Amendments to Law for the Improvement of Tax Management

Law for the Improvement of Tax Management

Law #9069- Effective as of September 18th, 2012

The Law for the Improvement of Tax Management was issued with the objective of ensuring better tax revenue without creating new taxes and aims at improving fiscal transparency and strengthening the Treasury to facilitate the collection procedure.

The main amendments introduced by this Law are:

- Amendments to the PROPERTY TRANSFER TAX LAW, No. 6999-

The main amendments affecting the Property Transfer Tax Law are:
 The definition of “transfer” was modified. As of now, “Transfer” should be understood as any legal transaction by which real estate is transferred, either directly or indirectly, in accordance with the nature of the business and not in accordance to the denomination given by the parties to the transaction. “Indirect transfer” should be understood as any legal transaction that involves change in the control of any company which holds real estate.
From the previous definition, it can be concluded that the assignment or endorsement of shares or quotas of a company which holds real estate, will be subject to the property transfer tax and the same rules will apply when real estate is transferred directly. There is no clarity as to what happens if there is a partial assignment or endorsement of the capital stock; nonetheless, it can be assumed that the transfer tax must be calculated based on the proportional value of the transferred percentage and not based on the total value of the capital stock.
 The taxable event occurs on the day and time when the public deed is executed, in case of direct transfer of real estate, or on the day the legal transaction which transfers real estate indirectly, takes place. The tax must be canceled within the following fifteen (15) business days since the transaction was documented. The tax should be calculated over the actual value of the transaction, which shall be consistent with the usual market value and may not be less than the highest value recorded for the property, according to the market value methods established by law.
There is no clarity yet on how the Tax Administration will collect such taxes and how they will control that such payments take place within the provided fifteen business day term since the transaction took place, considering that the Shareholders Registry Book is private.
 Finally, the Purchaser has the obligation of declaring the value of the transaction before the corresponding Municipality in order to update the value of such property for Property Tax purposes.
Many Municipalities have not established yet the mechanism to implement the amendments introduced by this new law, but will have to do so in the short term.

- Amendments to the COMMERCIAL CODE, Law No. 3284-

 Newly constituted companies are required to legalize their corporate books through the National Registry. Previously, said procedure was undertaken by the Tax Authority of each Province. When filing for the registration of the company, corporate books must be filed along with it in order to be legalized. The corporate books must consist of removable sheets and shall have all security methods to be determined by the National Registry.
 It is established that transferring of real estate, into trust property, in favor of a Trustee Company, duly registered before the Financial Regulatory Entity (SUGEF, by its initials in Spanish), whose Beneficiary is also a financial institution regulated by SUGEF, shall be exempt from the property transfer tax and other registry stamp taxes. The previous will apply as long as the assets remain in trust property and constitute a guarantee for an underlying financial transaction.
Nonetheless, when the Trustee transfers the entrusted property to a third party, other than the original Trustor, all taxes and stamps shall be payable at that point in time. The same applies for the transfer of motor vehicles, aircraft, and watercraft.
 Trustor may not be part or hold interests, either jointly or separately, in the Trustee Company; nor may the Trustee be part or hold interests, either jointly or separately, in Trustor.

-Amendments to the TAX REGULATION AND PROCEDURES CODE, Law No. 4755 –

 In case assets or rights are transferred, the Purchaser will be jointly liable with Seller for the tax debts owed by Seller, up to the value of such assets or rights.
 The Tax Authority will have a four-year (4) term to determine tax obligations. Such term will be extended up to ten (10) years for those taxpayers or non-registered tax payers who have not filed declarations or whose declarations have been classified as fraudulent.
 Taxpayers will have a four-year (4) term, since the date payment took place, to claim the refund of due payments in those cases where the law provides for a tax credit in their favor.
 Taxpayers who pay the taxes after a fifteen (15) day term since due date, shall pay a fine equivalent to one percent (1%) per month or fraction of a month that has elapsed since due date. Under no circumstance shall this fine exceed twenty percent (20%) of the amount owed.
 In case of failure to provide information, the offender will be fined with an amount equivalent to two percent (2%) of the total income of the offender, based on the fiscal period prior to the infringement, with a minimum of 10 minimum wages and a maximum of a 100. Currently, the minimum wage is set in 365,000 ($727 approximately).
Taxpayers who do not issue invoices or vouchers duly authorized by the Tax Administration or do not provide them to their customers, will be fined with two (2) minimum wages.

Law for the Fulfillment of the Fiscal Transparency Standard
Law #9068- Effective as of September 18th, 2012
The Law for the Fulfillment of the Fiscal Transparency Standard was issued with the objective of improving fiscal transparency and optimizing tax information exchange with other countries.

The main amendments resulting from this Law are the following:

-Amendments to the COMMERCIAL CODE-

 All references to bearer shares were eliminated; therefore, any and all references are limited to nominative shares and/or quotas.
-Additions and Amendments to the TAX REGULATION AND PROCEDURES CODE, Law No. 4755 -
 Companies have the responsibility to keep their Stockholders Register Book duly updated; otherwise, an economic sanction equivalent to one minimum wage will be imposed. Currently, the minimum wage is set in 365,000 ($727 approximately).
 Companies should keep their accounting books, files, or negotiation records required for the correct auditing and determination of their tax obligations for a period of five (5) years, even after being liquidated. Previously, this obligation was limited to a four-year (4) term.
 Financial entities have the obligation to provide the Tax Authority with information about their costumers and users, including, but not limited to: transactions, operations and balances, savings and checking account statements, deposits, long term certificates, loans and credit accounts, trust funds, individual investments, joint portfolio investments, stock transactions, and other operations, either active or passive, as long as the information is necessary and pertinent for an auditing procedure or to fulfill information required by another jurisdiction, by virtue of an international convention that provides for tax information exchange.
The process through which the Tax Authority requests information from financial entities was amended. The process shall now be conducted before the Administrative Courts and will have an average duration of fifteen (15) business days. As a final result, the Judge will deliver a resolution authorizing (or not) the Tax Authority to request, from the respective financial entity, the delivery of the required financial information.
If the financial entity does not comply with the judicial resolution, they will be sanctioned with a fine equivalent to two percent (2%) of the total income of the offender, based on the fiscal period prior to the infringement, with a minimum of 10 minimum wages and a maximum of a 100.

This information was provided by:

Sfera Legal
Centro Corporativo Plaza Roble
www.sferalegal.com