Revised corporate tax bill is shelved for a week

A legislative committee has created and approved a revised version of a bill to impose again a tax on corporations.

The same committee, the Comisión Permanente de Asuntos Hacendarios, also decided to freeze the proposal for a week so that the Luis Guillermo Solís administration can iron out an internal conflict.

The original bill drafted by the Ministerio de Hacienda did not retain an exoneration from the tax for registered small- and medium-sized enterprises. But the Ministerio de Economía, Industria y Comercio, which oversees the small business program, is anxious to return their tax-free status.

The new draft reduced the tax bite from that which was in the original bill presented by the administration. The tax was ruled unconstitutional more than a year ago because legislative aides failed to publish a revised text for the benefit of the public.

All but a small part of the tax goes to the Ministerio de Seguridad Pública, but the new draft specifies that the money can only be spent for building and renovating police stations and the purchase of equipment. Prohibited would be local and overseas trips, overtime, travel expenses and the fees of consultants. These expenses would have to come out of the regular ministry budget.

The previous version of the tax raised at least $56 million, but some estimates say from $70 to $80 million. Even though the tax is unconstitutional, owners of Costa Rican corporations and similar legal entities are supposed to pay the 2015 tax. Many have not because they are waiting to see the results of the legislative discussions.

More changes are possible when the measure is considered again in a week.

Many expats hold vehicles, boats and dwellings in corporations.

The committee decided to charge corporations without economic activity 15 percent of  the base salary used in the law to establish such fees. That would be 63,600 colons or about $120.

Corporations that have a small amount of economic activity would pay the same.

Corporations with annual income of 50.9 million colons or less would pay 25 percent of the base salary or 106,000 colons.

Larger corporations with income between 50.9 and 119 million colons would pay 30 percent or 127,200 colons. Corporations larger than that would pay 50 percent of the base salary or 212,000 colons.

The base salary is indexed to inflation, so the amount would increase each year.

The previous law imposed the same amount of tax on large and small corporations.

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