Owning assets through commercial entities with no economic activity is a unique aspect of Costa Rican regulations, setting it apart from many other jurisdictions. What’s often overlooked is that merely having a legal entity is insufficient; there are various commercial and tax responsibilities to meet, even when the company is entirely inactive. You are required to maintain a shareholder register, submit the “asset declaration” form, pay the corporate tax, pay the education and culture stamp fee, and maintain proper accounting records for your corporation.
Regarding these obligations:
- Shareholder Registry:
Law No. 9416 established the requirement for legal entities, including private trusts and non-profit organizations, to disclose information about the ultimate beneficial owners of these entities. This involves identifying the shareholders of each legal entity down to the individual owner of the shares. This informational registry doesn’t result in any tax payment and must be filed annually in April. It should also be submitted within 15 business days of any change in ownership that exceeds 15% of the shares. Failure to provide this information can result in fines starting at ₡1,386,600. - Corporate Tax:
The Law on Corporate Taxes (No. 9428) imposes an annual tax on commercial entities, branches of foreign entities, or their representatives registered or planning to register in the Legal Entities Registry of the National Registry. This tax must be paid each year before January 31st, and there’s no need to submit any declaration. For the year 2023, the rate is ₡69,330 for inactive corporations.
Compliance with this payment is crucial to avoid financial penalties, as there’s a 1% monthly penalty for non-payment. Furthermore, delinquent companies cannot make any changes with the National Registry or engage in contracts with the state or any other public institution. Three consecutive non-payment periods can lead to the dissolution of the corporation. - Education and Culture Stamp:
The Education and Culture Stamp is an annual fee paid to the Ministry of Finance in February and March. It’s a tax applicable to all registered commercial entities and subsidiaries of foreign entities registered in the Mercantile Section of the Public Registry of Property. The amount due is calculated based on the net capital reported in the Income Tax return from the previous year. - Asset Declaration for Dormant Legal Entities:
This doesn’t imply that these entities must pay Profit Tax or be classified as taxpayers in Costa Rica for any other reason. Instead, it means that inactive legal entities must declare their assets annually to the Tax Administration for transparency and control purposes. Since the approval of the Law on Strengthening Public Finance in 2019, all legally constituted legal entities in the country are considered declarants for Income Tax, even if they are inactive entities. - Obligation to Maintain Accounting Records:
Although it is not a tax obligation, keep in mind that every commercial entity in Costa Rica, including dormant corporations, is required to maintain proper accounting records and corresponding accounting books. The obligation is indicated in Article 234 of the Commercial Code, which also establishes the requirement to retain accounting books, correspondence, invoices, and other company documents for five years. The obligation is further complemented by Article 251 of the same code, which clarifies that the obligation to maintain accounting and financial records is independent of the records required by tax regulations.
Being the owner of asset-holding companies entails multiple obligations. At Across Borders Realty & Property Management, we can clarify any doubts and assist you in fulfilling your obligation.
Contact us at info@acrossbordersrealty.com.
Written by Edward Gudeman, Attorney and Notary
