Here is a yearly reminder. Education and culture taxes — Timbre de Educación y Cultura — are due next Monday, March 31.

Many people, including professionals, sluff off filing form D.110 and paying these taxes. However, paying them is required by Ley 5923, and every company in Costa Rica listed at the Registro Nacional is required to pay this tax. A company’s net capital amount determines the tax to be paid.

The tax amounted to quite a bit of money in 1976, the year the general assembly enacted the law. Today, the amount is almost insignificant and is a nuisance tax to most.

The law has not changed significantly since 1983 when law 6879 modified it by increasing the tax 200 percent. There are important aspects to the law that have not changed. For example, Article 6 of the law requires the tax department, Dirección General de Tributación, to publish the names of companies that do not pay the tax on a deadbeats list in the official newspaper, La Gaceta. Article 7 allows the tax police to collect the tax using various means outlined under the different tax laws.

In actuality, the tax department does not publish the deadbeats list nor goes to great effort to collect the tax even though the law requires it to do so. Practically speaking, the now minimal tax does not justify the effort or expense. This said, people owning companies do get collection notices for this tax on occasion and this can be a bigger nuisance. Any collection process in Costa Rica means there is an attorney involved and they get their cut, so they can get pretty pushy.

The tax is for education and culture, as the name of the law suggests. The money collected goes to the Universidad de Costa Rica, continuing education programs and the national museum system. The purpose of the tax is one good reason to make the extra effort to pay it.

There were some interesting changes made by the tax department in the past calendar year worth special mention.

Legal books and the whole rigamaroo surrounding legal books changed or better stated: old rules that have existed for a long time became important again. For several years, legal books could be thin and stapled. Not so any more. They need to be thick and glued giving book makers more work. The downside to this is they will not fit in a file folder and are easier to lose. They also must have a standard pre-printed form on the first page of each book. Inactive companies can only legalize three minute books — called “acta” books — and not all the books which include accounting ledgers.

The fuzzy logic behind a tax department memo May 14 to taxpayers is that inactive companies do not hold taxable assets, thus no accounting is required.

Multi-million dollar properties held by inactive companies do not pay taxes to the Dirección General de Tributación except for the Timbre de Educacion y de Cultura, a maximum tax of $18.30. Attorneys transferring these properties from one company to another under report their value avoiding transfer taxes too. So there is no checks and balance, so why make people fill out accounting books.

Now that the tax department’s computers are working better, filing an income tax form for an inactive company can make it active. When a company is active, this puts it on the tax rolls when in fact it may not owe income taxes. Filing an income tax form is not the only thing that can make a company active. It may show up as active because an input operator made it active by mistake.

It is important to check a company by going to this link http://196.40.56.20/ruc/#consulta
and typing in the company’s identification number or legal name and see if the company is “con obligaciones,” with tax obligations, or “sin obligaciones,” without tax obligations.

If a company is “con obligaciones” when it should not be, one must file form D.140 to remove the company from the tax obligations list. To do this, one must fill out the form, get a certification of the company from the Registro Nacional and file this paperwork at the tax office along with a copy of the legal representative’s identification.

Expats with a company in Costa Rica need to file and pay their Timbre de Educacion and Cultura by Monday of next week. Most banks will accept the form and payment. Penalties and interest accrue after the due date. Checking one’s company obligations is also a prudent item to put on this week’s do list.

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It is tax time again. Tax returns for individuals and companies are due on Friday. Yes, this Friday.

Every company is required to register with the taxman. This registration happens when one gets a set of legal books approved at the tax authority, Tributación Directa. The form to do so changed this year from one without a number to Form 406. The old form had no number and was clumsy looking. It can still be used until Friday, but starting Monday, to register a company to get legal books authorized one must use the new form.

There are several important deadlines for taxpayers in Costa Rica. The most important ones for expats are Dec. 15 when Form 101 for income taxes is due and March 31 when Form 110 for education and cultural taxes is due.

To be a contributor to the tax system one identifies him or herself on Form 140.

Registering to get legal books approved is not the same as identifying oneself as a taxpayer. However, getting legal books approved adds a company or individual to the computer system.

Many expats do not file Form 140 because they do not feel they are involved in financial activities as defined by the tax code. Others do not know about Form 140, and others just feel that if they do not file it the tax collector will not catch them.

Article 2 of the Tax Law 7092 states that every entity involved in a financial activity must file tax information in Costa Rica. However, owning a piece of property and selling it, making a bundle on the transaction, is not considered a financial activity.

Renting or leasing the land, renting out a house, villa, or condo over the Internet to others like tourists, as many homeowners here do, is considered an income-generating activity and profits are taxable. Many expats that do this type of rentals collect the money here or outside of Costa Rica and do not pay tax on the profits.

