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(506) 2223-1327           Published Monday, July 11, 2011, in Vol. 11, No. 135           E-mail us
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With proposed tax, they'll get you coming or going
By Garland M. Baker
Special to A.M. Costa Rica

There is a new tax on the horizon for all types of companies, including inactive ones, that could prove to be very expensive for expats living in Costa Rica.  This tax is just another way to squeeze everyone, including expats.  It will surely prove to be a deterrent to investing in the country.

What is the tax department going to do with all the inactive companies if the new tax on them is passed?  An inactive company exists for the sole purpose of holding an asset, but is not engaged in commercial activity.  The tax is going to be somewhere between $200 and $300 per company.  The exact amount is being debated now in the legislature.  It is rumored the tax will probably be $200, but no definite amount is set as yet.

The tax department, Dirección General de Tributación, apparently cannot make up it mind as what to do with inactive companies. 
There was a time that these inactive companies received legal books just like active ones.  That practice was canceled in 2010 with directive DGT-12-2010.  The directive stated that inactive companies should not receive legal books.  People complained and legal books were reinstated for these types of companies in June of this year.

There are two components to legal books for a company, minute books referred to as actas, and accounting books.  An active sociedad anónima gets three minute books and three accounting books. A sociedad de responsabilidad limitada gets the same number of accounting books but only two for minutes.  The difference is that the board of directors book is not required in an S.R.L. and it is omitted.

Expats need to take a hard look at their companies to see if any of them can be closed before the tax on them becomes law.  The problem is that it is not all that easy to get rid of them.  One cannot just go throw the books in the trash can.  Legal professionals questioned about the situation believe that the tax department is going to go after those people that do not pay the tax, and, of course, there will be additional fines and penalties for not paying.

The proper way to close an inactive company is to go before a notary and change the constitution.  Most companies are constituted for 99 years.  The notary would change the constitution of the company to only a few months into the future.  Once past, the company would be in theory dead.  The books then should go to the tax department for cancelation.

Sounds easy, but this process is expensive.  Here is an estimation of the costs:

A notary will charge around 20,000 colons ($40) for writing the change into the minute book and 60,000 colons ($120) to notarizing the act.  To change the constitution of a company requires publication in “La Gaceta,” the official newspaper, which costs between 7,000 and 8,000 colons (up to $16).  To file the paperwork costs about 65,000 colons ($130). 

Add it all up and the result is 153,000 colons or three hundred and six dollars. A lot of money just to kill and inactive company.

The only alternative is to do nothing and wait to see if tax department tries to collect the money.  Which they probably will in time.  Now during that time, the tax, interest and penalties will all add up to more than it would have cost to close the company.
The squeeze play for expats

Why is the legislature trying to pass this tax?  The answer is simple.  Many people avoid transfer taxes on real property and other assets like vehicles by just transferring an inactive company that holds the asset. 

This is perfectly legal, transferring a company to another owner, but the tax department does not get its share, the transfer taxes.  It is envisioned that imposing a yearly tax on inactive companies should curtail some of this activity.

This new tax really puts expats in a dilemma.  It is not a very good idea for expats to hold property in their personal name. 

There are many reason for stating this but the most important is due to probate.  Probate is expensive and time consuming.  Judicial probates can last for many years.

It is wise to hold property separate from vehicles and employees which means many expats have at least three companies.  This new tax is going to make doing so too expensive for many expats.

An amnesty would be nice, to give people a chance to get rid of old and out-of-date companies.  Many expats created companies years ago. Some have forgotten about them, others have no idea where the paperwork is for those entities.

Even though an amnesty seems like the thing to do, it does not look like there will be one.  The tax appears imminent for this tax year.  It all comes down to money.

The Costa Rican government is trying to close the loophole and collect more transfer taxes.  It would be interesting to know if the legislature has considered lost new investments into the country due to imposing a yearly tax on inactive companies.

The final kicker is that this proposed new tax would not be a deductible item on the company's incomes taxes, according to the draft of the proposed law.

