This content was previously posted on the TMF Group’s website.
Costa Rica has enacted new Ultimate Beneficiary Owner (UBO) requirements to combat against tax evasion in the country. This new regulation substantially amends the Tax Regulation and Procedures Code in Costa Rica and puts the obligation on companies to disclose their capital and individuals with majority ownership.
UBO law details
The new UBO disclosure law applies to legal persons and legal structures domiciled in Costa Rica. These companies are obligated to provide a registry of shareholders and ultimate beneficiaries that have substantive ownership, which is between 15%- 25% of the share capital. The personal information of the shareholders and ultimate beneficiaries must be collected and disclosed such as, identity number, contact information, passports, capital, type of shares and number of shares. This information must then be submitted through a secure online platform with the Central Bank of Costa Rica (BCCR). The UBO reporting is to be completed on an annual basis.
Two very specific parts of this regulation can add complexity and time to the process. The first challenge is the need for a digital signature, which is a special card with a card reader that must be plugged into a computer to access the secure online bank system. This is only available to Costa Rican locals and foreigners that are residents in the country. For anyone who lives outside the country, they would need to grant power of attorney to a local person to file the UBO information on their behalf. The second challenge is that all the required documents must be translated into Spanish.
Timeline for compliance
The timeline for this legalisation change has been pushed back and is still subject to change but there is a tentative plan for when it will come into effect. The obligation should start in September 2019 with a monthly roll out of deadlines for filing dependent on the last digit of the Costa Rican entity’s tax ID number. For example, entities with a 0 or 1 will have to file in September and each month the next two numbers will have to file, ending with 8 and 9 in January 2020.
There are financial penalties for non-compliance cited in Article 82 of the Tax Procedural Code. If the UBO information is not reported, the government can penalize your business at 2% of the profit gained during the last year, which can range from a minimum of three salaries of a government employee in Costa Rica to a maximum of 100 salaries.