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Inactive Companies Must Register And Provide Tax Returns

Inactive Companies Must Register and Provide Tax Returns

Starting in January 2020, inactive companies in Costa Rica (such as holding companies with no business activity) will need to start registering with the tax department and submit yearly returns.

This requirement has been adopted to confront possible tax evasion and tax fraud by shell companies. It is in line with most other countries in the world, including the OECD nations where Costa Rica is pushing hard to join the ranks.

For example, a US-based LLC with no commercial activity, but that owns a property in its name, must make a yearly return to the IRS and to the state, and detail its assets and liabilities. This is now the same for Costa Rica.

This is independent of the Shareholder Registry, which must be completed and updated by all companies, active or otherwise.

Costa Rican companies with company numbers (cédula jurídica) ending in the number 1 and 2 must register with Hacienda by the end of January 2020. The rest of the companies have a staggered deadline as follows:

  • Ending in 3 and 4: February
  • Ending in 5 and 6: March
  • Ending in 7 and 8: April
  • Ending in 9 and 0: May

Registering Properties in Company Names

In Costa Rica it has been common practice among both locals and expats to register properties (homes, cars, etc) in the name of inactive holding companies. This has been done primarily to limit liability and obfuscate the real owners of the properties from the public. With the ongoing changes, it is becoming less viable to do things this way. We suggest considering registering properties in your personal name as an option. Remember, insurance is there to cover liabilities.

Speaking of insurance, did you know that we can help you with your Costa Rica insurance requirements? We can refer you to a licensed insurance broker for local insurance products approved by SUGESE, Costa Rica’s insurance regulator.

If you have any questions about the new requirement or need assistance registering, please contact us and we can help.

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