Doomsday is coming for expats and Ticos alike who have ignored their responsibilities under Law 9024. The law is better known to all as the Impuesto a las Personas Jurídicas or the company assessment tax.
The law provided several bailout provisions. There is only one left, outlined on Oct. 28. This last provision allows anyone with judicial and extrajudicial authority and/or full power-of-attorney in a company the ability to relinquish their post through resignation by April 1.
However, April 1 may be too late. Article 6 of the law states that the Registro Nacional can dissolve any company with three unpaid periods due, and workers there can start putting preferential liens on assets to collect the money. The surprise is the deadline. The first year of the tax started on April 1, 2012. The second year on January 1, 2013, and the third year will start on the first day of this coming January. There is a 30-day grace period after the due date, so the tax will be in default on Feb. 1. Those who have not paid anything will be three years in default at that date and ripe for collection.
People in Costa Rica have not jumped willingly on the bandwagon to pay this tax. At the outset only around 20 percent anted up quickly, 77 percent less than was expected by the Registro and the tax department. This tax has not been a secret. The local press and A.M. Costa Rica have written about it extensively. Nevertheless, even with all the press, still many have not done their duty to pay the assessment.
What does it mean for those that have not paid? According to Marco V. Retana, abilingual Costa Rican attorney, Registro officials can start publishing notices in the La Gaceta official newspaper in February. Once published, a requirement of the law, they can start dissolving companies. Since La Gaceta went digital several months ago, the process could be fast.
Retana also said that Article 6 gives the Registro immediate authority to attach any asset in a defunct company with a judicial preferential mortgage on real property and a preferential lien on other types of assets. Annotations like mortgages and liens usually come with administrative and legal costs on top of the debt.
Some expats believe the country will take over assets. This is not true. The Registro, in concert with the tax department, will have to go to the courts and start a collection process, which will result in a public auction. A collection action usually costs an estimated 50 percent more on top of any annotated amounts. This means a debt of a few hundred dollars could turn into a thousand or two or more.
As stated Oct. 28, all money due by a company pierces the corporate veil and is the responsibility of its owners, legal representatives, and anyone with a full power of attorney. Since ownershipof sociedades anónimas and sociedades limitadas are written in physical legal books, which are hard to acquire by authorities, it will be difficult for them to pursue shareholders but not representatives.
Dec. 16 is the deadline to register as a pequeña y mediana empresa, known as PYME, to avoid the tax, as reported Nov. 5. That is only a little over a month away, and with the way things move in Costa Rica really too short of a time to do so for those who do not know if they qualify.
Expats and Ticos should not take this assessment lightly. The country needs the money. So far, no one has been able to defeat the law in the courts. Even people who do not have assets in companies that owe the tax but are responsible for them should worry. Entities as far back as 30 years ago and longer may still be registered with the Registro Nacional and owe the taxes. One expat was shocked to learn he had a full power of attorney given to him when he was 18 years old by his father. The expat is now 60 and responsible for the tax. His father has since left the country.
Trying to resign from a company after the deadline of April 1, will be costly. First, the tax needs to be paid, then the company needs to be legally dissolved by an attorney to the tune of an estimated $500 to $1,000.
What should expats do if they have assets in a company owing Impuesto a las Personas Jurídicas? They should pay the tax before Feb. 1 or suffer the consequences. Expats who want to surrender their legal authority or power in a company should resign before April 1. Expats who do not know what is going on or what to do should contact an accountant or lawyer to get some advice, but only a lawyer has authority to clean matters up.
Garland M. Baker is a 42-year resident and naturalized citizen of Costa Rica who provides multidisciplinary professional services to the international community. Reach him at email@example.com. Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica. Find the collection at http://crexpertise.info, a complimentary reprint is available at the end of each article. Copyright 2004-2013, use without permission prohibited.