Considering that a series of legal reforms have imposed new obligations for companies in 2020, below, we summarize some of the legal obligations that apply to companies registered in Costa Rica, as a reference and reminder for our clients about new obligations and those that previously existed.

1. Corporate tax

This tax must be paid between January 1 and January 30 of each year. The tax is established by Law No. 9428.

Non-payment in time carries interests and also, non-payment for three consecutive periods provides the government the possibility of automatically dissolving the company, regardless of whether it has assets and or other legal obligations. On a case by case analysis, this may result in additional complications for the shareholders of these companies, and is, therefore, important that this is paid on time and an annual basis.

2. Registry of Transparency and Final Beneficiaries

Law No. 9416, Law to Improve the Fight against Tax Fraud, and it's Decree No. 41040-H, created the registry of shareholders and final beneficiaries. The entities required to declare are Corporations, Limited Liability Companies, Companies in Collective Name, Limited Partnerships, Foreign companies incorporated in Costa Rica, Individual Limited Liability Companies, Civil companies, and professional companies.

The declaration must be filed ordinarily once a year, between September 1 and 30 of each year. Legal entities incorporated before or after September, have 20 business days as of the date of incorporation, to comply with the ordinary declaration filing.

Extraordinary declaration filings must be submitted within 15 business days after any change in share participation greater than or equal to 15% takes place, or when a final beneficiary is included or changed.

The deadline to file the 2019 ordinary filing expired last March 31, 2020. The deadline to file the 2020 ordinary should be achieved during September 2020.

High fines apply for non-compliance, within the range of approximately US$2,300 up to approximately US$76,000. Please consider that the government is actively pursuing the application of these fines and lists of non-compliant companies have even been made public, as a “last call” warning from the government. The list of delinquent companies with this obligation is already available on the Tax Administration website.

3. Registration of inactive companies before the Tax Administration

Under resolution DGT-R-075-2019, companies and corporations that do not carry out lucrative activities in the country are obliged to register in the Single Tax Registry (RUT), according to the code 960113: "Legal entities incorporated in the country that do not carry out economic activity from a Costa Rican source." The process is carried out using form D-140.

The Tax Administration scheduled compliance with this obligation according to the last number of the legal document:

Failure to comply with this obligation leads to fines ranging from ₡225,100.00 colones to ₡1,350,600.00 colones.

4. Equity Declaration for inactive companies

Besides, resolution DGT-R-075-2019, establishes that all inactive companies must file the "Asset Declaration for Inactive Legal Persons", this will be done using form D-135.

The period to comply with this obligation is within two months and fifteen calendar days following the close of the fiscal year. For the fiscal period 2020, which ends in December, the reporting period will expire on March 15, 2021.

5. Stamp of Education and Culture

All companies with or without economic activity must pay this stamp annually, during February and March. The amount is calculated based on the income tax declaration. In the case of companies that are not taxpayers of this tax, they must declare this stamp using form D-110 so that the balance is duly charged. The tax rate is regulated in Law No. 9643 Strengthening the Music Education System.

6. Real estate tax and municipal and other fees

* Applies only to companies that own real estate.

The real estate tax is regulated in Law N° 7509 Real Estate Tax Law. This tax is collected and managed by the corresponding municipality and must be paid for each real estate property owned by the company. The tax base for calculating the tax will be the value of the property registered in the municipality as of January 1 of the corresponding year. The declaration to updating the value of each real estate must be filed every 5 years, otherwise, the municipality will render an appraisal ex officio and adjust the tax base.

The value of the tax will be 0.25% of the registered value of the property, this is payable in quarterly installments to the municipality. However, it can be paid in a single tract for the whole year.

Within the quarterly payment to the municipality, other fees may apply, such as garbage collection and park maintenance.

Failure to pay this tax and fees on time carries interest and even the judicial sale of the property.

7. Income Tax

The income tax is regulated in Law No. 7092, the Income Tax Law, the taxpayers of said tax is all-natural or legal persons that have lucrative activity from a Costa Rican source.

The value of the tax is staggered, it can be up to 30%, the applicable tranche is calculated on gross income, but the tax base is net income (net income fewer expenses). Therefore, the income tax must be calculated on a case-by-case basis, according to the specificities of each administrator.

The fiscal year for this tax runs from January 1 to January 31 of each year; therefore, it must be declared and paid annually. Once the fiscal year has expired, taxpayers will have three and a half months to declare and pay the corresponding tax, that is, until March 15 of the corresponding year.

8. Value Added Tax

It is regulated in Law No. 6826, the Value Added Tax Law, and applies to the sale of goods and the provision of services carried out in Costa Rica.

Article 1 of the Law establishes when a good is considered sold in Costa Rica or when a service is considered to be provided in Costa Rica.