Garland M. Baker is a 39-year resident and naturalized citizen of Costa Rica who provides multidisciplinary professional services to the international community.  Reach him at  Baker has undertaken the research leading to these series of articles in conjunction with A.M. Costa Rica.  Find the collection at, a complimentary reprint is available at the end of each article.  Copyright 2011. Use without permission prohibited.

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Our reader's opinion
Evidence supports effect
of Prop 13 on education

Dear A.M. Costa Rica:  

The debate over California’s faltering public education system — now ranked 48th in the country — pits those who fault the influx of illegal immigrants into the state against those who fault Proposition 13, the 1978 referendum that capped property tax increases in the state.

Those who hold Proposition 13 responsible make the stronger case.

True, California’s public schools are charged with educating a lot of illegal immigrants.   Currently 15 percent of the children enrolled in the state’s public schools fall into this category.   True too, some of these students struggle with English, which depresses their scores on standardized tests.

However, educating illegal immigrants is hardly a recent challenge for California — and the state used to do a good job of it.   In 1980, over 4 percent of the state’s population was illegal.   While today the percentage is almost 7 percent, this increase is too small to explain the state’s plummet from near the top to the bottom in the educational rankings.

Neither can the challenges of educating children for whom English is a second language explain declining education quality in California.

The U.S. Department of Education reports that the percentage of children aged 5-17 who have difficulty speaking English rose from 4.1 percent in 1980 to 5 percent in 2009.   The increase may have been slightly higher in California (Department of Education data are national) but clearly the increase is too small to explain dramatically declining educational measures.

There is also the question of why falling measures of educational achievement would be pinned on illegal aliens in the first place.   Is the claim the xenophobic one that these children are dumber or less academically ambitious and prepared than legal residents?

Not usually.   Usually the claim is that illegal immigrants place a financial burden on the school system that is not offset by the taxes they pay.

In the short run, this appears to be true.  A frequently-heard estimate is that educating illegal immigrants costs California $7.7 billion annually.

However, in the long run, it’s not clear that this charge is entirely fair.   Illegal immigrants after all pay property taxes too, at least indirectly through rent, and funding for public education is never a pay-as-you go affair.   Parents are rarely taxed at the full cost of educating their children when their children are in school, but make up for this by paying school taxes before and afterward.

School funding requires generational, not annual, accounting.

Once this issue of generational accounting is raised, it merits mention that illegal immigrants help shore up Social Security.

Stephen C. Goss, chief actuary of Social Security, estimated that in 2007 contributions by illegal immigrants represented to a net gain to the system of between $120 billion and $240 billion.   Thus, while illegal immigrants are a burden to the schools, they are a boon to the retirees.

But whether or not illegal immigrants are a net economic loss or gain to the country (an issue that is hotly debated by economists) the interesting thing is that those who blame illegal immigrants for California’s collapsing school systems ultimately really argue that California’s schools are failing because they lack money.

Well, this is the explanation that those who emphasize the role of Proposition 13 start with.   They point out that educational funding in California has been cut in half since this tax-cutting law went into effect (an estimate advanced by Ronald G. Corwing of Ohio State University).   This has in turn left California’s schools without the resources they need to educate any child — legal or illegal — as adequately as they could back when California was able to boast one of the best public school systems in the country.
Ken Morris
San Pedro

British student thanks
embassy here for info

Dear A.M. Costa Rica:
I am a 12-year-old pupil at Fulston Manor school in Kent, Sittingboure, and I recently had to find out information on your beautiful country Costa Rica.
I should be very grateful if you would allow me, through your newspaper, to thank the staff at the Costa Rican embassy of Great Britain for their assistance in completing a school project. In particular a young lady by the name of Karina, was particularly helpful. I had not realized how diverse and lovely your country was until Karina sent me an education pack.
I will certainly view the news on Costa Rica regularly from now on
Luke Haddon

Find out what the papers
said today in Spanish

By the A.M. Costa Rica staff

Here is the section where you can scan short summaries from the Spanish-language press. If you want to know more, just click on a link and you will see and longer summary and have the opportunity to read the entire news story on the page of the Spanish-language newspaper but translated into English.

