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I’m not an attorney either, but I believe that corporate books must be kept at the official address for the corporation. That way the taxing and legal authorities know where to show up to inspect them if they so choose. It makes good sense to have your attorney or accountant provide you with that official address (even if you don’t live outside the country), as they’re the ones that have to keep them current, and they know what to do and say when the Ministerio de Hacienda agents show up at the door.
Also, remember that CR law requires attorneys to create their original legal documents in their “protocolos” (a log book individually certified & stamped by the government with page & line numbers), and to maintain this protocolo in their offices. As such, it is normal operating procedure for attorneys (and/or accountants) to house such documents. Clients should maintain copies, or 2nd originals, but unless you want to deal with the Ministerio de Hacienda directly, I’d leave it to the professionals.
That said, $650 per year seems excessive.
Regarding corporate “inactivity”, it’s not clear to me how a corporation which holds title to a property can be inactive. A house requires maintenance, electricity & water even if it’s vacant. If it’s just land, you still have to pay annual taxes. Doesn’t this constitute “activity”? I suppose you could simply pay such bills without going through the corporation. This may be, technically-speaking, the wrong way to run your accounting, but I’d be surprised if there were some kind of penalty for doing so, aside from being unable to book expenses in order to reduce tax liabilities, which are nil anyway unless you’re renting it out.
Hmmm . . . “Legal address”, eh? We’ve had two attorneys involved in the creation and maintenance of our books and neither of them has suggested either that we need worry about a legal address or that we leave the books with them. Nor have they ever suggested that the bills we pay be accounted for in the books. In our two cases (one corporation for the real estate, a second for the car), we just pay the expenses, keep the receipts, and saunter blissfully down the garden path. Maybe we’re cruisin’ for a bruisin’.
One position a corporate officer might adopt would be to let the Ministio de Hacienda agents look for our corporation anywhere they like. If we’re not at that legal address, where will they look next? And, with all they have to oversee, and with their limited resources, why would they come looking for us anyway?
I dunno . . .
Our atty told us that if we weren’t going to be living there right away, it would be good to keep all the books and share certificates in a safe place within their law firm. What they take care of is; 1. being the legal address for notifications for the corporation within the republic of CR, 2. Payment of tax revenue form and payment of the educacion and cultura stamp to be paid each September 30, and 3. legal custody of all the documents in order to take care of these things.
We only have the property at this point…no house. (one piece in the mountains south of San Jose…near Santa Maria de Dota, and another piece we’re paying on near Tamarindo which is investment property for us) We plan on building as soon as Paul retires…in another year and 1/2. Our atty also said that we could opt out of this service if we wanted…and they would have to send all the information via courier to the US, for which we’d have to pay. However, if we opt out, wouldn’t we have to make a lot of changes as to shareholders, President AD HOC, and Secretary AD HOC? From this distance, it seems like a lot of trouble and perhaps it’s simply easier to pay the steep fees each year.
I believe yearly property taxes aren’t that much,…am unsure about cost of eudcacion and cutura stamps. Even then, with both of those of properties, I don’t imagine it would be very muuch…so we feel certain this firm’s fees are quite high. We would go to another law firm, however, we really should wait until we come down there our next trip…hopefully in October/November sometime…and see if we can locate another “reputable and honest” lawfirm. Seems a bit ambiguous and that there are several different answers for the same question…possibly another lawyer could tell us if our current situation is legally appropriate.
I’ve been looking through the CR tax codes (this replaces the Tequila I drink at night to help me sleep), and have as of yet been unable to find anything which talks about keeping your books at your official address. As such, I retract my assertion for now, but I’ll keep looking.
David – are you saying that your two corporations for the house & car are inactive, and you do not file, even though the assets are still there? This sure sounds hinky, but I of course defer to your attorney’s expertise.
Finally, you are totally correct in implying that the Tico Taxman is extremely unlikely to audit you. They’ll go after the large, very active and highly public companies. That’s where the money is, and the biggest PR pop as well to get their point across.
GringoTico, with respect to both our corporations, we keep no records and, therefore, can demonstrate “no economic activity”. It’s true that we put fuel in the car, pay the utility bills for two houses, and even pay a mortgage, but we treat those as personal expenses, not corporate. And since we have no income coming into these two corporations, there’s nothing to report.
I should point out that the official corporate books where one might record the assets (the car, the land and the two houses) are blank. On paper (in the books, that is), the corporations have no assets even though the car and the real estate are registered in the Registro Nacional in the names of their respective corporations.
A respected local accountant has advised us that it’s not necessary to make any annual filing for these corporations. His opinion is that, if he’s wrong, there will be a penalty of a couple of dollars per year and that paying the penalty, which is likely to be assessed only if the corporation is sold, would be cheaper than the annual filings.
So, we don’t file.
Now THAT sounds authentically Costa Rican. You are doing it the “wrong” way because the “right” way is costly and time-consuming, and the penalty for non-compliance is remote and insignificant. That pretty much embodies what I both love and about Tiquicia.
By the way, if ever the taxman does come a knockin’, the correct response is “Oh yes, I do have the books here, but I locked them in the safe and my wife has the key. Can you come back tomorrow?” Then call your accountant.
More invaluable advice for free on WLCR.com.
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