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://188.8.131.52/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.