)
The National Registry will send the notice of dissolution to the official newspaper, La Gaceta, in accordance with article 207 of the Commercial Code, and after a set deadline will proceed to the cancellation of the corporation’s registration and an inventory of its assets. The notice in La Gaceta shall be published ONLY ONCE, in accordance with the aforementioned Article 207, announcing that the corporations in question are being given a period of THIRTY DAYS in which interested parties can appear before the relevant authority to speak against such dissolution. After the deadline, the registry will proceed to the dissolution of the corporations which have not paid the past-due corporate tax.
Due to the implementation of Article 6 of Law 9024 Taxes on Legal Entities, owners of corporations delinquent on taxes are asking themselves what will happen with the property, furniture, or real estate held in the name of the corporations which owe these back taxes.
Article 209 of the Commercial Code states: “Once the corporation is dissolved, it will enter into liquidation, retaining its legal status for this purpose.” That is to say, the assets registered in the names of these corporations would have to be liquidated by the person (liquidator) named by the Court in which the proceedings are carried out. A legal mortgage or legal pledge of payment will be borne by the liquidator for the purpose of guaranteeing first and foremost the payment of what is owed in corporate taxes.
Along the same lines, Article 210 of the Commercial Code further states that: Liquidation shall be borne by one or more court-appointed liquidators, who shall be the managers and legal representatives of the corporation in liquidation, and they shall be liable for the acts they perform if they exceed the limits of their position.
An important point that must be taken into account, according to statements made in conversations with representatives of the National Registry of Costa Rica: Since there is currently no administrative guideline or court decision detailing the procedure itself, once the corporations have been published in one of the lists submitted to the official newspaper, La Gaceta, and thereby considered officially notified, their liquidation can only be stopped by an order from a Judge. This makes it very important for interested parties to make every effort to contact the appropriate judicial authorities WITHIN THE 30-DAY TIMEFRAME, otherwise it will not be possible to stop the liquidation process even if the amount owed in corporate taxes plus interest is paid.
It is important to share and broadcast this information so that the owners of corporations delinquent on corporate taxes know what they are facing if they do not pay the taxes owed by their corporations.
Frequently Asked Questions
The following links show some of the lists of corporations which have been published in the official newspaper La Gaceta.
Note: These are not the only lists. The National Registry continues to send more lists to La Gaceta containing the names of corporations found to be delinquent due to the non-payment of corporate taxes.
Filed Under: Corporate Law