How does the corporation tax in Costa Rica interfere with your business?
I wrote a blog just this last week about the approval of the new corporation tax in Costa Rica which you can read on my own companies´ website.
Today, I’d like to give you my opinion, the opinion of a Costa Rica real estate agent, how this new tax can interfere with your business or with the car or property in Costa Rica you own.
I really don’t think the Costarican government came up with this scheme to charge taxes on corporations to get rich. Soon, they’ll find out that maybe half the corporations that are registered were abandoned by their owners.
Get a better idea of what this new tax on Costarican corporations can mean to you. For up to date information (made on 2/22/2018) go to the November 2017 Update Corporation tax and form D140.
Have you paid your mandatory corporation tax every year? Did you get your mandatory digital signature yet? Did you register the shareholders with the government? If your answer is NO and you don’t know how to resolve this, click on the banner below. We can offer the solution, at a very affordable cost.
Abandoning a corporation
Many people that moved to Costa Rica, started some kind of business and when they moved elsewhere they just abandoned the corporation without dissolving it.
This also happened with thousands of people who at one time bought a property in Costa Rica and when they sold the property again. Then they moved out of the country and left the corporation abandoned. I might be guilty myself of having abandoned some corporations down the road, I really don’t remember. Since there was never a penalty for leaving an existing corporation, who really cared? Why bother paying an attorney to dissolve a corporation if you leave the country anyway and there are no assets to be taken?
Why a corporation
These are to my opinion the two main reasons for the creation of the corporation tax in Costa Rica:
1. The measurement is probably to try to stop buyers of Costa Rica real estate. Many just transfer the shares of the corporation that owns the property, when purchasing. Many buyers will prefer to just transfer the title to their own name(s) from now on. For multiple buyers in one property, you can just use different “derechos”. Developers will probably not hold hundreds of corporations and pay their taxes while trying to sell all the properties. This change will probably stop buyers of properties in Costa Rica from not paying the transfer tax and attorney fees at closing.
2. This new corporation tax in Costa Rica and the new Dimex card are probably part of the big plan to stop money laundering. Or they try to have more control over it. North American citizens will not be able to hide their assets any longer. They will have to tell the IRS about their property ownership in Costa Rica. But with every new measure, there will be a countermeasure. Maybe like making a Nicaraguan the owner of your Costa Rican corporation?
What will happen to shelf corporations?
For many years, it took a few months to constitute a new corporation. Therefore, many attorneys would constitute a “shelf corporation”, with their own employees, to serve their clients better and faster. And make some extra money. These shelf corporations would make it unnecessary to wait anymore, for an X amount of time. Clients could buy property with a ready-made shelf corporation.
Now it takes less than a few weeks to constitute a new corporation. With the new corporation tax in Costa Rica, the shelf corporation will be totally out of business. The attorney will not run the risk of having to pay the tax if the corporation doesn’t sell the same year as it was constituted.
If you own a shelf corporation and have not used it, check with your attorney. It is possible the government already closed it. Or you owe several years of corporation tax in Costa Rica.
What will happen with property purchases?
Most attorneys, when you buy Costa Rica real estate, will tell you that it is important to transfer the title into a corporation because it will keep your property safe from any personal liability you might have in the future. What will happen to this? Each attorney will have a different opinion on this and the answer to this depends a lot on your personal situation. Ask your lawyer for an answer to this question.
When you purchase a property in Costa Rica for sale you should ask yourself the following questions:
- How much importance do you give the cost of having less liability risk against the cost of paying the annual tax?
- Should you keep your properties in one corporation and your cars in different ones?
- Did you put your assets in a corporation so your children could inherit without any trouble and the estate doesn’t have to go through probate? What do you need to do if you change that?
- Should you keep your properties in your personal name and your cars in different corporations?
Before you take any decisions, good or bad, make sure you inform yourself well with your attorney. Check for awesome attorneys of Costa Rica.
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