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Important legal update on Costa Rica corporations from Attorney Roger Petersen.
[url=http://costaricalaw.com/costa-rica-legal-topics/corporations-in-costa-rica/costa-rica-corporations-liquidated-non-payment-corporation-tax/]Costa Rica Corporations Are Being Liquidated For Non Payment of Corporation Tax[/url]
The National Registry of Costa Rica which oversees and manages the Corporation recording section has initiated the process to liquidate any corporation that owes more than 3 past due payments of the corporation tax (Impuesto de Personas Juridicas). Pursuant to Article 6 of Law 9024 (corporation tax law) the National Registry may initiate the dissolution process of any corporation that has not paid the corporation tax for the past 3 years. To that end the National Registry has initiated the first step which is to public notice in the official government Gazette (La Gaceta). Once notice is published, Article 207 of the Commercial Law allows a s 30 day period to object to the dissolution. Once that 30 day period expires the corporation will proceed to administrative dissolution and any debt for corporation tax that is outstanding will result in a preferential lien being placed on the property owned by that corporation.
The Constitutional Court had found certain portions of the corporation tax law (Law 9204) unconstitutional. As a result the government has drafted and presented to the legislature a new and revised corporation tax law which is expected to come into effect in 2017. However as part of its resolution the Supreme court validated the existing debt for the corporation tax for the past years. It is this debt that the government is now trying to collect by forcing the liquidation of the company.
I guess I can get over feeling like an idiot for properly paying the prior corporation tax faithfully when I know many people that didn’t. … and then just laughed at folks like me that had paid when it was nullified. You had to figure that the folks running the CR taxing agency would have to add some teeth to this relaunching of this corporate tax scheme. If they had not done so they would have had folks just simply not pay it again waiting for some court ruling that overturned it a few years down the road!
Should be a big boost to the lawyers helping folks move assets outside corporations before the government moves to attach those assets for non payment. That threat seems a bit over the top however…. if CR can’t even effectively collect taxes what makes anyone think they would be able to take action to seize physical assets held in a corporation. I’m sure they’ll do their best to make an example of some people, that’s how governments scare people into compliance.
My view is it’s better to fly under the radar than to put yourself firmly on it when the cost to keeping your stealth is rather cheap.
Just my two cents.
[quote=”Imxploring”]
My view is it’s better to fly under the radar than to put yourself firmly on it when the cost to keeping your stealth is rather cheap.
Just my two cents.
[/quote]
Exactly !!
And though the luxury tax was advertised as being “temporary”, those of us from the States know that there is no such thing as a temporary tax. We’re still paying excise taxes from WWII put in place to curb demand.
I paid all of my corporate taxes for the corporation that owns our condo, but I wish that I could find an economical way to get out of the corporation now. The problem is that I would have to transfer the property from the corporation to my name as owner of the property. That would require payment of a transfer tax based on the value of the property, as well as some legal costs. Even though that would save some corporate taxes in the future, the transfer tax would cost enough to make the value of doing the transfer questionable.
The proposed tax on corporations is a minor annual fee. Just think about what your annual property taxes in the states would cost for a similar condo. Keeping the property in the corporation still provides some advantages that are worth the small annual cost of keeping the corporation taxes current.
The total of my municipal tax, luxury tax, corporate tax,and legal fees to maintain a corporation were higher in 2015 in CR than the municipal tax I paid on my home in the USA in 2013. Admittedly, my ocean view condo in CR has a value a bit higher than my house did, but these costs do add up.
When I set up the corporation, part of the intent was to save on the transfer tax when the condo is sold, but that “loophole” has now been closed.
The other thing that I dislike with using a corporation for home ownership in CR is that the value of the home is treated by the IRS as a financial interest in a foreign corporation, which dictates that I must file Form 5471 with my USA tax forms each year (even though it does not generate any income). And Turbo Tax does not include this form, so I must now mail in my tax form rather than filing on line.
At this point, I wish that I had not used a corporation to buy my condo.
Lucky you! It’s going to take CR quite a while to catch up to charging me anywhere near the $10k+ in annual municipal taxes I’m paying on my home in NY!
I guess everything is relative…. even with my annual CR property taxes, attorney fees, and now the tax on corporations it’s a drop in the bucket compared to the scalping we take in NY.
Best of luck and enjoy the view…. It’s a bargain!
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