On April 23, 2018, the Executive Branch issued and published The Regulations of the Transparency and Final Beneficiaries Registry (hereinafter the "Regulations"). The Regulations introduce new obligations related to the provision of information. These obligations apply to most companies and other legal structures which operate in Costa Rica.
The Regulations are part of Costa Rica´s actions to follow the recommendations issued by the Financial Action Task Force (FATF) and the Organization for Economic Co-operation and Development (OECD), to control money laundering and fulfill the country´s commitments with other nations, in relation to the exchange of tax information. These Regulations are highly relevant for almost all entities operating in Costa Rica, and this article, under a Q&A format aims to provide a clear understanding of the changes introduced and the current legal status regarding its implementation and enforcement.
I. What is the object of the Regulations?
To establish how will the Transparency and Final Beneficiaries Registry (hereinafter the "Registry") operate. The Registry was created to provide more information and increase the state control over corporate structures and the final beneficiaries of those structures, with the purpose to mitigate money laundering and tax evasion.
II. Which entities are obliged to comply with the Regulations?
All corporate structures and entities which are domiciled in Costa Rica. This definition encompasses: 1) Corporations, Limited Liability Companies, Branches, etc.; 2) Administrators of third party resources; 3) Non-profit organizations; 4) Private trusts.
The following entities are not subject to compliance of the obligations set forth by the Regulations: a) Companies which are listed in a local or foreign stock exchange, b) Public Trusts, c) entities under the supervision of the Financial Superintendence, and d) Public Institutions.
III. What are the new obligations created by the Regulations?
In general terms, providing to the Registry, information of the final beneficiaries of each legal structure. The specific information will vary depending on each entity and shall be clearly specified in a Joint Resolution (hereinafter the "Joint Resolution") to be issued by the Ministry of Finance and the Costa Rican Drugs Institute. Nonetheless, in general terms the information to be provided is the following:
- Companies: Information about the different stock participations and final beneficiaries. Also, information about voting rights, and control over the company.
- Trusts: Object of the trust, parties of the trust (final beneficiaries of each party).
IV. When should these obligations be fulfilled?
- There is an obligation to submit an information report annually. The Joint Resolution shall establish the date date on which the report has to be filed.
- During the 20-business day period after a company´s or legal structure´s constitution or incorporation (in case of new entities).
- Whenever there are substantial changes in participation (those which exceed 15%)
** These obligations are not due yet. The Joint Resolution shall establish the moment from which the obligations enter into force.
V. Which are the potential sanctions in case of breach of these obligations?
A fine of up to 2% of the gross income during the previous fiscal period. The minimum fine will be 3 base salaries (approximately $2,300.00) and the maximum fine will be 100 base salaries (approximately $77,000.00). Additionally, there is a reputational damage, since the Registry will publish a list of the entities which have not complied with their obligations.
- Monitor the publication of the Joint Resolution, which shall determine the date on which the obligations enter into force and will establish in detail the information to be provided.
- Review that the obliged entities have the updated information which allows them to comply with their obligations, according to the Regulations and the Joint Resolution.
If this information interests you, we may gladly update you once the Joint Resolution is published and clarify any doubts on this topic. For this purpose, please contact us to the email email@example.com.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.