Corporations owners become suspicious characters

Many expats would be surprised to know that they are suspicious characters because they own offshore corporations.

From the viewpoint of the U.S. tax authorities all those Costa Rican corporations holding vehicles, homes and even A.M. Costa Rica are offshore. That is why U.S. expats here have to file the appropriate papers with the U.S. Internal Revenue Service each year.

The ownership of offshore corporations is in the news now because someone hacked the files of a Panamá law firm that specialized in setting up corporate entities there and in countries cash-hungry governments like to call tax paradises.

As is usually the case, Costa Rica authorities reacted with surprise and then determination to news stories. The chief prosecutor ordered the economics crime unit to study the Panamá Papers to see if there was any evidence of wrongdoing, according to the Poder Judicial. So far most of the disclosures involving Costa Ricans seemed to be business as usual.

And the stolen data probably could not be used in court anyway.

The decidedly anti-capitalistic weekly newspaper at the Universidad de Costa Rica, El Semanario, continues to gleefully publish more names and data provided by the International Consortium of Investigative Journalists.

The prime minister of Iceland resigned because of information about offshore accounts held by him and his wife, but the allegation was hypocrisy and not a crime.

At the legislature Wednesday the Comisión de Asuntos Hacendarios approved a substitute text to the executive branch’s tax fraud bill.

The new draft includes a requirement for corporations to report the names of their shareholders to the Banco Central.

The lists are supposed to be confidential, but so was the information in the Panam á law firm of Mossack Fonseca. Approval by the full legislature is likely. The law will not affect foreign corporations.

Some companies now reveal the names of their shareholders. That is a condition of doing business with the government. But many private firms here and also in the United States are under no obligation to provide tax authorities this type of list.

The Ministerio de Hacienda, which includes the Dirección General de Tributacion, also would prefer that all sales be made via credit card so inspectors can track every transaction.

Expats here own corporations to hold properties without opening themselves up to personal liability. They also have found that bank accounts and other business transactions are easier through a corporation. At one time that was the only way for an expat to get a bank account or even a cell telephone.

The downside is that corporations pay taxes on every colon earned but individual income is exempt up to about $1,500 a month.

Of course offshore companies also can be used to avoid income taxes in the homeland or launder money. But in many cases stashing money offshore is legal and the sums do not become taxable until they are brought into the home country, if then.Plenty of tourism operators here use a United States-based Pay Pal, and they may or may not report the transaction as Costa Rican income.

A wire service report noted that the hacked material released so far contains details on more than 214,000 offshore entities connected to people in more than 200 countries and territories. It also named 140 international politicians, including 12 current and former political leaders. And that is just one law firm.

Although many persons wonder why many Americans are not named in the papers, the wire services noted that some U.S. states have strong secrecy laws and Americans are more likely to create companies there.

The Panama firm appears to have a minimum charge of $1,000. Corporations can be formed by anyone in the State of Delaware online for less than $100. Costa Rican lawyers charge from $200 to $1,000 to set up a sociedad anónima here.

A report by the McClatchy newspaper group found scanned copies of at least 200 American passports in the leaked documents, according to wire services. It reported that many of the passports appeared to be from retirees using offshore companies to buy real estate in Latin America. There also were 3,500 shareholders of offshore companies who provided the firm with an address in the United States, the newspaper said, according to wire services.

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