Costa Rica: Changes to the UBA Report in Costa Rica
Our tax experts in Costa Rica share this article on the main changes introduced by a recent reform to the UBO Report Regulations that will enter into force as of 2024 in Costa Rica.
1. Changes to the Reporting Subject Categories.
Branches of non-profit organizations and foreign subsidiaries of international non-profit organizations are now subject to reporting obligations.
The regulation has limited the reporting obligations only to private trusts that own or manage property, assets, or rights, including foreign trusts that carry out activities in Costa Rica or have a legal identification number assigned by the National Registry. The Regulations also clarify that all those legal entities that have been assigned a legal identification number by the National Registry are obligated to file reports.
Entities without an identification number in Costa Rica are mandated to file for a registration or assignment of a legal number by the Public Registry.
Finally, the amendment to the Regulations now obligates state-owned enterprises, non-state-owned public enterprises, and non-state-owned public units, as long as they have private legal entities or individuals as participants in their capital stock.
2. Elimination of Special Powers of Attorney.
The new Regulation establishes that, only in exceptional cases, duly justified, entities and individuals subject to reporting obligations may grant a full power of attorney for the filing of the UBO report, and that a Joint Resolution will establish the procedure and conditions for registering this full power of attorney. A term of six months was granted for the issuance of this Joint Resolution.
The above generates a limitation for the effective compliance of many taxpayers whose legal representatives are foreigners, without domicile in the country and without the possibility of obtaining a valid digital signature certificate in Costa Rica, considering that to obtain this digital signature certificate the person must have a Costa Rican identity card or a DIMEX.
Additionally, following the text of the disposition, since the legal representative is the one who must grant the general power of attorney, it seems that it could not be granted through a shareholders' meeting -which is contemplated in the Commercial Code-. This could mean that, in the case of a foreign representative, they would have to go to a nearby consulate or come to Costa Rica to grant the power of attorney before a notary public.
The Regulations do not define what situations qualify as "exceptional cases, duly justified" that will be established in the Joint Resolution to grant the power of attorney. Although the submission of the UBO report for 2024 has been moved to July 2024, it is possible that by then we still do not have said resolution nor clarity on the requirements.
Our analysis is that these provisions of the Regulations contradict those of the Code of Commerce, a hierarchically superior source of law, introducing substantial complexity into compliance processes.
3. New Guidelines for Due Diligence and Custody of Information.
Regarding the new provisions for due diligence on which reporting obligations are based, the most relevant change is that either prior to the distribution of dividends or other benefits, or prior to the exercise of voting rights in the corresponding meetings, foreign owners of equity participations are obligated to identify, or update the information of their ultimate beneficial owners.
In relation to the custody of the information, the new Regulation establishes a five-year term for the retention of the information, records and documents that support due diligence. The five-year period is counted from the date on which the last report is made, or from the date on which the closing, dissolution, extinction, transformation, merger, or any other similar action takes place.
We will keep you updated on any new developments regarding this obligation. If you have any query, please do not hesitate to contact us.
Author:
Ligia Alfaro. - Senior Counsel, Costa Rica.
ligia.alfaro@ariaslaw.com
The information provided by ARIAS® is presented for informational purposes only. This information is not legal advice and is not intended to create, and does not constitute, an attorney-client relationship. Readers should not act upon this information without seeking advice from professional advisers.