The tax man cometh with lots of new rules and fines

Tax collectors have new rules, and individuals who pay taxes or manage corporations face penalties that the public accountant association says have increased drastically.

The new rules, issued in April, also allow tax collectors to go back 10 years to check for errors or irregularities if they consider the tax filings to be inconsistent or fraudulent.

In case tax investigators allege a fraud of 199,900,000 colons ($357,000) or more, the case goes directly to prosecutors, and the taxpayer faces from five to 10 years in prison, if convicted, the association said.

The Colegio de Contadores Públicos de Costa Rica outlined the changes in announcing a free, public seminar for business executives and independent workers. The seminar is in the campus of the Colegio de Abogados in Zapote Wednesday at 9 a.m. The organization noted that for many the tax year ends on the last day of September.

There is at least one change that Guillermo Smith, president of the Colegio de Contadores Públicos, considers to be abusive. Under the new regulations, when auditors of the Dirección General de Tributación find that income was understated or disallow some expenses, the individual or company has just 30 days to pay the new tax assessment. If not, the tax agency can embargo assets. The abusive part, according to Smith, is that the taxpayer has to pay the disputed amount before filing an appeal, according to a summary by the accountancy organization.

Smith was quoted saying he considers this abusive because the demand for a substantial sum by the tax agency could make the individual or firm involved financially insolvent.

That would be true even if the individual  or company later wins its appeal with the tax agency.

Penalties have increased, the organization noted. In the past, a taxpayer was assessed 25 percent of the underpayment as a fine if there were no deceit and 75 percent if deceit or fraud were found.  That was in addition to paying the taxes owed. The current fine is 50 percent of the understated amount if the case is considered levy or light. The fine is 100 percent if the case is considered grave or serious, and 150 percent if it is very serious or muy grave.

And then of course, is the possibility of prison for the most serious violations.

The summary also noted that tax investigators have the right to ask a judge to get access to bank accounts if they have a solid argument. That way investigators will obtain a list of income to verify against what the taxpayer has reported.

The current interest stipulated on unpaid amounts is 12.74 percent a year, the summary said.

The new regulations increase the tax years into which investigators may look. In the past, investigators could only go back five years, even in serious cases. Now the maximum is 10 years. That would seem to mean taxpayers should keep their files that long.

The regulations were authorized by Ley 9069, which went into effect in September 2012.

The tax agency is under pressure to reduce what many believe is rampant fraud in tax filings. This is a critical aspect of the new government’s effort to reduce the country’s deficit.

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