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(506) 223-1327         Published Thursday, Dec. 13, 2007, in Vol. 7, No. 247               E-mail us
Jo Stuart
Real Estate
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Yikes! The Costa Rican tax man cometh Monday
By the A.M. Costa Rica staff

The Costa Rican income tax filing deadline is Monday for most residents. The law sets the deadline as two and a half months after the end of the tax year.

Because most residents use the normal tax year of Oct. 1 to Sept. 30, Dec. 15 is the filing deadline.  This year that date is on a Saturday, so the last day to file without a penalty is Monday, Dec. 17.

Many residents and expats do not file income tax declarations here and pay no taxes, but the collecting agency in the Ministerio de Hacienda, Tributación, has been getting training from the U.S. Internal Revenue Service and has acquired new computers and software.

What a lot of expats do not know is that the firms with which they do business frequently report the money that was paid to them on a vendors and providers report that is filed with Tributación every Nov. 15. Payments to independent contractors as low as 50,000 colons a year (about $100) are listed on the form along with identifying information on who got the money. If there is not a subsequent declaration by the person who got the money, Tributación will seek them out for the tax, fines and penalties.
tax man cometh

Refurbished Black Star Line building again open to public in Limón
By Helen Thompson
of the A.M. Costa Rica staff

Limon's most prominent symbol of black heritage was re-opened to the public this month after a restoration that cost $97,000.

The Black Star Line building, which is mostly made of wood, was constructed in 1922 and is linked to Marcus Garvey's Black Star Line shipping association, a company that only lasted three years but has remained a symbol for African Americans.

Marcus Garvey was a Jamaican who founded the Universal Negro Improvement Association, an organization which he intended would unite blacks all over the world and push for black rights.

The offices of the organization are still located in the Black Star Line building today, and it is also used for cultural and social activities for the general public in Limón. 
Balck Star Line building
Ministerio de Cultura, Juventud y Deportes photo
Black Star Line in Limón centro

In July 2006 the building won the Salvemos Nuestro Patrimonio Arquitectónico prize, handed out annually by the Ministry of Culture.  The money helped to repair damage done by insects and fungus attacking the wood, the poor state of electrical installations and the deterioration of the building.

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San José, Costa Rica, Thursday, Dec. 13, 2007, Vol. 7, No. 247

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Our readers' Opinions
She's astounded by plan
to increase tax bite here

Dear A.M. Costa Rica:

In regard to the astounding property tax hike described in Tuesday's A.M. Costa Rica article, I can only describe my reaction as alarmed, insulted and disappointed.

I'm alarmed because this tax hike may well make a serious impact on my budget. I'm alarmed because this could mean Costa Rica is no longer affordable for me or for the many "Baby Boomers" that Costa Rica is banking on to invest and retire here. A tax increase of this magnitude could send many expats packing for home or to other countries. Though tax revenue is desperately needed here, this is a clear case of biting the hand that feeds you.

I'm insulted because this draconian tax hike reflects the Costa Rican mindset that all Gringos/foreigners are rich, rich and foolish enough to pay preposterous taxes. A substantial number of the expats who invest here and contribute daily to the Costa Rican economy are not rich or foolish. And our dollars are hard earned. We spend them as wisely as possible.

We all watch the "bottom line" and when that "bottom line" looks too risky, as it does now with this tax hike, we pack up and move on. It may also come as a surprise to Costa Rica that rich foreigners, retirees and investors, got rich and stay rich by watching the "bottom line" closely. They have the financial mobility to move elsewhere at the drop of a hat.

I'm disappointed that Costa Rica is courting the super rich without regard for its own socio economic future. As those of us from the U.S. well know, communities, regions, and small countries that cater to the super rich exclusively, do their citizens no favors. The middle class will shrink until Costa Rica is like its Latin American neighbors. There will be the super rich and their work force, the super poor who will never be able to afford to buy or pay taxes on homes or to purchase goods and services whose prices reflect the generous budgets of the rich consumer.

