practice once the company is operating a business. 4.3 Annual Tax Declaration All tax-contributing entities must file an annual tax declaration form (D.101) at the end of every fiscal year. The accountants are the persons in charge of preparing this form. However, a confirmation by the auditor is not a formal/legal requirement. The only formal requirement is to sign the declaration form by the company’s legal representative. If the company is not actively operating and the income generated is “zero”, then anyone may complete and file this form (with the legal representative’s signature). Once the form is duly signed, the accountant may pay the taxes and file the form on behalf of the entity. Inactive entities (not registered as income and/or sales taxpayers with the Tax Administration) must also file a declaration form on an annual basis. 4.4 Transparency and Beneficial Ownership New Registry. Under By-Laws of Registry and Transparency of Final Beneficiaries #410140-H of April 5 th , 2018, all entities, including legal persons and legal arrangements such as, but not limited to companies, trusts, foundations, partnerships, and others, must disclose and report to the Costa Rican authorities who are the natural persons that ultimately are the owners/controllers of the legal persons or legal arrangements, either through their ownership interests, through positions held in the legal persons or legal arrangements. This requires including the ownership chain to natural persons, including disclosure of Holding Companies, Trusts, Institutions, or others involved. Specific formalisms must be fulfilled and could trigger and limit each entity on its future ability to operate. The purpose of this

registry is to reach international standards of transparency. 5. Other considerations. It is of the utmost importance to realize that becoming the owner and/or part of a foreign entity may impact one´s tax responsibilities. In these cross-border interactions, seeking proper advice in the home country becomes a must. 6. Foreign Investment, Thin Capitalization,

Residency Restrictions 6.1 Foreign Investment

Costa Rica encourages and enables domestic and foreign entities to establish businesses through various institutions such as the Foreign Trade Promotion Corporation (PROCOMER), Costa Rican Investment and Development Board (CINDE), Tourism Institute (ICT), and others. Nonetheless, there are some limitations, such as: ● Several areas are known as legal monopolies belonging to the public sector, such as public transportation services. ● In areas such as medical series, communication, and insurance, state entities take over, though private entities can compete. 6.2 Thin Capitalization Rules Costa Rica does not have specific “thin capitalization rules”. However, there are limits on the payment of interest by a Costa Rican Limited Liability Company to its members and/or head office. These rules do not apply to a Corporations (Sociedad Anónima), only to Limited Liability Companies (Sociedades de Responsabilidad Limitada). 6.3 Remitting funds out of jurisdictions Residents of Costa Rica as well as non-residents are taxed on their income only if it originates

ILN Corporate Group – Establishing a Business Entity Series

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