Translations may be a bit rough, but software is improving every day.

When you see the Summary in English of news stories not covered today by A.M. Costa Rica, you will have a chance to comment.

This is a new service of A.M. Costa Rica called Costa Rica Report. Editor is Daniel Woodall, and you can contact him HERE!

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San José, Costa Rica, Monday, July11, 2011, Vol. 11, No. 135

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San Ramon march
Photo by Community Action Alliance
San Ramón residents carried banners during their march.
Marchers in three communities seek end of crime waves
By the A.M. Costa Rica staff

Citizens in three communities took to the streets over the weekend to protest murders and other crimes

The largest gathering appeared to be in San Joaquín de Flores de Heredia where robbers executed three women in a store Wednesday.

Another march was in Cariarai de Pococí where residents claimed at least 35 street robberies take place every week there.

Another march in San Ramón de Alajuela took place Saturday, the same day that the security minister was speaking to business groups and at a special meeting of the municipal council. He promised 10 more police officers for the area. The Community Action Alliance, a private group there, reports that there have been five murders in the past several weeks. One was of the owner of a pulperia or small store who was gunned down when he tried to open his business early Monday in Barrio San José.

Friday President Laura Chinchilla tried to dismiss what she says was a common belief that crime is on the rise. She spoke in Poás de Alajuela .

She said she shared the impatience of all Costa Ricans on the topic of crime, but she said that her government would not take a step backwards in fighting against citizen insecurity. She said that communities organized against crime and under direction of the authorities would take care of the job, according to a Casa Presidencial summary of her talk.

The president called upon the legislature to approve additional funds. The president is hoping for a $130 million loan which would be used in part to integrate criminals into society.
Mario Zamora Cordero, the security minister, came to San Ramón at the request of  Edgardo Araya, a legislative deputy. The ministry said that Zamora was addressing the preoccupation of the residents over what they saw as criminals from San José moving into their town.

Zamora said that he and some of his top police officials came to the community to plan strategy that will be revisited in three months, according to the ministry.

The local Community Action Alliance was more specific in an email sent to residents.  Of the five murders, two have been gang-related and there were two other gang-related shooting that did not result in death, said the email. Three murders were the result of non-gang violence, including personal and domestic disputes, it said.

Citing unspecified sources within the Fuerza Pública, the email continued:

"It is known that the gang-related violence is the result of a gang from San José (the Escalera Gang) coming in to San Ramón to attempt to take control of the drug activity in the market.  This has occurred in previous years, however the number of gang members and arms this year is more than in the past.  It is speculated that the increased gang activity in San Ramón is in part due to the efforts of Costa Rican security forces to crack down on drug activity in San José. 

"This is supported by the fact that other neighboring communities have experienced increased gang activity as the Escalera Gang attempts to establish itself outside of San José."

The morning march Saturday was organized by Opinión Ramonense. There also was a vigil Saturday night in the Parque Central.

U.S. Embassy video chronicles a really bad trip here
By the A.M. Costa Rica staff

What can happen to a tourist here who does not pay attention to basic security precautions? That's the premise of a YouTube video produced by the U.S. Embassy here that seeks to promote vigilance.

The answer is that the tourist could end up in the consular section of the embassy one morning wearing one sandal and stripped of all possessions.

Johnathan Roy, a vice consul, has the only speaking role. He's a friendly Gringo giving safety tips to a forlorn man who has been victimized even before he left the airport. That is where he lost his luggage to a thief, according to the video.

The man's visit goes downhill from there.

He meets pretty girls in a bar, and when he wakes up, his backpack is gone. At the beach he leaves his car keys on the sand along with his few remaining possessions. That's where he loses a sandal as well as the car.

Roy said the video was a joint effort between the Consulate staff and the Public Affairs Office. Actors were embassy staffers.
poor guy
U.S. Embassy video
Tourist is left with one sandal as thief drives off with car

The Consulate is the part of the embassy that provides new identification to U.S. citizens who have had their passports lost or stolen. So nearly every weekday morning there are real tourists there with their tales of woe. A.M. Costa Rica reported last month that the Consulate has logged a decline in stolen U.S. passports. Still there were 417 passports stolen through May, the Consulate said.

