June 15, 2017 by Tammy Hansen Snell
by Tammy Hansen Snell and Rosario Araya Arroyo
Tip: Put a reminder on your calendar for each January going forward that if the annual corporate tax is not paid prior to 31 January, fees/interest will accumulate until it is paid.
UPDATE: January 2019
The tax on corporations for 2019 is due by the end of January 2019. Payments made after that date will be subject to interest charges and fees. The amount in colones for this year is 66,930 colones for each inactive corporation, and is best paid in person at any Costa Rican bank. Give your corporation’s identification number to the bank teller and let them know you want to pay the annual tax on corporations. (Amounts for active corporations vary depending on the corporation’s income.)
UPDATE: January 2018
The tax on corporations for 2018 is due by the end of January 2018. Payments made after that date will be subject to interest charges and fees. The amount is approximately $116 (approximately 64,000 colones) for inactive corporations, and is best paid in person at any Costa Rican bank.
HOW DO I PAY?
Paying in person at any of the Costa Rican banks is recommended. Take your corporation’s I.D. number with you and tell the bank employee that you want to pay the annual corporate tax. It is also expected that people will be able to pay via the online banking systems for any of the various Costa Rican banks. Check for options relating to payments for Tributación or Hacienda.
WHAT IS THIS I HEAR ABOUT A REQUIRED FORM?
In addition to the tax, all inactive* corporations which want to remain inactive will need to fill out a D-140 form stating that they wish to remain inactive. (*Inactive in this case means the corporation is not in a business which requires ongoing income reports and payment of income taxes.)
The law states that this D-140 form must be signed by a representative of the corporation, the signature of the representative must be authenticated by a notary or a lawyer, and in our Central Pacific Coast region it must be turned in at the office for Tributación in San Isidro.
Those corporate officers unable to sign the form in Costa Rica can work with an attorney who is also a Public Notary in order to name a proxy to act on behalf of their corporation.
Due to the enormous amount of corporations in Costa Rica, the government is asking that corporations file their D-140 form in a specific month in order to spread out the impact on the Tributación office. The “deadline month” depends on the last number of the corporate I.D.:
For corporate I.D. numbers ending in 1 or 2 which existed prior to October 2017, the form was to be done prior to the end of the month of October 2017.
For corporate I.D. numbers ending in 1 or 2 which came into existence AFTER October 2017, the form must be done in February 2018.
For corporate I.D. numbers ending in 3, the form must be done in March 2018.
For corporate I.D. numbers ending in 4, the form must be done in April 2018.
For corporate I.D. numbers ending in 5, the form must be done in May 2018.
For corporate I.D. numbers ending in 6, the form must be done in June 2018.
For corporate I.D. numbers ending in 7, the form must be done in July 2018.
For corporate I.D. numbers ending in 8, the form must be done in August 2018.
For corporate I.D. numbers ending in 9, the form must be done in September 2018.
For corporate I.D. numbers ending in 0, the form must be done in October 2018.
Filing the D-140 form in the appropriate month is important. A fine equal to $400 per month will be charged for each month late a corporation’s form is, up to a maximum fine of $2400.
All new corporations being created will need to complete the D-140 form after their corporation has been inscribed and given an I.D. number. Newly created corporations will pay a pro-rated amount of the annual corporate tax.
WHEN DID THE CORPORATE TAX COME BACK?
Beginning in September 2017, corporations in Costa Rica began to again be required to pay an annual tax. After certain articles in the previous corporate tax law were declared unconstitutional in 2015, the presumption was that it would be rewritten, which it was. The new version, Law #9428, was passed into law 22 March 2017, and went into effect 1 September 2017. If you’d like to read more about this law and its “reglamento” in Spanish, you can find a .pdf of the law here, and a document put together by the Ministerio de Hacienda here.
WHO HAS TO PAY?
All corporations – whether active or inactive – will be required to pay this corporate tax, but the amount of tax paid will be lower for inactive corporations. As a general rule, active corporations are those running a business and which are required pay taxes in addition to the annual corporate tax. Inactive corporations are those which exist to be the owner of property such as a real estate asset or a vehicle.
WHEN DO I PAY?
