A common practice by many foreigners (and Costa Ricans alike) is to hold property, ie, a vehicle or real estate in the name of a corporation rather in their person.
Not a problem if and when the ‘tax on corporations’ is paid. But what happens if not?
Currently, some 265,216 corporations have been dissolved by the National Registry (Registro Nacional) for non-payment of the tax on corporations of the previous law. However, according to Luis Gustavo Álvarez, director of the Registry of Legal Entities at the National Registry, though the corporaitons have been dissolved, the assets (held in the corporation) is not lost.
Alvarez clarified that the assets such as vehicles and real estate registered with the National Registry are not canceled, but are annotated with a mortgage or lien, as the case may be.
“The cancellation of registration refers to the dissolution of the corporations, that is, to cancel the registration of the corporation as active, giving it the status of dissolved. In relation to the registered property it will be noted with a preferential mortgage or lien,” Alvarez explained.
He added that it is the normal steps in dealing with assets when a tax (any tax) is not paid.
“The same happens with other taxes, such as municipal taxes, the law gives the power to establish legal mortgage on that property to serve as a guarantee for non-payment of a tax,” he said.
The official wants to make it clear, the assets of ‘dissolved corporations’ are not lost, they continue in the name of the corporation, that in the dissolution has become inactive but has not ceased to exist.
But disposing (selling) of the asset, being a vehicle or real estate, is not simply by entering into a buy/sell agreement and transferring the asset to a new owner. For that to occur, certificates such as the ‘personeria juridica’ for the transfer, but given that the corporation is now dissolved, the certificates cannot be issued.
There is a process. In order to resolve the situation, the owners must carry out a liquidation process, in which the shareholders agree and appoint a “liquidator”, who will be in charge of distributing the proceeds of the assets according to the participation of shares of each of its partners, after paying any the outstanding taxes.
“Following liquidation, the corporation ceases to exist. It is necessary to clarify that the liquidation does not exempt the payment of the taxes nor fines, and even the personal exposure of the partners to the processes of judicial collection”, explained the vice-president of the Costa Rican Association of Public Accountants, Luis Javier Porras.
Porras added that taxpayers can also enter into a payment arrangement with the National Registry’s Comptroller of Services.
For many the confusion comes from the on and off, pay and don’t pay of the tax passed by the previous government, which at one point was deemed unconstitutional, followed up with an new law by the current administration that sets out a new tax regime and empowered the national registry to take action on corporations in arrears of three fiscal periods or more.
The defaulters may pay for periods or total debt at any branch of the Bank of Costa Rica (BCR) and if they pay within the grace period, which runs from September 1, 2017, to December 1, 2017, they may be exempted from payment of fines and interest.
Important to note that the payment of tax arrears does not revive the dissolved corporation.
In addition, to streamline the liquidation process, on September 8, in the Blog Punto Jurídico, an agreement was announced by the Notarial Superior Council, which states that public notaries are authorized to process the liquidation.