Most expats now should know everyone with a Costa Rican company of any type will be required to file an income tax return this year. What many do not know is that they will have to submit two within three months of each other.
According to attorney Marco Retana, there is a fine of around $375 (depending on the exchange rate) for not filing. More importantly, non-filers will not be able to get any legal documents at the national registry for their company if they are not in compliance with the law.
The first filing date is Dec. 16 for the fiscal period Oct. 1, 2018, to Sept. 30, 2019. The second is March 16, 2020, for the short period of Oct. 1, to Dec. 31, 2019.
The recently passed Law 9635 changed future fiscal periods and made them the same as a calendar year. This year is a transition time and the reason for two filings. Usually, tax returns are due on Dec. 15, but this year that date falls on a Sunday, as does March 15 next year.
Almost all tax documents of any type require online filing nowadays. There are no more paper returns except for some penalties which are printed on an online form and paid at a bank.
To file a tax return with Costa Rica’s tax department a person with legal representation must declare it for the company because they are personally responsible for its accuracy.
To do so, the person needs an account with the Administración Tributaria Virtual system (virtual tax administration, known to everyone as ATV). It is straightforward if one has the correct information.
Now the hard part.
Most expats do not have their company up-to-date or do not qualify to get an ATV account. Only people with a Costa Rican cédula (citizen I.D. card), a DIMEX (residency I.D. card), or a N.I.T.E. (a unique tax number assigned by the tax department) can register.
Here is a checklist for expats to prepare for filing a tax return:
1. Go to the Registro Nacional’s website (Costa Rica’s national registry) and sign-up for an account and buy a literal certification of the company.
2. The Banco de Costa Rica, Banco Nacional or any Costa Rican post office can also print the informational form for a cost of around 3,000 colons.
3. Check the information about the company. Is all the identification data correct and up-to-date? If not, one needs to visit a Costa Rican notary and correct it.
4. Is there someone in the company with full representation to conduct legal affairs with a Costa Rican citizen I.D. or a DIMEX? If not, and the company’s other information is correct, the legal representative can go to any Hacienda (the tax department) office (located in most big cities) and request a N.I.T.E. number.
Once the above steps are complete, and the responsible persons have the correct information they can sign-up for an account with Costa Rica’s ATV tax system. Here are the steps to do so:
1. Go to this web address: https://www.hacienda.go.cr/ATV/Login.aspx.
2. Click on the text “Crear cuenta de usuario” (create a user account) left of the “Ingresar” (enter) button.
3. The first question is “Tipo de identificación” (type of identification). There are three options. “Cédula persona fisica” (I.D. for Costa Rican citizens), “Número de Identificación Tributario Especial” (the special tax I.D. number referred to above called a N.I.T.E), and lastly, “Documento de Identificación Migratorio para Extranjeros” (this refers to a DIMEX I.D. for residents).
4. Select the correct identification with the drop-down selector and fill in the number in the box that follows.
5. People with a cédula and a DIMEX number will also need to input their birth date and the expiration date of the card they carry. This data is a crosscheck to avoid fraud.
6. Once all the correct information is filled in, click the “Aceptar” (accept) button, and if everything right, the system will next display a temporary password to log in and provide the user with a page of token numbers. Do not lose them, they are important.
What are token numbers?
Tokens are like the captcha boxes found on many websites. They are used to distinguish a human from a machine to thwart spam and automated extraction of data.
Hacienda refers to its token system as TIV or “Tarjeta Inteligente Virtual” (virtual intelligence card). It has three boxes, and each requires the input of a letter and a number from the token list supplied during sign-up.
To summarize the details above:
1. Everyone needs to file tax returns for every type of company in the future. It does not matter if they are active or inactive. The tax department wants to get away from that distinction. Staffers there consider all companies active. Many expats and frequent visitors use inactive companies to hold property titles, motor vehicles, boats and other assets. In the past they have not had to file returns for the companies if there was no economic activity.
2. Filing tax returns with the tax department is not hard to do, but a company’s legal information needs to be current. If it is not, an attorney who is a notary must bring it up-to-date.
3. Once a company’s data is correct, only a person with a Costa Rican citizenship I.D., DIMEX number or a N.I.T.E can get an account;
4. It is easy to sign-up and log into the tax department’s system and fill out the forms found there, including income tax returns.
Can an accountant do this? “Yes,” according to Kevin Chavarria, a certified public accountant, “but the legal information must be correct,” he said.
Now for the tricky part, what to put on the tax form. Law 6935 is specific according to Chavarria. “Inactive companies do not have income. The government wants to know the value of all the assets held for future taxes especially capital gains taxation,” he said.
Next month’s article on June 3 will discuss what to put on a D-101, Costa Rica’s income tax return for the many expats holding assets using inactive companies. There is still plenty of time to learn how to it and comply with Law 6935 to avoid penalties.
Under the existing rules, foreigners who own a Costa Rican company must be physically present in the country to obtain a N.I.T.E. number. That could impose a hardship on those who visit the country infrequently as tourists or similar yet still have assets here.
Article first published in A.M.Costa Rica on May 8, 2019.
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