The jobs created by all the mega resorts coming to Costa Rica are dead end and mostly menial jobs that offer little or no opportunity for the employee to advance or acquire an education that would apply to anything outside the hospitality industry.

This tax hike is short-sighted and ill timed. Gringos here and at home are watching their dollars very closely due to economic hardships in the real estate market at home. Costa Rica doesn't look like such a good idea anymore!
Pamela Ellsworth

Homeowner facing trial
is reversal of principle

Dear A.M. Costa Rica:

I am shocked to see such a reversal of the principles of justice as found in the story of a man apprehended and extradited internationally after an incident of lethally injuring a criminal in the process of defending his property.

Call me a Texan, but if someone tries to intrude on my property and does not respond to warnings or worse, is obviously breaking and entering, I feel I should have the right to take out and use, a firearm or any suitable weapon as a defense.

Not having that right or principle in force — instead having laws that protect violent intruders — may be the reason why criminals here feel they can peel up your metal roof and drop in with practical impunity.  And according to other reports I have seen, if they (and you) DO make it out alive, you are actually at grave risk of retaliation.  At risk of their return "to finish you off" for no better reason than the fact you reported them to the police.

I am not a violent person and do not advocate violence.  I do not even own a firearm.  But when I see law enforcement apprehending THE VICTIM in such an efficient manner, using MY TAX DOLLARS, when the thieves, including those who use firearms, poison the watchdogs (and in one instance that I know of, poisoning the victims!) and threaten the lives of residents who might resist such an intrusion, actually go free only hours after being apprehended?  Then I begin to wonder just how insane the justice system has gone. Does anyone else see the completely ridiculous lack of logic in all this?

The protection of criminals with laws that punish the victims and take away the right of self-defense presents an untenable existence for people who wish to live in peace and pursue prosperity.

For good reason the founding fathers of the United States of America insisted on the right to bear arms.  Not to encourage a violent society (it doesn't by statistics) but to DISCOURAGE violent intrusions — be they from rogue governments or rogue criminals.

The justice system here needs work.  But it's not just here — the real shocker is that more and more states in the U.S.A. have fallen away from basic constitutional principles of right to protect and defend one's property and person.

Scott Gordon
San Jose, Costa Rica

Panamá is no paradise,
ex-Ojochal homeowner says

Dear A.M. Costa Rica:

In today's publication there was an article about leaving Costa Rica and moving to Panama for lower taxes.

Before Mr. Garretson makes the move because of things like real estate taxes — he had better do some more research. Yes — some of the taxes are lower — but they have other taxes that make up for it. There is a tax relief for the house (but not the property) for 15 years up to some dollar figure for the pensionado and Panamá does have quite a few discount items that are nice (like a 25 percent discount on a meal at most eating establishments, up to 50 percent discounts for hotel stays and several other items).

Gasoline and cars are also cheaper. Mostly though, Panamá is NOT cheaper than Costa Rica. Property and house taxes are about 2 percent. Food costs are higher. Cost of property and housing is comparable to Costa Rica. The beauty of the land has been cut down for farming. Burning of the farm lands is very common and obnoxious. Panama is NOT  nearly as ecology conscious,

Generally the roads are better. Political corruption is as bad or worse than Costa Rica. It is just as slow to live here as it is in Costa Rica (14 months to build a house is normal). Cost of building is getting up to $80/sq ft (or more) (similar to Costa Rica), cost of electricity is MUCH higher, the water conditions in Panama are generally awful - and expensive).

The People are very nice and helpful in Panama. I do speak a little Spanish so I can get around here. But, in general, very little English is spoken in Panamá where in Costa Rica English seems to be generally everywhere.

I am writing you from the City of David. I moved here about six months ago from Ojochal. I am considering moving back to Costa Rica as I finish the house I am building at the moment and get it sold.

