CORPORATE TAXES
GENERAL NOTE
The information in this entry is current as of January 1998. For subsequent developments consult the contact listed above.
TAXES ON CORPORATE INCOME
Taxable income is taxed at a 30% rate.
CORPORATE RESIDENCE
In most cases, the place of incorporation is regarded by Costa Rican authorities as the corporate residence. However, income taxes on corporations in Costa Rica are levied on local income irrespective of the place of incorporation, since any business not registered under Costa Rican
laws that carries on industrial, agricultural or commercial activity
is subject to taxation in the same way as a registered business. At the same time, under the Costa Rican Income Tax Law, certain transactions (income and expenses) may be regarded as performed outside Costa Rica and, therefore, as not subject to income taxes.
Corporations may have their residence in Costa Rica and perform the central management function of other nonresident affiliates from Costa Rica and not be subject to taxes, as long as the registered entity performs no income-generating activities within the country and all local disbursements are subject to reimbursement from an outside source.
OTHER TAXES
Sales tax/Sales tax was increased to 13% effective March 19,1997. It is applied at all stages in the sale of merchandise or the invoicing of a service. The tax is levied on sales of merchandise within the national territory (except sales of land, buildings, exports, and certain basic necessity items, such as medicines and veterinary products); the value of services performed by restaurants, bars, motels, printing services, social and recreational clubs, and painting and repair shops; and imports consisting of merchandise for personal use or consumption or to satisfy commercial needs.
Property tax/Fach local government is in charge of real estate appraisal. The tax to be applied throughout Costa Rican territory is 0.25% of the appraised value. The first CRC 3,789,000 is exempt if the taxpayer owns only one property.
Franchise tax/Some miscellaneous businesses, including nonimporting representatives of foreign firms, are subject to franchise taxes levied by municipalities. The tax is assessed at 0.36% of gross income.
Capital gains tax/At present, there is no capital gains tax on the sale of real estate or securities when such sales are not a habitual activity.
Real estate transfer tax/Redal estate transferred is taxed at 3%.
Selective consumption tax/The selective consumption tax rates range from 10% to 75% and are applied to goods that are considered nonessential. The tax base is the CIT price plus import duties for imported items and sales value for articles produced in Costa Rica. The tax is levied at only one stage in the sale of merchandise, payment of the tax being required at the time of importation or, for articles produced in Costa Rica, within two months after the month of the sale.
BRANCH INCOME
Branch income is subject to income tax at the rates applicable for corporate income taxes. A 15% tax in lieu of a dividend withholding tax is assessed on profits transferred abroad.
INCOME DETERMINATION
Inventory valuation/Inventories are generally stated at the lover of cost or market and can be valued at average, FIFO, LIFO, or last invoice price. Since all entities must keep legal records, any adjustment resulting from different methods of inventory valuation for tax purposes and financial
purposes should be recorded.
Capital gains/Capital gains and losses on the disposition of all fixed assets or shares of other companies are excluded for income tax purposes if such dispositions are not a habitual activity.
Intercompany dividends/Dividends between domestic subsidiaries and other domestic corporations are not subject to any taxes. There are no ownership requirements to qualify for this exclusion.
Foreign income/Foreign-source income is not taxable.
Stock dividends/Stock dividends are allowed and are exempt from taxes.
DEDUCTIONS
Depreciation and depletion/Only the straight-line and
sum-of-the-years-digits methods of depreciation are allowed.
%
Buildings………………………………2 to 6
Machinery and equipment……………7 to 15
Furniture
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