In a previous article we published on July 5th, 2019 we explained about the creation of a “Registry of Transparency and Final Beneficiaries“, which made becoming necessary to report to the Central Bank of Costa Rica who the stockholders on every corporation existing in Costa Rica are. A calendar was established depending on the last number of Corporate ID number, between September 2019 and January 31st. Later authorities tried to be more flexible by establishing that the final deadline for all corporation to comply with this rule was January 31st, 2020. Failure on the filing will bring fines starting around US$2,300.

The new regulation indicated that the legal representatives e.g.- President on SAs and Manager on Limitadas or LLCS could perform the report as long as it was done online using a digital signature card. That’s similar to a debit or credit card with a chip that can only be given to citizens or legal residents. To perform the report, it is also required to be computer literate and understand Spanish, visiting the website named Central Directo. Because of that, several expats decided to grant a special POA to a law firm or accountants that decide to provide the service.

As informed, the deadline expires this Friday January 31st. Statistics updated at the beginning of this month show that as much as sixty percent of the corporations had not filed the report, which makes it easy to conclude when the final date is reached probably half the corporations will be in default. Consequences for not complying are that Registro Nacional will not issue “personerías” or legal representation certificates, and severe fines will be imposed, to name a couple. In my opinion, the “last minute compliers” might cause the system’s collapse during the week, especially on the last day indicated above.

One interesting fact is that January 22nd in the official Gazette appeared a law project directed to grant some respite. The Congressman behind this project is Pablo Abarca Mora. The project showed to have support of the majority at Congress by granting TWO months extra without consequences and a third month at 50% of the fines. It got approved January 28th during the evening. It certainly will become a life saver for all those corporation owners’ that did not fill this legal obligation on time. The government should make a bigger effort to advertise this requirement all over the country.

Just when many failed to digest and adjust to this change, on December 20, 2019, two new regulations required by the Ministry of Tax appeared in the official Gazette. The publication date is ironic, because that was the day that all government institutions went on vacation, and most of the population was more concerned with Christmas preparations than dealing with legal changes. The logical effect was that these regulations went completely unnoticed. However, it is important to take note to comply with them and avoid further headaches.

The first regulation consists of the obligation for ALL corporations that have inactive status – that is, they do not generate income or have any economic activity – to proceed to register with the General Directorate of Taxation, in order to update the information of the company such as: address, email, legal representative information and the like. For this you must submit a form D-140. Usually Accountants are the best option to submit this type of form. For this, a compliance calendar was again established, which is described as follows:
 Corporations with last ID number 1 and 2: January 2020
 Corporations with last ID number 3 and 4: February 2020
 Corporations with last ID number 5 and 6: March 2020
 Corporations with last ID number 7 and 8: April 2020
 Corporations with last ID number 9 and 0: May 2020

Although this can be considered as a new obligation, the truth is that for those corporations with 2 or more years of existence it is not. This is because the Ministry of Finance had already established that requirement for inactive companies when the Corporation Tax Law came into force at the end of 2017. At that time a calendar was established between the end of 2017 and the first months of 2018. Those inactive corporations that at that time complied with the presentation of the D-140 then do not need to do it again in this 2020.

The second obligation must be taken with more care and much more seriousness. It is established that between January and March 2021 the inactive companies must submit a form D 135 disclosing all assets, liabilities and the amount of the capital stock. This is aimed at greater control processes at the tax level. What is the purpose of this? Detect “unjustified increases in patrimony”. This means that if valuable assets are registered in the name of a company that does not generate income, those assets can be considered as a form of taxable income. (Yep you read that right, no more hiding assets in S.A’s)

In order to begin to protect yourself from these changes, it is important to have proper records of the origin of such assets, such as capital contributions made by the partners. It is also important to review the amount of the capital stock of the corporation in comparison with the value of the registered assets. The reality is that most corporations have stock capital composed of amounts ranging from 10,000 to 100,000 colones (between US $ 18 and $ 180) while they have registered assets with tax values of tens of thousands of dollars. It is important to review and adjust the amount of stock capital if necessary.

Again, it is important to check that every corporation complies with the Final Beneficiaries report now that Congress will give an additional respite-. Also verify that any inactive corporation complies with the update of data with the D-140 form – between January and May 2020 if it had not done so between 2017 and 2018 – as well as preparing for the D 135 form required by 2021.

As is usual, we are giving the notice to our readers in advance.

About the Author: Allan Garro was incorporated as a lawyer and public notary in 1996. He specializes in Litigation, Corporate, and Real Estate Law. He has also acted as an external legal consultant to Congress. He has been the author of more than 100 published English Language articles and can be reached at [email protected]