The information obtained through the Registry of Transparency and Beneficial Ownership ("RTBF") will be combined with the information from the Information Statement of Inactive Legal Entities (Form D195)

The Costa Rican Tax Administration issued the selection criteria to use the information obtained in the Transparency and Beneficial Ownership Registry ("RTBF") since January, to prepare its tax non-compliance risk management plans for this 2023.

The Tax Administration included the following criteria:

• Failure to file the RTBF by its due date (June 30, 2023).
• A commercial name registered in the Public Registry in the name of a company, which is not registered as a taxpayer before the Tax Authorities.
• Shareholders of companies reported in the RTFB domiciled in "tax havens" (non-cooperative jurisdictions with little or no taxation).
• Failure to identify all persons (individuals or legal entities) abroad with a substantive participation (15% or more of the capital stock).
• When a natural person has participation in 50 or more legal entities.
• Assets registered in the Public Registry in the name of a company reported in the RTBF that evidence a "presumed increase in net worth" or reflect a "high net worth".

It is important to be very careful because although the Income Tax Law provides what should be understood by "unjustified increase in net worth", there is no clear legal or regulatory definition of what should be understood by "high net worth". This denotes an intention on behalf of the Tax Administration to make "fishing expeditions" to try to collect as much taxes as possible.

It will be necessary to be very vigilant since it is an undetermined legal concept. There may be subjective interpretations and arbitrary actions by the Tax Administration auditors in the event of eventual audits to companies owning different assets registered in their name in the Public Registry.

In any case, the Tax Administration must respect the ordinary prescription period of 4 years in its previous audits of inactive companies, as stipulated in the Code of Tax Rules and Procedures.

The D195 statement requires completing certain amounts that the filer will not know for certain. For example, the approximate amount for annual expenses to be incurred. The Tax Administration indicates that approximate amounts may be submitted to determine expenses. However, in an audit process, the auditors in charge will not be satisfied with "approximate amounts". They will most likely request precise and exact explanations of the amounts reported.

Finally, it is important to consider that since the companies are not inactive companies or businesses in operation, then the International Financial Reporting Standards (IFRSs) do not apply to the filing of the D195 return. These normally integrate the tax regulations to comply with the formal and material obligations. Likewise, it would not be necessary to declare holding shares of other Costa Rican companies by an inactive company since this is declared in the RTBF declaration.

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