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- Photo via Asamblea Legislativa de Costa Rica -

Costa Rica Congress pre-approves law to avoid Europe's gray list

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Published on Thursday, September 7, 2023
By the A.M. Costa Rica staff

The new law to meet the standards sought by the European Union to remove the country from the gray list is pre-approved by Congress in the first round of voting, with 28 deputies voting in favor.

The gray list is also known as the EU list of non-cooperative tax jurisdictions. The list is part of the European Union's efforts to combat tax evasion and avoidance.

According to Congress's statement, the new law No.23.581 intends to prevent European residents from utilizing the country to avoid paying taxes in their own countries.

The revised law is expected to pass in a second round of votes in Congress. If it is adopted, Costa Rican companies with European investments must pay income taxes in the country where they are registered in Europe rather than in Costa Rica. Furthermore, the law prohibits the Treasury from taxing Costa Ricans who make earnings abroad.

Costa Rica's name will be removed from the list if it passes a new law that meets all EU commitments.

However, Nogui Acosta, Minister of Finance, stated that the new law's content could harm the country's finances since taxpayers with income in Europe may decide to pay taxes in their own nations rather than Costa Rica. Faced with the possibility of jeopardizing the state's finances, Acosta said that the administration might oppose the passage of this new law.

Costa Rica was included on the list for the first time in February because it has not fulfilled its pledge to remove or reform the damaging parts of its foreign source income exemption regime.

The EU list now includes American Samoa, Anguilla, Bahamas, Fiji, Guam, Palau, Panama, Samoa, Trinidad and Tobago, Turks and Caicos Islands, US Virgin Islands and Vanuatu, British Virgin Islands, Marshall Islands and Russia.

Listed countries either have not engaged in a constructive dialogue with the EU on tax governance or have failed to deliver on their commitments to implement the necessary reforms. 

"Those reforms should aim to comply with a set of objective tax good governance criteria, which include tax transparency, fair taxation and implementation of international standards designed to prevent tax base erosion and profit shifting," the EU said in its statement.

What impact does Costa Rica's being on the blacklist have on the country's international trade?  We would like to know your thoughts on this story. Send your comments to news@amcostarica.com