There is only one tax inactive companies need to pay every year. It is the education and culture tax. The tax is due by March 31 which falls on a Wednesday this year. However, it can be paid anytime during the month of March.
Law 5923 requires the paying of this tax. Many people slough off paying or do not know about it. The tax is filed and paid using tax form D.110. The form is easy to fill out and most banks will accept the payment for the tax authority. A company’s net capital amount determines the tax to be paid.
As reported on March 24, 2024, 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, the 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 fact, 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.
This is really just a pesky tax for inactive companies and its due date is somewhat inconvenient too. Most relevant taxes for companies are paid in December. One can obtain the form D.110 for free at the tax department located in Barrio Don Bosco close to Jardines de Recuerdo or buy the form at some national banks. The amount is from 750 to 9,000 colons, not a very big bite.
A company in Costa Rica is either in one of two general tax categories. Active or inactive. Active companies are those that perform some commercial activity and receive revenue. Inactive companies are those that may only hold assets and only exist for that purpose. The asset could be properties or vehicles.
Many expats confuse the two and use a company to buy a property and then use the same company to pay their staff which usually requires a bank account and registration with the Caja Costarricense de Seguro Social. Once they do this, they make the company active in the eyes of the tax authority. As it is, when opening a bank account these days, the bank usually asks for the form from the tax department activating the company.
An active company requires the filing of an income tax form D.101 in December. If the form is not filed on time, a hefty fine can be levied against the company and collected judicially including penalties and interest.
All people with companies in Costa Rica should check each year to see if their company is active or inactive. This can be done by going to this link (http://196.40.56.20/ruc/#consulta) and typing in the company’s name or identification number.
If an inactive company is active, form D.140, “Declaración de Desinscripción del Registro de Contribuyentes” (declaration to unregister as a taxpayer) needs to be filed with the tax department to put it in an inactive status.
There is one big inconvenience for people that do not pay the education and culture tax. After a period of non-payment of the tax, there is the possibility the tax department will delete the inactive company from the tax rolls completely. When this happens, the company in theory does not exist as a legal entity anymore even if it shows up at the Registro Nacional.
Where this becomes a problem is when an expat goes to sell a piece of property held in an inactive company and the buyer requires all the legal paperwork up-to-date. If the company has been deleted by the tax department, workers there will not issue a certification the company is current.
What generally happens in these cases is that a seller needs to write a letter to the Dirección General de Tributación requesting the reason for the purging of the inactive company.
They begin a study which can take as long as three months to complete only to return with a letter stating the company was deleted because the education and culture taxes were not paid. They can reactivate the company after collecting all the back taxes but the process is a pain in the neck.
Generally, what happens is a seller transfers the assets of the purged inactive company to another inactive company so the asset can be sold to the buyer. All of this takes time and depending on the fiscal value of the asset being sold can be expensive because transfer taxes and legal fees need to be paid.
Expats and Ticos alike should abide by the tax law and pay this annoying tax. If they do not have someone monitoring their company, like an accountant, they should add a note to their calendar for March of each year to pay this pesky tax. By doing so, they will avoid irritating problems when trying to transfer an asset to another person.
