Costa Rica

Costa Rica: Tax administration temporarily suspends filing date for TP information return

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The Costa Rican Tax Administration has temporarily suspended the filing date for the transfer pricing information return. On 5 June 2017 Resolution DGT-R-28-2017 was published in the Official Gazette to give effect to this measure. The resolution modifies Article 4 of Resolution DGT-R-044-2016 to temporarily suspend the due date for filing the information return.

According to a previous ruling transfer pricing information returns for fiscal years 2015 and 2016 would have been due on 30 June 2017. This deadline is suspended until further notice. However, taxpayers should maintain the information that would be included on those information returns for filing when the tax administration requests the information.

Costa Rica signs OECD Multilateral Instrument

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Costa Rica has signed the Multilateral Convention to implement tax treaty related measures to prevent Base Erosion and Profit Shifting (“Multilateral Instrument” or “MLI”). More than 68 countries, including Costa Rica, signed the Convention on 7 June 2017 at Paris.

The convention is a key outcome of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project, which aims to offers concrete solutions for governments to close the gaps in existing international tax rules by transposing results from the OECD/G20 BEPS Project into bilateral tax treaties worldwide.

The convention enables all signatories, inter alia, to meet treaty-related minimum standards that were agreed as part of the final BEPS package, including the minimum standard for the prevention of treaty abuse under Action 6.

The convention will enter into force after signatories have completed their domestic requirements and deposited their instruments of ratification with the OECD.

Costa Rica: Tax Authority issues transfer pricing guidelines

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Costa Rican tax authority on 21 April 2017, issued Resolution DGT-R-16-2017 in relation to transfer pricing documentation guidelines. The Resolution establishes requirement of taxpayers having transactions with related parties to retain supporting documentation of certain corporate information and company local information.  The requirements are aligned with Master File and Local File maintenance as proposed by the OECD BEPS project.

The DGT’s corporate information is equivalent to the Master File that is summarizes qualitative and quantitative data from the multinational group. The company local information (equivalent to the Local File) requires the taxpayer to provide the organization structure, chain value, financial information etc. Failure to comply with this provision could lead to a penalty of an amount up to approximately USD 90,000.

Costa Rica: Government publishes late payment and penalty interest rate for 2017

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The Ministry of Finance published the Resolutions No. DGH-016-2017 and DGA-DGT-006-2017 in the Official Gazette on 27 March 2017. In accordance with Resolutions, an interest rate of 11.73% will be applied for late payment and refunds of taxes, surcharges and penalties effective as of April 1, 2017.

Costa Rica: Corporate flat tax re-entered into forced

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Costa Rica has been updated the Law N° 9428 which previously declared unconstitutional due to the approval procedure inconsistencies. The Law provides the corporation flat tax which is establishes an applicable progressive rate.

Thus, the tax considers whether the entity is registered as a taxpayer or not. Also, (if registered) it considers the gross amount accrued by the entity during the tax period. Herein, the new amounts of the Corporation Flat Tax are:

Corporation Flat-tax
Corporation
Branch or
Individual
Corporation
Registered as taxpayer Gross Income Rate Amount in Colones Amount in USD
NO Not Applicable 15% BW 63930 112.5528
YES Less than 120 BW 25% BW 106550 187.588
YES 120-280 SB 30% BW 127860 225.1056
YES More than 280 BW 50% BW 213100 375.1761
                                                        BW=Basic wage 2017: 426.200,00

The law extracts from its predecessor, the dissolution penalty when the entity is three consecutive amounts due. Additionally, for tax return purposes the Corporation Flat Tax will be considered as non-deductible and not subject to compensation. The CFT corresponding to this year must be paid as of July 1st, of this year. The Costa Rican National Registry will be entitled to collect the CFT amounts due. In this sense, the above said law has established a tax amnesty up to October 1st, so the CFT due can be paid without any penalty or fine.

Costa Rica: Legislative Assembly approves the bill to restore registration flat tax

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The Costa Rican Legislative Assembly on 17 March 2017 approved the bill which restores the registration flat tax on companies. The bill, which intends to restore the registration flat tax on companies, had been declared unconstitutional on 28 January 2015.

The registration flat tax remains an annual tax, but rates will be amended as follows:

  • Companies that do not file income tax returns will pay a tax resulting in 15% of the salary base
  • Companies whose gross income from the preceding year does not exceed 120 base salaries will pay a tax resulting in 25% of the salary base.
  • Companies whose gross income from the preceding year exceeds 120 salaries, but not more than 280 base salaries, will pay a tax resulting in 30% of the salary base.
  • Companies whose gross income from the preceding year exceeds 280 salaries will pay a tax resulting in 50% of the salary base.

For 2017, the base salary is CRC 426,200. The Bill becomes effective upon publication in the Official Gazette. Further details will be reported in due course.

Costa Rica: Supreme Court issues base salary for 2017

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The Supreme Court of Justice released Circular No.230-2016 on 10 January 2017 regarding base salary for 2017. According to the Circular, with effect from 1 January 2017 the base salary is CRC 426,200. The base salary is applicable to compute certain taxes, income, penalties and social security contributions. It is also used as an index every year and valid for the whole calendar year.