The Law on the Strengthening of Public Finances establishes a tax amnesty program in Costa Rica to allow taxpayers to pay tax liabilities without the imposition of interest and with a reduction of penalties on taxes incurred up to 1 October 2017.

The tax amnesty program covers taxes administered by the Tax Authority (Dirección General de Tributación), Customs Authority (Dirección General de Aduanas), Institute for Rural Development (Instituto de Desarrollo Rural), Joint Institute for Social Aid (Instituto Mixto de Ayuda Social) and the Institute for Municipal Development and Consulting (Instituto de Fomento y Asesoría Municipal).

The amnesty program will be effective for three months after the publication of the Law in the Official Gazette.

Benefits of the tax amnesty program

Under the tax amnesty program, taxpayers may pay tax liabilities without the imposition of interest. Additionally, reduced penalties will apply as follows:

• A reduction of 80% of the penalty if the tax liability is paid within the first month of the amnesty program
• A reduction of 70% of the penalty if the tax liability is paid within the second month of the amnesty program
• A reduction of 60% of the penalty if the tax liability is paid within the third month of the amnesty program
• A reduction of 40% of the penalty if the taxpayer applies to the amnesty program within the three-month period, but requests to defer payment of the tax liability (the deferral period cannot exceed six months and taxpayers must provide a bank guarantee)

Who is eligible for the tax amnesty program?

The tax amnesty program is available in the following cases:

• Taxpayers filed the corresponding tax return, but failed to pay the tax liability.
• Taxpayers failed to file the corresponding tax return, but filed the return in a timely manner within the amnesty program period.
• An amended tax return has been filed or is filed within the amnesty period. The amended tax return may be filed by taxpayers without approval of the tax authorities, even when a tax examination or administrative litigation is pending.
• The tax liabilities were paid to the tax authorities as a consequence of the applicable legislation, including tax liabilities that are determined as part of an administrative decision.
• The tax liabilities result from the taxpayer’s withdrawal of challenges pending in the administrative litigation process, including the Administrative Tax Court (Tribunal Fiscal Administrativo).
• Tax liabilities resulted from the acceptance of an adjustment proposed by the tax authorities.
• Tax liabilities resulted from assessments imposed by the tax authorities and are being challenged at the judicial level, provided the taxpayer has accepted the assessment determined by the tax authorities; if the taxpayers already paid the tax liabilities, they are not eligible for the amnesty program. Taxpayers must be aware of the implications and potential impact that accepting the assessment determined by the tax authorities may have on future transactions.
• Taxpayers registered with the tax authorities may report non-justified increases of patrimony (assets) and will have to pay a tax rate of 15% over the market value of the assets; the tax authorities are empowered to verify the value of the assets that are being adjusted.
• Tax liabilities were sent to the Judicial Recovery Department, but no lawsuit has yet been filed before a judicial court.

Once a taxpayer applies for the tax amnesty and pays the tax liability during the amnesty period, the tax liabilities must be eliminated. The tax amnesty program does not apply to cases that can be or were reported to the Public Prosecutor (Public Ministry of Costa Rica).

For additional information with respect to this Alert, please contact the following:

Ernst & Young, S.A., San José, Costa Rica

• Rafael Sayagues | rafael.sayagues@cr.ey.com
• Juan Carlos Chavarría | juan-carlos.chavarria@cr.ey.com
• Antonio Ruiz | antonio.ruiz@cr.ey.com
• Guillermo Leandro | guillermo.leandro@cr.ey.com
• Paola Castro | paola.castro@cr.ey.com
• Randall Oquendo | randall.oquendo@cr.ey.com
• Daniel Quesada | daniel.quesada@cr.ey.com

Ernst & Young, LLP, Latin American Business Center, New York

• Ana Mingramm | ana.mingramm@ey.com
• Enrique Perez Grovas | enrique.perezgrovas@ey.com
• Pablo Wejcman | pablo.wejcman@ey.com

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

• Jose Padilla | jpadilla@uk.ey.com

Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

• Raul Moreno, Tokyo | raul.moreno@jp.ey.com
• Luis Coronado, Singapore | luis.coronado@sg.ey.com

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