In Costa Rica, Law 9416 to combat tax fraud created a “register of shareholders” in the Central Bank of Costa Rica. On June 12, the Ministry of Finance published on its website the draft regulations in order to determine how to implement this registry, which was created in order to seek transparency and clarity in mercantile companies and other legal vehicles.

Which entities are obliged to contribute to the registry? According to Law 9416, the following legal institutes are obliged to register: companies, indefinite legal structures (neither determined by law nor by means of regulation), and private trusts.

Who are excluded from contributing to the registry? The General Superintendent of Securities, the General Superintendent of Pensions, and the General Superintendent of Financial Institutions were determined by regulation to be excluded from the scope of the said registry. All other decentralized public entities, autonomous, and semi-autonomous institutions are outside the scope of the law together with the municipalities and public trusts.

Who is responsible for the shareholder register? The obligation is imposed by the legal representative of the company or the fiduciary in their case. Both must have a registered digital signature.

What happens if you break your legal obligations? In case of non-compliance, the penalty is a fine of 2 percent of gross income in the tax on the income of the taxpayer of the previous immediate fiscal period, with a minimum of three and a maximum of 100 base salaries. It is necessary to clarify that in addition to these sanctions, non-pecuniary sanctions appear on the public omission list and an inability to register documents in the public registry shall be carried. 

The objective is to identify the “final or effective beneficiary,” defined as a natural person who exercises substantive influence or direct or indirect control, to the legal vehicle taxable because it has the majority of the voting rights and therefore voice and decision in the entity.  “Substantive participation” is understood to be equal to or exceeding 15 percent of the shareholder’s capital.

Below we detail the modular and essential aspects that come into effect with the reform.

Creation of a Centralized Register of Shareholders and Final Beneficiaries of Corporations

“Legal entities or legal structures domiciled in the country, through their legal representative, must provide the Central Bank of Costa Rica with the registration or indication of the shareholders and final beneficiaries that have a substantive participation.

“A final or effective beneficiary is a natural person who exercises a substantive influence or control, direct or indirect, over the legal person or legal structure in a way that has the majority of the voting rights of the shareholders or partners, has the right to designate or to cease most of the administrative, management or supervisory bodies, or to have the control status of that company by virtue of its statutes. Indirect control shall be understood as having control over legal persons who finally have a participation in the legal person or national legal structure and, directly, the possibility of having sufficient shares or shares to control the legal person or national legal structure. In the case of persons or legal entities domiciled in Costa Rica, whose substantive shareholding in the share capital belongs wholly or in part to legal entities domiciled abroad, where it is impossible to identify the final beneficiary, in accordance with the provisions of this chapter, having exhausted all means of identification and provided that there is no cause for suspicion, it shall be presumed that the final beneficiary is the administrator.

“Substantial participation shall mean the holding of shares and shares in a percentage equal to or greater than the limit established by the Ministry of Finance for these purposes, in accordance with international parameters, and within a range of fifteen percent (15 percent) to twenty-five percent (25 percent) of participation with respect to the total capital of the legal person or legal structure.

“This obligation to supply information must be fulfilled annually, or when a shareholder equals or exceeds the limit defined by regulation, as provided in this article” (Article 5).

Temporary Precautionary Measure of Freezing Assets for Defaulting Taxpayers

“When in the process of determining a tax credit, in the opinion of the competent administrative authority, there is a danger that the obligor is absent, alienates or conceals his assets or performs any maneuver intended to leave the credit unpaid, the Tax Administration may request The Collection Office which requires the competent judicial authority to seize the property as a precautionary measure, which shall be valid for up to two years, extendable for the same period” (Article 196 bis).