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San José, Costa Rica, Monday, July11, 2011, Vol. 11, No. 135

CR Home

March begins today to support or oppose many projects

By the A.M. Costa Rica staff

Six organizations, including three political parties, are planning a march staring this morning from San José to Mirimar.

The route is along the new Autopista del Sol, which is one of the works some of the group are protesting.

Participating are the political parties, Frente Amplio, Acción Ciudadana and the Partido Verde Ecologista. Also marching are representatives from Frente Nacional de Territorios Costeros Comunitarios, Movimiento Patriótico Juanito Mora and Juventud Progresista de Cartago. Each appears to have their own agenda.

The Partido Verde or green party seeks to stop the Diquis Dam Project planned by the Instituto Costarricense de Electricidad. A spokesman said that the party is concerned about the impact on the native residents of the area, the environment and also methane gas that would be produced by vegetation blooded by water backing up from the dam.

Frente Amplio seeks to have the contract under which the autopista was constructed renegotiated.

Most, if not all, of the parties oppose the resumption of mining activities at Miramar where the Bellavista Mine was damaged heavily by a landslide.

Those who will make the hike, which will last six days, are getting a send off at the Estadio Nacional this morning.
The residents of the costal areas are pushing for a proposed law that will protect them from being evicted under terms of the current maritime legislation.

The march was a successful technique that drew attention to the Las Crucitas Mine in northern Costa Rica.

Both operations are run by Canadian mining firms through subsidiaries here.  Heavy rains caused the soil on which refining operations at the Bellevista mine rested to move, and key elements of the mining process slid downhill. Mining operations there started in April 2005, and operator Glencairn Gold Corp. ended them in August 2007 due to ground movement. The landslide happened the next October. Gold has soared in value since the closing.

The Bellevista Mine is in Montes de Oro near the town of Miramar east of Puntarenas.

The mine concession now is held by a firm called B2Gold, which said that it and Glencairn have conducted an extensive monitoring program and site reclamation. The firm said that the Secretaria Tecnica National Ambiental conducted audits of the site that show the soil has remained stable and that there has been no contamination of surface or groundwater.

Las Crucitas, operated by Industrias Infinito S.A, is appealing a lower court ruling that the award of its concession was irregular. The mine site is at Cutris de San Carlos. The Tribunal Contencioso Administrativo ordered the central government to cancel the mineral concession.

Despite Sala IV, road agency still will collect seat belt fines

By the A.M. Costa Rica staff

The Consejo de Seguridad Vial said Friday that it would continue to collect 308,100-colon fines for not wearing a seat belt that were issued before the Sala IV constitutional court found the amounts excessive.

The traffic agency noted that the high court decision is not retroactive. The old fine was about $615. The agency now has lowered the amount to 16,000 colons or about $32 in the face of the high court decision.

The court acted in May but the written decision has just become available.
In addition, the road agency said it would not return the money of those who already paid the fine. Any outstanding fines will draw interest at 3 percent a month, it added.

Many motorists who were ticketed for not wearing a seatbelt waited for the Sala IV decision before paying their fine.

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Has anybody seen her? Reward offered!
Cel: 8876-9882

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San José, Costa Rica, Monday, July11, 2011, Vol. 11, No. 135

Medical vacations in Costa Rica

Community Action Alliance
San Ramón resident responded to the challenge Sunday and planted 2,500 trees as part of the  San Ramón Carbon Neutral initiative. They were sent off by Rita Arias, vice mayor and local poet, (inset) who performed a dance/poem about protecting the environment and carbon neutrality.

Tico football squad to host
an international tournament

By the A.M. Costa Rica staff

Three foreign American football teams, including one from San Diego, California, are coming to San Ana to participate in a tournament with a Costa Rican team.

The Costa Rica squad is made up of selections from the teams here that just finished their season. The national team  is 100 percent Costa Rica, organizers said.