Each year the annual tax on corporations will be payable as of 1 January, and due by the end of January.
WHAT ABOUT NEW CORPORATIONS?
New corporations will be required to pay the tax within 30 working days after their initial inscription in the Public Registry.
WHAT WILL THE AMOUNT BE?
The corporate tax is calculated using a certain percentage of the base monthly salary for a judicial administrative assistant, which is currently reported to be 426,200.
NOTE: The following table shows expected payments for both active and inactive corporations, including dollar amounts calculated using an exchange rate of 550 colones.
WHAT IF I DON’T WANT MY CORPORATION ANYMORE?
The new law is allowing corporations which have been considered inactive for at least 24 months prior to Law 9428 being enacted to have a one-year exemption from paying the transfer tax in order to allow time for these corporations to transfer their assets either to a private individual or to another corporation, and then be dissolved. While the usual government tax applied to transfers will not be charged, you will have to pay your legal fees for executing the transfer. So, if you have a corporation for owning your car and decide you would rather transfer ownership of the car into your personal name rather than pay the annual corporate tax – make this transfer and dissolve your corporation within 1 year of the law going into effect, and you will not have to pay the new corporate tax or the usual taxes associated with transferring an asset. The legal cost for dissolving the corporation will be your responsibility.
NOTE: Many people start a Costa Rican corporation in order to hold their assets as a way of protecting themselves from liability. Before you decide to dissolve your corporation, consider whether or not you still want that protection.
WHAT IF I OWED PAST CORPORATE TAXES?
If you paid some but not all of the corporate taxes due during the 2012 to 2015 timeframe, the new law allows the government to dissolve your corporation.
Bear in mind that past-due corporate taxes in Costa Rica constitute a legal preferred mortgage situation. If you did not pay any of the corporate taxes due for 3 consecutive years when the previous law was in effect (2012 to 2015), you need to know that the public registry is currently exercising its legal right to dissolve corporations in this position and place a lien on their assets, based on Article 6 of Law 9024. (For more information check out our article on this – Is Your Corporation In Danger Of Being Dissolved For Non-Payment Of Corporate Taxes?)
It is important to keep in mind that this can also happen in the future with the new law since Article 7 of Law 9428 sets up the same potentiality: if you do not pay corporate taxes for 3 years in a row, the government is within its rights to dissolve the corporation and place a lien on its assets.
NOTE: If your corporation has been dissolved due to the non-payment of corporate taxes for a consecutive 3-year period, that DOES NOT MEAN that your corporate tax debt has been eliminated. The officers of the corporation could end up being held accountable by the government and required to pay the past-due amounts.
WHAT IF THE CORPORATION DOESN’T HAVE ANY ASSETS TO GO AFTER FOR COLLECTING THE TAX PAYMENT?
The old law, 9024, states that the representatives or officers of the corporation can be deemed personally responsible for the payment of the past-due corporate taxes. The new law, 9428, adds that in addition to the officers, the shareholders can also be held responsible.
WHAT IF I WANT TO RESIGN AS A REPRESENTATIVE, OFFICER, MEMBER OF THE BOARD OF DIRECTORS, OR FISCAL OF A CORPORATION?
Legal representatives, officers, members of the Board of Directors, and the fiscal of a corporation can unilaterally decide to resign their positions through an “acta,” which means it needs to be done through a legal document drawn up by a notary.
NOTE: In order for someone to resign their position from a corporation – the corporation must be up to date on corporate taxes and their resignation must take place within 24 months after Law 9428 goes into effect.
WHEN DID THE NEW LAW GO INTO EFFECT?
1 September 2017.
NOTE: Corporations that are not current on payment of the annual tax on corporations will not be able to have any documents inscribed in the Public Registry (such as title transfers due to sale/purchase), and will not be able to obtain a certified copy of the Personería Jurídica (document listing the legal representatives of the corporation) until the corporate taxes are up to date.
WHAT WILL THE MONEY RAISED BY THIS TAX BE USED FOR?
90 percent of the tax receipts will be used for public security.
5 percent will be used for the prison system.
5 percent will be used for the organized crime task force.
Filed Under: Corporate Law