The General Directorate of Taxation of the Costa Rican Ministry of Finance published a resolution on the list of non-cooperative jurisdictions for tax purposes No. DGT-R-55-2019.
Citeria for a jurisdiction to be included on the list
Referring to Costa Rica article 9 of the Income Tax Law (ITL), there are two criteria for a jurisdiction to be included on the list:
- The countries should have an income tax rate less than 40 percent of the income tax rate established by article 15 of the ITL. The rational of excluding the lower tax rate countries is due to the high fiscal risks where the companies might erode the tax base through the transfer of benefits to territories with a tax rate significantly lower than what they have in Costa Rica.
- The availability of exchange of information. The jurisdiction that doesn’t have signed tax information exchange agreement (TIEA) or a double tax agreement (DTA) with a clause on exchange of information will be included in the non-cooperative list. Such instrument is utterly necessary so that Costa Rica can verify the substance and valuation of the declared operations.
According to subsection K) of article 9 of the Income Tax Law, to the extent the jurisdiction is included in the list, as a result, any expenses incurred to transactions with individuals or entities in those jurisdictions on the list, directly or indirectly, will be treated as non-deductible expenses for Costa Ricans income tax purposes.
The list will be effective on 1 October 2019.
The list of those jurisdictions
The list of jurisdictions is as follows:
- Bosnia and Herzegovina;
- French Polynesia;
- Norfolk Island;
- North Korea;
- North Macedonia;
- Réunion Island;
- Saint Pierre and Miquelon;
- United States Virgin Islands;
- Uzbekistan; and
- Wallis and Futuna.
Source: Costa Rica Official Gazette