A broker who sells real estate in Costa Rica and makes a commission is also involved in an income-generating endeavor, and taxes are due on the commission earned. However, many real estate people selling properties to foreigners do not declare their earnings or pay taxes on them. Some are not even legal residents.

Tax hikes are in Costa Rica’s future. The current administration is working hard on new tax legislation. The last tax bill died due to technicalities not content. This is true even though the content would surely have destroyed the country.

More importantly, taxes in the future will have more of a bite. The tax dodging games of today will meet harsh penalties.

When a new tax law is reality, the country will be ready.

Things are changing fast in Costa Rica regarding taxes and most people are not aware of what is happening around them. Banks are perfecting their computer systems to enhance electronic banking. The reason for this is due to the worldwide movement toward transparency.

Transparency in itself is scary, but when it comes to a collection vehicle for taxes, it is a spine-chilling nightmare.

Bank accounts now are monitored very closely. Bank officers now regularly call clients asking questions regarding common transactions. All banking information is available to the tax authorities.

Moreover, the tax authorities are now doing the checks and balances matching tax returns to money movements. When the results do not look right, strange people show up at the door requesting to look at records.

Many expats play games with the money they are
making in Costa Rica. They feel they will never be caught because the country is very disorganized in its collection of taxes. Others hide their earnings from their home country’s tax department too.

Costa Rica may not currently have a capital gains tax, but the United States as well as other countries do, and citizens are required to pay it even if the money is made here.

The common prescription for a good night’s sleep is adequate doses of tax planning and staying on the up and up with all tax authorities.

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December and Christmas in Costa Rica is the prelude to tourism season and better weather, but this also is the time of the year to file certain crucial tax forms.

Everyone knows that life has two certainties: death and taxes. There is another: The national tax authority’s Web site stinks. It stunk last year, the year before that and the year before that. This year it is fancier with new graphics, new links, and a new search engine. They have obviously spent some money on revamping the interface much like the Instituto Costarricence de Turismo with its $880,000 site. However, it still does not work properly.

Many links go nowhere, and the search engine is a joke. A search lists orderly results but a click on them ends in this error “The page you are looking for is currently unavailable. The Web site might be experiencing technical difficulties, or you may need to adjust your browser settings.”

It is frustrating enough to have to find which bank is selling tax forms, what bank has what forms, and what bank is not selling forms because they are fighting with the tax authority, referred to as the Dirección General de Tributación also known as Tributacion Directa for short. Yes, it is true, Banco Nacional, the country’s most important governmental bank will not take money to collect sales taxes for Tributación, and other banks will not accept Banco Nacional checks for tax payments.

At the Web site, explanations and details for more complex matters simply are impossible to get. The Web site requires a lengthy registration process to make simple requests, such as to download the ministry’s most recent bulletin. Curiously, nowhere on the home page of the ministry do tax deadlines appear.

The absurdity about all of this is the current government wants to approve a new tax law for $500 million in new taxes when it cannot collect the taxes due. Just blocks from the main Tributación building, there are businesses that ask purchasers whether they want to pay sales tax. It appears in Costa Rica that it is optional to pay sales taxes because many businesses ask customers “Do you want an invoice? If you do, we will have to add sales tax and the purchase will cost you 13 percent more.”

How much money is lost in Costa Rica each day because of this common practice? Probably much more than the amount lost because many legal professionals do not use real values in property transactions to save on transfer taxes.

Only the Movimiento Libertario, headed by Otto Guevarra, is opposed to the new tax package currently in front of the legislature. The party argues that every government for the last 30 years has approved a new tax plan with the promise it will be the last and the one that will solve the country’s problems. The Libertarian party advocates diligently collecting taxes owed, promoting ease of payment and removing the current mountain of obstacles that exist.

Here are the most important filings for most readers up to the end of the year:

Nov. 30 Form D.151, Sales and Purchases Summary, is due. This is where businesses list the major payments and purchases they have made during the year.

Dec. 15 is the deadline for the annual income tax form, D.101v2.

All vehicles need a new marchamo (wheel tax) sticker on their windshields by Dec. 31.

All individuals inscribed with Tributación as working are required to file a personal tax return. All companies registered as active are required to file. Companies registered as inactive as those that only exist to hold property do not have to file a return, but it is a good idea to do so. Form D.101 version 2 is used for individuals and companies alike. The form is due on or before Dec. 15 which falls on a Thursday this year. A company is any legal entity registered at the Registro Nacional doing business as an S.A., sociedad anónima, or S.R.L, sociedad responsabilidad limitada.

Paying taxes is important for Costa Rica. Please do so even though it may be very frustrating and hard to do.

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