Costa Rica To Impose New Tax On Corporations

by Mike Godfrey, Tax-News.com, Washington

21 August 2006

A new tax on corporations has been proposed as part of the comprehensive tax reform plans currently before Costa Rica's legislative assembly.

The $200 tax will apply to all personas juridicas, or legal persons, and will be payable within ten days of the start of a new tax year, which will run from January 1 to December 31, A.M. Costa Rica reports.

Such corporations are popular with expats and non-resident property owners who use them to apply for basic services, such as cellular telephone services, in Costa Rica.

Failure to pay the tax under the current draft of the legislation will result in the Registro Nacional refusing to file any papers relating to the company. According to the report, this will require that the Registro workers check with the Ministerio de Hacienda each time there is a transaction to make sure the tax is paid. There will also be other penalites against non-payers.

In addition, a smaller tax based on the net worth of a company is set to continue.

The new tax is being proposed to reduce the number of companies being formed with the sole intent of avoiding taxes, a summary attached to the legislation explained.

The proposal is part of a wider tax bill which would, among other measures, tax worldwide earnings in certain circumstances, revamp the income tax system, introduce a value-added tax in place of the current sales tax, apply a 0.5% financial transactions tax and impose taxes on luxury property with a value of 100 million colons (US$193,000) or more.

However, it is uncertain if and when the tax bill will be passed into law.

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