Are you amongst the more than 250,000 corporate owners whose corporation was dissolved by the Public Registry for non-payment of the Corporate Tax? If your corporation was dissolved by the Public Registry, what happened to your property?
During the real estate boom of 2007-2008, real estate developers set up corporations so that their clients, could easily purchase their properties in Costa Rica. A large number of investors bought a property by purchasing the shares of the corporation that owned the land.
Many property owners just assumed that the Costa Rican Tax Authorities would send them a tax bill when due. Obviously, these property owners never received an invoice, so they never paid. FYI, authorities will NOT send out tax bills.
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Corporate tax law
In 2012, the Costa Rican government approved the first corporate tax law. This law imposed an annual tax on all corporations. Said tax was due every January.
The government eliminated the law a few years later. But if owners did not pay the pending tax, the debt remained. Then, the tax authorities instituted a new corporate tax in the last quarter of 2017. Corporation owners, who did not retain the services of Concierge Group Costa Rica, or didn’t receive the Easy Times weekly newsletters, never even heard of the corporate taxes.
The corporation was dissolved
Therefore, they never paid the tax and as a result, found their corporation was dissolved by the tax authorities.
The corporate tax law established that if the corporate tax was not paid for three consecutive years, the Public Registry had the authority to dissolve the corporation. Then the government can auction the assets owned by dissolved corporations to collect payment. The Public Registry dissolved more than 250,000 corporations.
Corporation owners started noticing that they could not dispose of the corporate assets after the Registry dissolved their corporations. For example, if they had a Certificate of Deposit (CD) under a corporate name.
As soon as they wanted to cash it, or use the interest, the bank told that the owner of the CD no longer existed. There was no way they could cash in their CD or even receive the interest.
Others also had problems when they found their land, house, boat, car or other assets owned under a corporation that was also dissolved had they simply gone into a “limbo”.
If the Public Registry dissolved your corporation you had the opportunity to “reactivate” it. But, the shareholders had to present a petition no later the January 15th, 2018.
Those that found out about it in time, regained control of their corporation. Many others remained in the dark. Essentially, today, you don’t have more time to “re-activate” or “bring back to life” anything, if your corporation was dissolved.
Now, there is no need to panic! There is a solution. The dissolved corporation can enter into the liquidation stage. The liquidation process is the only mechanism left in order to get all corporate assets out of the dissolved corporation.
If the Public Register dissolved your corporation these are the basic steps of a liquidation process:
a) first the shareholders need to have a meeting to appoint a liquidator to serve as the legal representative of the corporation,
b) then the legal representative has to publish an announcement of the appointment,
c) the representative has to register the appointment at the Public Registry,
d) next, the liquidator has to review the inventory of the corporate assets, get their estimated value, pay all corporate obligations and present the distribution plan to the shareholders for their approval.
e) then, the liquidator has to publish a summary of the distribution plan,
f) and the final step is to transfer all corporate assets to the shareholders according to the distribution plan.
Transfer tax and fees
It is very important to keep in mind is that the transfer of property will be subject to paying the transfer tax, stamps, and legal fees. Therefore, the expenses can add up. These expenses depend on the registered value of the assets and/or the assigned value as per the executed assessment (whichever is highest).
Not so simple
As you can see, the road to getting back control of corporate investments is not simple. BUT, it is possible, and you will NOT lose your property.
However, we encourage you to start the process right away. The Public Registry has the authority to initiate an auctioning process to collect the taxes owed. And this is exactly what you want to avoid. For more information, if your corporation was dissolved, contact me now.
Esq. Maricruz Sánchez and three other female professionals offer a unique service in Costa Rica: legal and real estate concierge services as well as personalized travel assistance. Concierge Group Costa Rica can, for example, pay your property tax payments, corporation tax, give you constant tax updates, keep track of your property, and plan your vacations. Learn more about Concierge Group Costa Rica now.