Shareholders Public Registry In Costa Rica Is A Serious Threat To Privacy

One of the main assets when it comes to privacy in Costa Rica is being jeopardized by the Tax Administration.

Their goal is to create a Public Record of Shareholders (Registro de Accionistas) of every single corporation in Costa Rica, their logic behind that is, primarily, there are a lot of properties being transferred without paying the property transfer tax, ever since the property is registered under a corporation and when the seller endorses the shares to the buyer, the Public Record Office (Registro Publico) does not get involved and therefore the transferring tax is not paid, which represents a big loss for the Government and they desperately need the funds to cover a National Budget which only 60% is payroll.

How did all this start?

Back on September 28th, 2012 a new Law (Ley de Fortalecimiento de la Gestión Tributaria) got partially reinforced, and I mean partially reinforced since it created a new concept of “property transferring”, which is, in plain English, to transfer the ownership or control of a corporation which owns or control a property or business, but the law never established a procedure to control or audit that type of transactions. Why I am not surprised?

The Tax Man’s Great Idea!

Nowadays, the Tax Man is trying to catch up on that procedure which was never reinforced. However, his idea of creating a Public Record of Shareholders, regardless if the corporation owns or not a property or business, was not warmly welcomed right away.

There are many reasons and entities which refuse that idea, for instance the Industry Chamber (Camara de Industrias) already stated that this can even jeopardize the safety of the shareholders, not to mention, blackmailing and even extortion. On other hand, the Attorneys & Lawyers Bar, also stated that this Public Record must be created by a new Law not by a decree which is the tool that the Tax Man is intending to use.

A Different Angle

I agree with both Industry Chamber and Attorneys & Lawyers Bar perspectives, but as it is commonly known in Costa Rica, the politicians are not famous for using their common sense. I would suggest, in order to save all that tax money in discussions and probably the Supreme Court getting involved, let’s not forget that privacy is a Constitutional Right in Costa Rica, by simply enclosing a Shareholders Certification issued by a notary (attorney) when this type of transactions takes place, and that document’s cost is around $60.

Let’s keep in mind that in Costa Rica there is no way to figure out who the shareholders of a corporation are, or if the shares are being endorsed, ever since this entry is made on the private legal books of the corporation, but there is a hint: when a new legal representative is appointed, so when that happens, changing the legal representative of a corporation, the Public Record office would have to ask for the above mentioned $60 certification and if the shareholders are different then they can collect the tax instead of spending hundreds or thousands of dollars trying to reinforce the Public Record of Shareholders.

On other hand, the Tax Administration is entitled to, when they properly audit a corporation, to have access to the Shareholders Log Book (Libro de Registro de Accionistas) so there is another way to find out if at some point the transferring tax was not paid, how?? Well, by simply screening which corporations owns properties and look into their Shareholder Log Book to make sure it hasn’t changed hands since September 28th, 2012.

Simple isn’t? But what do I know? I am just an accountant!

We will know more about this after February 24th 2015, which is the deadline for anyone who does not feel comfortable with this idea to address the reason to the Tax Administration.