The gray list

The most important thing is to position the reforms as reforms to the income and capital gains tax and not to the tax on profits as the project intends to do.

Published on

26/06/2023
Blog

With clear manifestations by the legislative benches on the refusal to support the fiscal projects of the executive, it seems unlikely that the gray list problem will be solved by changing the income tax proposed by the government, i.e., taxing income generated by capital of Costa Rican residents outside Costa Rica.

We are now focusing on what does seem possible, which is to try to approve specific regulations, as Uruguay has done, in order to remove Costa Rica from the European Union's list of non-cooperative jurisdictions in tax matters.

The project that seems to have more support is that of the PUSC, which however requires certain adjustments. The most important is to place the reforms as reforms to the income and capital gains tax and not to the tax on profits as the project intends to do. Secondly, not to limit compliance to a single tax period and thirdly, to improve the rules for crediting taxes paid in other countries. I think it is important to rescue, from the PLP project, the initiative to reduce the corporate rate from 30 to 27% plus I expect a fierce opposition from the executive, even though it has announced that the fiscal figures are very positive.

The project seeks to give substance to Costa Rican companies whose shareholders are not residents and that are currently used as investment vehicles outside Costa Rica in order not to be taxed anywhere, a matter that Europeans question, but not our territorial income system (taxation at source) per se. The project seeks to establish requirements of substance, that is, that they have employees, assets, that they assume risk and make decisions from here, that they are not just "paper companies". Thus, the draft reads: "ARTICLE 2 bis.- .....A qualified entity is understood to be those taxpayers that have adequate economic substance in Costa Rican territory during the tax period."

The challenge for the legislative Commission recently formed for this purpose is to ensure that the regulations are sufficient for Europe to consider us as "good neighbors", since it is not enough to copy the Uruguayan model because it will be necessary to take into account the characteristics of our income tax law, which contains two different systems: the profit system and the income and capital gains system, each with its own particular rules.

Acknowledgement of receipt: Narenda Modi, Prime Minister of India, visits the United States and signs historic trade agreementses and strategic. The paramilitary group Wagner, headed by Yevgeny Prigozhin, threatens for a few hours a military coup against Putin in Russia. The attempt is unsuccessful. 5 crew members die, including Stockton Rush, CEO of Ocean Gate founder of the company that owns the submarine Titan on its descent to Titanic's location site in the North Atlantic. The Tales of the Thousand and One Nights are presented in a theatrical play at the National Theater. Tributación closes Saprissa stadium for tax non-compliance dating back to 2013 and 2014. Shakira and her children visit Malpaís.

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