Special to A.M. Costa Rica

The new tax legislation requiring investors to pay capital gains in Costa Rica is a hard pill to swallow for many expats. Here is another pain from the legislators that will make many lives uncomfortable.

It is all about Ley 9416, approved two years ago on Dec 14, 2016. The law mandates the registration of all shareholders and beneficial owners of all legal entities except for ones under the control of these governmental institutions:

• Superintendencia General de Entidades Financieras (SUGEF – overseer of financial institutions);

• Superintendencias General de Valores (SUGEVAL – overseer of financial markets);

• Superintendencia General de Pensiones (SUPEN – overseer of pension funds);

• Fideicomisos publicos (public trusts).

It includes, but is not limited to, these legal structures:

• Sociedad anonima (S.A);

• Sociedad de responsabilidad limitada (S.R.L. also known as L.L.C);

• Sociedad civil (S.C. is also known as a civil society);

• Surcusal (branch of a foreign corporation);

• Asociación (asociation of any type include non-profit);

• Fideicomiso (trust except for public trusts).

Ley 9416 mandated the Banco Central (Costa Rica’s central bank) to have the system in place by last Jan. 1. The bank will hold all this information for investigative purposes to be used by the tax department and the drug enforcement agency.

Required registration begins March 1, based the last digit of an entity’s cédula (identification) number per the following schedule: In March, entities ending with the cédula number 0 must register. In April, entities with cédulas ending in 1 must do so. May is the deadline for entities with cédulas ending in 2, and so on until December when entities with cédulas ending in 9 must file.

Now for the hard part. Only certain people with specific representation or powers-of-attorney can do the registering.

• S.A. – only the president;

• S.R.L. - any manager with legal representation;

• S.C. – only the administrator;

• Surcusal – only representative with full power-of-attorney;

• Asociación – administrator with full power-of-attorney;

• Fideicomiso – trustee

The registering party must also have a firma digital or digital signature registered with the Banco Central. Only Costa Ricans and people with a legal residency who have a DIMEX number can obtain a digital signature in Costa Rica.

So how do retired expats or other people without legal residency who hold property in a company in Costa Rica register? They have to go to a public notary and assign a special power-of-attorney to someone else who does qualify to sign them up. This process is somewhat of an expensive endeavor, especially for retired folks watching their budgets.

How often is the registration required? Every year! Yes, annually, a correctly authorized individual will have to fill out the paperwork at the Banco Central for every legal entity in Costa Rica.

Of course, the fines for not filing the information are bank breaking. From three to one-hundred minimum salaries. The current legally established minimum salary is 446,200 colons or about $750. In U.S. dollars that translates into penalties of from $2,250 to $75,000 for non-compliance.