On September 26, 2023, with the support of 38 legislators, the Legislative Assembly resealed Legislative Decree #10,381 (the Law), which seeks to reform the Income Tax Law, to ensure that the country is excluded from the list of non-cooperative jurisdictions of the European Union.
In order to comply with the necessary requirements to leave the list of non-cooperative jurisdictions of the European Union, the reform includes a new tax treatment for income generated abroad with respect to:
- Dividends
- Interest
- Royalties
- Capital gains
- Real estate capital income
- Other income from movable capital from foreign sources, from assets located or rights used outside the national territory.
In these cases, such income would only be taxed when obtained by an entity that does not have an adequate substance in Costa Rica (non-qualified entity) or what could be called a “paper company”, which is also part of a multinational group.
Also, with this approval, the changes included in the Income Tax Law undermine the “pro-fiscum” interpretation that the Tax Administration has been using to tax Costa Ricans (natural or legal persons) who have made investments abroad. In that sense, the new wording of the norm delimits territoriality as the geographical space typified in articles 5 and 6 of the Constitution. In this way, only income or benefits from Costa Rican sources generated in the indicated geographical territory may be taxed; regardless of the nationality or domicile of the parties involved in these operations, and without taking into account the origin of the goods or capital, where they were negotiated or the connection they had with the Costa Rican economic structure.
Now all that remains is for it to be published in La Gaceta for the Law to come into force.