My home in Ojochal was an Ocean view home, 1/2 kms. from the ocean and on a mountain top. Absolutely beautiful. I place a price on the house that absolutely nobody would pay and then I got a call from Holland, and a gentleman gave me what I was asking and also gave me six months to move. I stupidly accepted the offer.

I now do live ON a beach (Playa Barqueta 26 kms. from David) with no trees, flat as a pancake and smells like over-grazed, over-fertilized farmland. I did not ask all the right questions when I purchased. My taxes are going to be excruciating. I am a pensionado and well over 65.

I am actually glad to see Costa Rica changing. IF they use the tax money wisely and make the taxes reasonable AND actually collect the taxes from everybody, they should be able to keep taxes reasonable.

Costa Rica also needs to enforce their immigration laws. Immigrants are NOT supposed to take the jobs from the TICO and they commonly do. The permanent tourist who simply pays about $30 to a Tico and has the passport taken to the border and stamped every 90 days is a joke. The expat should either be an expat or go home. I will have to say that Panamá does enforce their law here.

Frank Yates
David, Panamá

She's sick of complainers

Dear A.M. Costa Rica:

I lived in California over 30 years, and my property taxes when we left in 1989 were over $5,000 a year.  I expect they are at least double that now as the property values in that area have gone sky high — same as elsewhere in the US.

I just paid my annual property taxes in November  The municipality told me what I will be paying next year and for the following four years for a guaranteed property tax for five years.  (I have the papers to prove this amount.)  If this man thinks it is anywhere near what I paid in California and people are paying now, he needs to do some more research.

 Let him go to Panamá. I am tired of these complainers and especially the people who don't even live here and many who've never even been here.  Let them go elsewhere.

Marjorie Slovachek
Heredia, Costa Rica

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San José, Costa Rica, Thursday, Dec. 13, 2007, Vol. 7, No. 247

Paz con la Naturaleza campaign
British diplomat tells central government to lead by example
By Helen Thompson
of the A.M. Costa Rica staff

A British government worker made Costa Rican history last week when she was allowed into a cabinet meeting to make a presentation about the Paz con la Naturaleza campaign.

Claire Hughes, an employee of the British Department for Environment, Food and Rural Affairs, talked in front of President Óscar Arias Sánchez and 26 cabinet ministers, and was later told that it is the first time a diplomatic corps team has been allowed into one of these meetings.

Ms. Hughes has been travelling around the country searching out good and bad envionmental practises in order to compile an educational video about climate change during her work with the Peace with Nature team. She has spent six weeks as a voluntary intern using her experience of developing Britain's “Act on CO2” campaign, launched in July, to help develop communication materials.

Britain has donated $82,000 to the Peace with Nature campaign that Arias launched in July, even though Britain itself has a far larger problem with carbon output, ranking among the top 10 carbon producing nations in the world.

Costa Rica ranked 107 while Britain came in at number 8 in a study of countries' carbon emissions per capita done in 1997.

“Britain is helping Costa Rica with its climate change project rather than solely focussing on its own problems because everyone's actions impact one another,” said Ms Hughes.

“This is a worldwide problem and Costa Rica is like one big lung due to all its forests, a very great resource in the fight against climate change. By sharing our experience we can stop developing countries from making some of the mistakes that we have already made.”

The money came from Britain's public diplomacy fund, which supports overseas projects that promote Britain's international strategic priorities. Embassies must bid for the funding, and Ms Hughes' interest in coming to Costa Rica to help develop the project was one of the factors that secured the funding.

In the presentation of Dec. 5, Ms. Hughes and her team encouraged the cabinet and government bodies to lead by example in the fight to make the country carbon neutral by 2012.

“I gave a short presentation about what we have learned in Britain,” Ms. Hughes said. “For example, the images of the
lights on in Parliament at midnight when there is no-one there. When people saw that, they were outraged that the government was telling people to save energy and not doing anything about it themselves.”

