Registration of Shareholders
As many of you know, the Costa Rican government has a big debt problem and is in the process to increase the revenue through numerous means, one of the them is to improve the income tax on corporations and people.
In addition, the country is attempting to join the Organization for Economic Cooperation and Development (OECD) which requires development and implementation of numerous regulation aiming among other things to fight corruption and money laundering.
The country currently is in a ‘gray list’ in regards to compliance/corruption standards. In order to avoid falling into a black list and slowly moving towards a ‘white list’ some legislation is in the process of being implemented.
Some of you may be familiar with a particular piece of legislation requiring a number of businesses and professionals to register with SUGEF (Banking Commission). People subject to this registration includes but is not limited to: notary publics, accountants, lawyers, real estate, jewelers, and many other individuals and corporations that are relevant in some way or another in the fight against money laundering and terrorist financing.
There is another project that Costa Rica is currently working on, the so called Transparency and Ultimate Beneficial Owner Registry. The goal is to create a database with information lining out who owns more than 15% of the shares of a given company. But this project not only aims at grasping this information for corporations but for other entities and even unregistered partnerships.
The reason for this Registry is to aid in the fight against money laundering and financing of terrorism and to control tax fraud. Two agencies will be involved, one of them being Costa Rican Institute on Drugs (ICD) and the other one the Revenue Service (Ministerio de Hacienda). In addition, the Central Bank has taken the responsibility to create the technological infrastructure for the collection and storage of the information.
The Central Bank has already been involved in the implementation of the SUGEF registration for businesses as noted above as SUGEF if a subdivision of the Central Bank. The information required under the Transparency Registry is actually quite similar to that that is already being registered in SUGEF, so this new project should go smoothly.
It has been established that when either of the entities has a justified need for shareholder information, they must process such request in writing to the Central Bank, who will then determine its validity and furnish whatever information it may in accordance to legal regulations.
Initially the obligation to declare the shareholders and ultimate beneficial owners was scheduled to come into force in March 2019, but as was mentioned in an earlier article, this has been postponed until September of 2019. People in the industry are skeptical as to whether this will indeed happen, or if it will endure one or more moratoriums.
Furthermore, the obligation initially will be for registered mercantile corporations (the most common of these being the S.A.s and S.R.L.s). The reason for this is on the one hand the size of this task, and on the other, these entities are already listed/registered clearly in the National Registry.
Backing up, a little more history on this matter.
The Shareholder Registry was mandated in law No. 9416, Improvement of the Fight Against Tax Fraud Act, starting as early as section 5 of the law. It outlines the competent entities, information that will be required, entities and persons that have to submit the information, the process to do so, penalties to fail to comply, and so on. Additional regulations were issued in the executive order 41040 -H Regulations for the Shareholder and Ultimate Beneficial Owners Registry.
Finally, one of the core issues to why this has not been implemented yet, is that lack of additional regulations that have to be issued jointly by various government entities to get on the same page. We will have to wait and see.