This tax has specificities for each good or service, so it is recommended to evaluate the obligation on a case-by-case basis.

In general, the tax must be collected, declared, and paid by the taxpayer, within 15 days of the immediately following month.

9. Annual declaration of municipal patents

* Applies to companies with current municipal patents.

Each municipality has a specific law to regulate the matter of patents; however, one of the common obligations for companies with this type of fee is to file annually, later on, January 15, an affidavit of their gross income. Such a declaration intends to establish the tax base for the core of the patent.

The declaration must be accompanied by a copy of the income tax declaration, in addition to the specific requirements that may vary according to the competent municipality.

The payment of the patent tax, as such, is made quarterly.

10. Solidarity Tax

It was created through Law No. 8683, the Solidarity Tax Law for the Strengthening of the Housing Program, the It was created through Law No. 8683, the Solidarity Tax Law for the Strengthening of the Housing Program, the objective is to obtain resources to finance low-income housing. The generating event is the ownership of real estate for residential use that is used on a regular, occasional, or recreational basis, including fixed and permanent facilities. Among those obliged are the titles of said assets, as well as the certificates of the maritime land zone.

The obliged must register the property subject to this tax, on the ATV portal, this must be done only once. Also, the declaration of the value of the property must be presented under the parameters of the Unit Base Values Manual by Constructive Typology and the parameters of Maps of Land Values.

There is an obligation to file a declaration every three years no later than January 15 of the corresponding year, it must contain the indicated parameters to determine: 1) the subjection or not to the tax, and 2) the tax base. The declaration is presented through the "Single Registration Form, Declaration and Payment of the Solidarity Tax for the Strengthening of Housing Programs," Fourth Form D-179, the non-presentation entails a sanction of 50% of the salary base. The current triennium updated in 2019 and covers: 2019, 2020, and 2021.

The fiscal period for the solidarity tax is annual; it runs from January 1 to December 31 of each year, this means that the payment of the tax is annual, it must meet later on January 15 of each year. The no pay on time implies an interest of 1% per month, and the penalty will not exceed 20% of the tax.

Below is a table with the history of exempt amounts: 

This means that by 2020 the houses with a value equal to or less than 133,000,000 million colones (approx. $ 233,742), without paying the tax; for the contrary houses with a value greater than that indicated, must pay the tax.

The amount of the tax is staggered, the agreement of the sections established in the law, so the percentage of the value of the base is impossible to pay, it depends on the amount of the tax base, it must be reviewed case by case.

11. Taxes on rentals

According to the last reform to the Income Tax Act and Income Tax Regulation, the real estate rentals are in the real estate capital income, this is a new income tax format for this type of activity.

All individual or legal entities that rent a real estate, become a taxpayer for real estate capital income, there are two ways to calculate, to declare and pay for this tax:

11.1. Default format

The taxpayer will deduct a 15% flat of expenses over the gross income, the tax base is 85% of the gross income, and the tax percentage is 15%. Thus the payable amount is 15% over 85% of gross income.

Example: 

This tax must be declared and paid monthly, within the first 15 days of the immediately following month.

11.2. Conventional format

The taxpayer may choose to switch to the conventional income tax format; namely, the tax base is calculated on a net income basis (gross income fewer expenses), and it must be declared and paid yearly, according to the fiscal year.

Not every taxpayer paid; equally, there are a percentage of the tax by sections up to 30%, the applicable section is calculated on the gross income, but the tax base is the net income.

To apply to this format, the taxpayer must be recorded at the Costa Rican Social Security Fund (Caja Costarricense del Seguro Social) as an employer and pay for at least one employee the social security monthly; this is the main requirement to be in this format. Once the taxpayer is duly recorded, it should remain in the conventional form for at least five years in a row.

Additional things to consider: 1) The social security is 37% of the gross salary, charge as follows, 26.5% to the employer, and 10,5% to the employee; and 2) The Value Added Tax must be collected declared and paid in monthly basis as well.

In both cases, the Value Added Tax, which also applies to this commercial activity, must be declared and paid monthly, within the first 15 days of the immediately following month.

12. Informative return

All persons who are taxpayers of income tax are required to file the annual informative return, using form D-151, in summary, it is a report of specific customers, suppliers, and expenses, within the fiscal year, comprised from January 1 to December 31 of the corresponding year. The information must be reported to the Tax Administration no later than February 28 of the year immediately following the fiscal period.

Failure to comply with the obligation to declare carries a penalty of 2% of gross income in the fiscal period before the one that gave rise to the penalty, with a minimum of 3 base salaries and a maximum of 100 base salaries.

For further assistance in complying with the obligations applicable to your case, please feel free to contact us at your convenience.