Coming from San Diego is the Duo Sport Thundercats. From Managua, the Nicaraguan Guerreros has been invited, as has been the El Salvador Jaguares from San Salvador.

The four teams will play a game Friday, July 22. Costa Rica will face El Salvador at 4 p.m., and Nicaragua will face the U.S. team at 8 p.m. All games are at the Rio Oro Stadium in Santa Ana. The following day, the two losers will compete at 4 p.m. and the two winning teams face off at 8 p.m.

José Rafael López Palet, the head coach and general manager of the Costa Rica national team, said that the four-way contest is planned to be an annual event.  General admission to the games is 2,000 colons (about $4), and youngsters 12 and under can enter free with an adult.

Woman dies saving kids
in surf at Play Bonita

By the A.M. Costa Rica staff

A woman died at Playa Bonita in Mata Palo Thursday afternoon when she went into the surf to save her children, the Judicial Investigating Organization said.

She was identified by the last name of  Leriche. Agents said she was a national of Belgium.

The mishap took place about 1:20 p.m. when the two children called for help, and the woman responded, agents said. Eventually the children made their own way out of the water, but the woman was carried away.

Call center Concentrix
opens new Pavas building

Special to A.M. Costa Rica

Concentrix Corp. has inaugurated its new building in San José and investing upwards of $4 million, the company reported.

The new facility, located in Pavas in the vicinity of the U.S. Embassy, has capacity for up to 1,200 employees, it said. Currently, Concentrix Costa Rica employs 250 people who provide pre-sales, technical support and customer service in seven different languages including English, Spanish, Portuguese, French, German, Dutch and Italian. The company said it expects to hire 150 additional employees in the next six months.

Concentrix is the global business process outsourcing division of SYNNEX Corp., a New York Stock Exchange-listed company.

English teacher is victim
of Cahuita sexual abuse

By the A.M. Costa Rica staff

Officers of the tourist police detained a man in Cahuita over the weekend for investigation in the sexual abuse of a North American woman.

The Policía de Turismo said that alleged crime took place in the  Parque Nacional Cahuita, The woman is believed to be in the country as part of a two-year exchange to provide English lessons in a local institute, police said.
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San José, Costa Rica, Monday, July11, 2011, Vol. 11, No. 135

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Famed Cuban guitarist
dies of heart attack

By the A.M. Costa Rica wire services

Manuel Galban, the internationally-renowned Cuban guitarist featured in the "Buena Vista Social Club," has died of a heart attack in Havana.

A statement from Galban's publicist said the award-winning musician died Thursday.

The publicist said it was a "sad day" for Cuban music and its fans, who he said will miss Galban's enormous impact worldwide and his warm smile.

The 80-year-old musician got his professional start as a teenager in 1944. He rose to prominence in Cuba as a member of the Los Zafiros group, whose sound blended the Caribbean island's traditional music with rock and other styles. In the 1970s, Galban formed a group known as Batey, which traveled the world performing Cuban music for international audiences.

And in the 1990s, Galban's career surged in a new direction, when he appeared in the "Buena Vista Social Club" documentary about a group of older Cuban music stars. The film, a collaboration with a U.S. producer, Ry Cooder, led to a group of the same name, and the resulting album was an international sensation.

Galban teamed up with Cooder again in 2003 to record an instrumental album called "Mambo Sineundo," which won a Grammy award.

Attackers pour bullets
into Monterrey bar

By the A.M. Costa Rica wire services

Mexican officials say gunmen shot and killed 20 people inside a bar in Monterrey, Mexico, late Friday.

Local media say more than two dozen attackers opened fire on the patrons at a bar in a busy commercial district. 

Monterrey has been the scene of deadly battles involving drug cartels fighting over routes into the United  States.

Earlier Friday, Mexican police say the bodies of 10 men and woman were found shot on the outskirts of Mexico City.

Police say the victims were found in the Valle de Chalco area blindfolded and with their hands tied.

Police suspect the killings could be drug related, but say they are continuing their investigation.

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