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Know the General Obligations of a Corporation in Costa Rica

We will briefly explain the obligations and responsibilities that companies must fulfill here in Costa Rica in order to be in compliance. It is very important to comply with the established deadlines so that the

We will briefly explain the obligations and responsibilities that companies must fulfill here in Costa Rica in order to be in compliance. It is very important to comply with the established deadlines so that the corporation can remain in good standing and up to date.

Obligations for Business Corporations:

1. Corporations Tax:

Businesses usually adopt a corporate form in Costa Rica and are taxed as separate legal entities from the individuals that incorporated them. Taxpayers usually run their businesses through Corporations (Sociedad Anónima) or limited liability companies (Sociedad de Responsabilidad Limitada).

Each company must pay the corporate annual taxes, regardless of whether it is an active or inactive company. However, the amount will change depending on whether the company is active or inactive.

Moreover, the payment of this tax must be made within the first thirty calendar days following January 1 of each year for all legal entities in Costa Rica. It is important to make sure you pay your taxes by this date to avoid fines, interest fees or even a company dissolution. The Corporate Tax Law indicates that failure to pay corporate taxes for three consecutive fiscal years is cause for the dissolution of the company.

According to the law, if your company is inactive you will be asked to pay the minimum tax amount every January. This amount changes according to the Revenue Service (“Ministerio de Hacienda”).

Corporate taxes apply to all commercial legal entities, branches of foreign companies, and limited liability companies currently registered under the Mercantile Section of the National Registry (“Registro Nacional”).

2. Yearly Declaration of Assets and Capital:

By resolution DGT-R-075-2019 available to read in Spanish at the Alcance  No 286 A LA GACETA No 243 published on December 20th, 2019, starting in 2020 and 2021, existing inactive corporations must declare their assets, namely through D140 and D135 forms.

3, Register of Transparency and Final Beneficiaries:

The objective of this registration is to comply with OECD international standards and recommendations regarding tax and financial transparency by making the final beneficiary of the various legal entities clear, thus allowing us to have current, relevant and timely information to aid in the fight against: evasion, tax fraud, money laundering and terrorist financing, among other related crimes. Per the law, you must submit a report every year. Please click here for see more information about it.

4, Annual Shareholder Meeting:

Companies in Costa Rica, both active and inactive, are required to have an annual general meeting. Shareholder meetings of Costa Rican corporations must meet several legal formalities to avoid possible annulment claims against the agreements that may be approved. The annual meeting will be aimed at sharing the company’s financial results for the year.

5, Custody of Legal Books:

The normal process is that, with the shareholders’ authorization, the legal books remain in attorney custody in a secure place. Most property owners misplace the corporate books and find themselves in need of a replacement, which can be a hassle. The books must remain in a secure place and must remain in the country in order to comply with the Registry of Transparency and Final Shareholders Beneficiary before the Costa Rican Central Bank. If the shareholders would like to transfer assets, grant a power of attorney, dissolve, or provide authorization for any transaction on behalf of the company, the books are an essential requirement.

6. Law N ° 9643 Strengthening of the Music Education System:

It is a tax that legal entities must pay, based on the amount of net capital reported in the income tax return. Mercantile companies and subsidiaries of foreign companies registered in the Mercantile Section of the Public Property Registry must pay it annually, during the months of February and March. The tax calculation is determined according to the net capital declared in the immediate previous fiscal period. The tax rate was modified by Law No. 9643 Strengthening the National Music Education System (SINEM), article of February 16, 2019. The companies that fail to pay this tax must declare this through form D-110 so that the balance may be duly charged.

7. Value Added Tax: (VAT TAX)

In Costa Rica the tax is established by law N ° 9428 which states that a 13% value added tax (VAT) is added to all sales of goods and the provision of services. The tax, which is known as the Impuesto al Valor Agregado (IVA) in Spanish, replaced the country’s 13% sales tax (sometimes referred to as the IVI; Impuesto de Ventas Incluido or “Sales Tax Included” in English). Taxpayers must pay the tax no later than the fifteenth (15th) calendar day of each month. Learn more about VAT here.

8. Annual declaration of patents for business

Every year no later than January 15, people who own commercial patents for business and within the ordinary and simplified regime will present a sworn statement to the Municipality.

In special cases, when companies have been authorized by the General Directorate of Taxation to file their income tax return on a later date than that established by law, they may submit their municipal affidavit within the five business days following the date authorized by that Directorate.

9. Informative declaration D151

The Declaration D151 or Annual Summary Statement of Customers, Suppliers, and Specific Expenses is informative, that is, it only works to inform the General Directorate of Taxation.

Although it does not generate the payment of any tax, if it is not declared or is presented after the deadline, it generates penalties.

The new term in Costa Rica expires every February 28, since there was a change in the fiscal year and now it goes from January to December.

10. Income Tax

When your corporation is doing business and it is active under the Ministry of Finance (Ministerio de Hacienda), the company is obligated to pay this tax, according to Law No. 7092. The income tax is a tax levied on the earnings of individuals, companies, or other legal entities.

In general terms, the purpose of the income tax is to tax various forms of income obtained by individuals, companies, or others. The tax is calculated based on the net taxable income, which is determined by deducting the necessary costs and useful expenses from the gross income, listed in article 8 of the law and article 12 of the regulations.

To clarify, the corporate annual tax is different from the income tax.

If you have doubts about the compliance level of your company, contact us and we will help you to discover any issue before the authorities.

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kbaldioceda@outlierlegal.com

Paralegal Assistant with customer service certificate. More than 3 years of experience in Real Estate and Paralegal Services. Has worked as an International Customer Service Agent for Delta Airlines USA.

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