She said that her main role here has been to emphasize that the government must get its own house in order. It must ensure that it keeps to targets and makes the goals of Peace with Nature transparent so that the ordinary man on the street is able to see that the government is taking action.

Engaging with staff through events like pledge weeks, when staff must walk to work, take the stairs instead of the elevator and do other environmentally conscious actions, is a large part of this.

Once the government staff is able to show the commitment to change, said Ms. Hughes, it will be far easier to get the rest of the country's residents on board.

Making climate change part of the school curriculum, training teachers to include the subject in lessons and providing readily available teaching materials, such as the video that Ms Hughes is developing, will all be essential, she said.

Less obvious actions, other than using less fuel and planting more trees, will also contribute, she added.

Installing sewage treatment plants in coastal communities that recycle water for agricultural purposes will both reduce the demand for water and clean up the country's oceans, she noted.

“Unlike in Britain, I haven't encountered anybody who does not believe that climate change is happening,” Ms. Hughes said. “If everyone in the country takes ownership of the goal, then it is achievable.”

She is also positive that Costa Rica's project will influence other Central American countries to follow in its footsteps.

“Other countries in the region are taking notice — the Guatemalan Ambassador has already asked to talk to me,” said Ms. Hughes. “Costa Rica is showing that you don't have to be big to have big goals.”

Ms. Hughes acknowledged that not everyone will give up all of their enivornmentally unfriendly practises in the near future, but said that it is alright for people to take the odd flight home from Costa Rica to see their families if they use carbon offsetting techniques.

Ms. Hughes will leave the country Friday, but will maintain links with the project.

New Web site gives a summary of U.S. expat tax obligations
By the A.M. Costa Rica staff

An Escazú accounting firm has published a new Web page that tells U.S. expats their tax obligations to the United States.

The U.S. tax rules for expats here frequently are bent and twisted by individuals who may not have the whole story or don't want to know the whole story.

The company is U.S. Tax International, which is a new name for U.S. Tax and Accounting in Escazú and Executive Accounting and Bookkeeping Service, Inc., in Florida.

"Do not think that just by living, working, or investing in a country outside of the United States you are protected from the strong arm of the U.S. Internal Revenue Service," the Web site warns.

Many companies here provide extensive information about Costa Rican tax laws and obligations, but many questions by expats about U.S. rules end up being answered correctly or incorrectly on local Internet discussion lists.
The Escazú operation is headed by Randall J. Lindner, which has 25 years experience in U.S. tax matters.  The Florida operation is headed by Jerry P. Collins.

The Web site discusses the income exclusion of $82,400 earners of foreign incomes can take, but it notes that Social Security still has to be paid on that amount and that the exclusion does not apply to dividends, interest or capital gains.

The site also tells U.S. citizens that they must tell the Internal Revenue Service every year if they hold more than a 10 percent interest in a foreign corporation, even if the corporation is an inactive one simply used to keep title to a home or car.

And the site said that for U.S. citizens to obtain a U.S. visa for a foreign spouse, they must present three years worth of tax returns.

Many U.S. citizens here do not file U.S. taxes even to take the tax exclusion. The Web site says that failing to keep up with U.S. taxes can have long term negative results for U.S. citizens.

Another treaty measure, penalties for crooked companies, wins legislative OK
By the A.M. Costa Rica staff

A legislative commission has approved for the second time a measure that would sanction business entities that are involved in illegal activity. The measure is aimed at corruption and bribery.

The legislation is a change in the penal code and provides suspension for up to five years, fines or loss of concessions for companies, a legal entity under Costa Rican law, that is involved in corruption. The measure was one of the dozen changes Costa Rica has to make to conform to what it promised to do under the free trade treaty with the United States.

The Comisión con Potestad Legislativa Plena Primera has the power delegated to it to approve legislation without further action by the full legislature.
The measure was not without controversy. At first the measure envisioned criminal penalties for companies that violate corruption laws. But then several magistrates pointed out in a hearing that the Costa Rican Constitution only provides criminal punishment for living humans.

