The legislature is cooking up a new tax law on companies. Of course, they are. The country does not want to lose any tax revenue.
The Sala IV’s ruling of Jan. 28 found articles 1, 3 and 5 of Law 9024 unconstitutional. This sent a serious shock to the officials in charge of the government’s coffers. Many company operators just stopped paying the tax after the decision. These articles were the heart of the legislation.
Article 1, created the tax. Article 3, set the tax amount and divided the payment into two types, one for active and another for inactive companies. Inactive entities pay 50 percent less than active ones. Article 5, set the sanctions and fines for not paying the tax.
The Registro Nacional reports delinquencies rose to almost 60 percent in 2015 from around 40 percent in 2014 for active companies. Inactive companies rose to a whopping estimated 78 percent from last year’s 58 percent.
For those unfamiliar with the tax, it is the Impuesto a las Personas Jurídicas or Ley 9024. The tax started on April 1, 2012. It is now 3 years old, but four years of taxes are due at this time because as of Jan. 1 of each year, the whole year is due and payable.
The Sala IV said the creation, the amount and the sanctions to enforce it were illegal, but the country could still collect the illegal taxes due from April 1, 2012 to this Dec. 31.
Apparently, most understood the first part, that the tax was illegal, but missed or ignored the fact that the collection part of the law is still very much alive. The Registro Nacional still has the right to dissolve any company with three consecutive periods in arrears. The agency has the power to assess any past due amounts against any assets of a company behind on the tax.
Now the good news:
The proposed new law is exactly like the original. Right down to the transitorio clauses. Some of which imparted certain invaluable benefits. This is what they were and why they are important if they are part of the new law.
Transitorio I: This clause prorated the payment for 2012. If the legislature does not approve the new law by the end of the year, it will need a similar bridge to prorate the tax again next year.
Transitorio II: Many people did not take advantage of this option after the approval of the first law. It allowed people to dissolve companies without paying the tax. If it is in the new law, as it was in the first, people can dump unwanted entities.
Transitorio III: This required the Registro Nacional to provide a list of representatives to everyone who wanted one so anyone could see if he or she is part of a company. Some people do not realize or have forgotten about being involved in an entity required to pay the tax.
Transitorio IV: This clause was a bridging mechanism to give those not interested in being part of a company anymore the ability to get out and not be liable. The fact is everyone with legal authority and/or a full power of attorney is liable personally for this tax assessment. Many people did not resign when they could. The last date to do so was April 1 of last year. They will have another chance if this part is in the new law.
Transitorio V: The best for last. This transition clause allowed people to move property into another entity completely exempt from transfer taxes and registration fees. Most expats and Ticos know it is very expensive to move property. Transfer taxes are 1.5 percent of asset value. Registration fees are around 1.05 percent. This totals to 2.55 percent. This is a huge savings for those with a property in a company they do not want.
Attorney Allan Garro, an expert on the law, explained many people did not take advantage of the transitorios or bridges in the law the first time around. He said they provided excellent remedies for those stuck with companies owing the tax. If the new law has similar benefits, expats and Ticos alike would have a second chance to act.
The new tax law published in Gaceta No. 74, April 17 is identical to the one published on Dec. 27, 2011, except for changes to dates. There is no guarantee it will become law as such, but there is a very good chance it will. The legislature is very anxious to get this law fixed and back on the books.
A new law with the same bridging mechanisms as in the first will be a great opportunity for those who missed them the first time around.
Garland M. Baker, a certified international property specialist, is a 45-year resident and naturalized citizen of Costa Rica. His firm’s team provides multidisciplinary professional services to the country’s 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 free reprint is available at the end of each article. Copyright 2004-2015, use without permission prohibited.