So lawmakers opted for the administrative penalties. Of course, humans working for a company that violates the law can face criminal action and penalties. The current measure was necessary because Costa Rican law did not penalize corporate entities that violate the law, according to a summary provided by the executive branch.

Among other administrative penalties, a company can lose favorable tax treatment and other benefits. The measure is closely tied to a 2004 law that provides criminal penalties for public employees who take bribes and those who offer or give them.

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San José, Costa Rica, Thursday, Dec. 13, 2007, Vol. 7, No. 247

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23 in México face sanctions
under U.S. anti-narcotics law

By the A.M. Costa Rica wire services

The United States has sanctioned a group of Mexicans and Mexican businesses for allegedly serving as fronts for the Sinaloa drug ring.

The White House Wednesday announced 23 individuals and 19 businesses in Mexico will face sanctions under the Foreign Narcotics Kingpin Designation Act. The move prevents those named from doing business with Americans or using the U.S. financial system.

In a statement, the White House said the designation exposes and sanctions a principal money laundering organization and attacks the financial underpinnings of the Sinaloa drug ring.
It added that the U.S. remains committed to doing all it can to support Mexico's efforts "to break the power and impunity of drug organizations."
New immigration stamps
planned to cut down fraud

By the A.M. Costa Rica staff

All those perpetual tourists might actually have to leave this country to renew their visas after next Wednesday. The immigration department said Wednesday that it was distributing new stamps and a special ink to entry and exit points of the country.

Some current stamps or seals managed to find their way into the hands of crooks who use them to simulate trips by tourist who have to leave the country every 90 days. The usual fee is around $30, according to those who use the service.

Mario Zamora, the director general of the immigration service, said that the new seals will be secured at the immigration offices in strongboxes and that each will contain a unique code specific to an employee.

The new system will begin Wednesday at the Migración y Extranjería facility at Juan Santamaría airport. The special ink is not available commercially, said Zamora.

The new system will not stop all fake entry and exit stamps. Certain individuals on the Pacific coast and also on the Caribbean coast maintain a service of carrying expat's passports to the immigration office in Sixaola and Paso Canoas where immigration seals are applied that make it appear that the passport holder left the country and returned three days later.

Such departures every 90 days are necessary to maintain a valid tourist visa, although continually doing so, being a perpetual tourist, is contrary at least to the spirit of the law.

Some expats decline to seek other legal forms of residency because they lack the funds, they are fugitives or have criminal records in their home country that would disqualify them here.

Olga blamed in eight deaths
as storm heads out to sea

By the A.M. Costa Rica wire services

Tropical Storm Olga has claimed the lives of at least eight persons as it lashed the Dominican Republic Wednesday.

The northern province of Santiago in the Caribbean nation was hardest hit, with heavy rains causing the Yaque River to overflow its banks. In addition to widespread flooding, the storm is being blamed for several landslides.

Olga had earlier passed through Puerto Rico, where it is being blamed for killing one man. It later skirted Haiti, which shares the island Hispaniola with the Dominican Republic. Haitian authorities have not reported any serious injuries.

Weather forecasters say the storm is likely to weaken as it passes out over open water.

Olga comes nearly two weeks after the official end of the Atlantic hurricane season. The season began June 1 and ended Nov. 30.

Costa Rican weather experts said that rain would be isolated and centered over the mountains today. The Instituto Meteorológico Nacional said that weather conditions would be more stable and typical of the season, which is the start of the dry period. The winds from the north have been reduced, perhaps in part due to Tropical Storm Olga and this opens the door for humidity from the Pacific entering the country with the possibility of rain on the Pacific coast and in the Central Valley in the afternoon.

There had been concerns that the tropical storm would have a sufficient reach to bring heavier rains to Costa Rica.

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