New Joint Resolution on the Declaration of Ultimate Beneficial Owners

What is this?

This requirement was established in 2019 as part of Costa Rica’s efforts to join the OECD. It applies to all types of legal entities. This regulation requires all legal entities registered in the Public Registry of Costa Rica to report their ultimate beneficial owners to the Central Bank.

What are Ultimate Beneficial Owners?

They are essentially individuals who, through various means, whether by voting rights associated with shares or some form of participation in the entity, or by control in the administration, can influence the decisions made in a company, or entities like Foundations, or Associations.

Entities required to declare

Corporations (S.A.) and other legal entities: Must report ultimate beneficial owners who control at least 15% of the share capital or those with substantial influence. Required information includes:

• Identification data of the participants (name, ID number, nationality).
• Number of shares and voting rights.
• Special conditions, such as usufruct or pledge, if applicable.

Form No.1 attached, specifies the detailed information that must be reported by Corporations, Limited Liability Companies, and other legal entities, such as branches of foreign companies registered in Costa Rica.

Trusts: The settlers, trustees, and beneficiaries must be identified as ultimate beneficial owners. The specific data to report includes:

• Information about the trust structure.
• Identification of all parties to the trust and ultimate beneficiaries.

Non-profit Organizations (NPOs): From 2024, they must report their control structure (board of directors, management council) and donors who have made contributions equal to or greater than a base salary in Costa Rica, as well as the beneficiaries of the donations. For reference, the base salary applicable in Costa Rica for the second half of 2024 amounts to CRC 358,609.50 colones (approximately US$680).

The specific requirements of the annex for foundations and associations include:

• Identifying data of the organization: legal ID, corporate name, trade name, country and date of establishment, main economic activity, phone, email, and physical address.
• Information of the members of the control structure (board of directors, management body, administrative council, directors, or equivalents), as well as donors and beneficiaries of donations exceeding a base salary.

Form No.2 attached, specifies the detailed information that must be reported by Associations and Foundations.

Procedure for submission

The declaration must be submitted digitally through the Central Directo portal of the Central Bank of Costa Rica (centraldirecto.fi.cr) using a valid digital signature certificate (the “Platform” the “System“). The legal representative or proxy is responsible for making the declaration. For clarity, a digital signature or “Firma Digital” is a device issued by the Central Bank of Costa Rica. To obtain it, one must be Costa Rican or have Costa Rican residency and DIMEX. It is not possible, for example, to present the declaration at a physical office.

For now, it is possible to submit the declaration through a Special Power of Attorney (“Poder Especial”); however, we have seen efforts by the Tax Administration and the Costa Rican Drug Institute (“ICD“), to eliminate this possibility, so that declarations can only be submitted by the entity`s legal representative with a Full Power of Attorney (“Poder Generalisimo”), whose power must be registered in the Public Registry of Costa Rica. For now, granting a Special Power is feasible, but eventually, it may be necessary for the entity to grant a Full Power of Attorney. We will keep you informed as soon as we have more information on this.

What is needed?

All supporting documentation must be up to date. For example, in the case of Corporations and Limited Liability Companies, it is the corporate books. Additionally, if, for example, the Costa Rican company is part of a structure with a Holding, or some other entity like Trusts, it is necessary to obtain the supporting documentation that allows confirming who are the physical persons, who exercise control, either directly or indirectly, over the structure. It is important to clarify that, if documents are issued abroad, they must be notarized and apostilled and issued no more than sixty (60) days before the submission.

In the case of non-profit organizations (“NPOs“), all the information indicated in the attached form must be reported.

All information reported on the Platform must have the corresponding backup documentation.

The Platform requires that all entities report an Ultimate Beneficial Owner, either because they have substantial participation in the capital, or because they are capable of exercising control by other means, such as appointing and removing members of the Board of Directors.

Submission Deadlines

1. Annual declaration: Must be submitted in April of each year; however, exceptionally, this year’s submission deadline has been moved to October 2024, so the deadline to submit the declaration is October 31, 2024.
2. Extraordinary declarations: In the event of new registrations, transformations, or mergers, the declaration must be submitted within 20 business days following the event.
3. Corrective declarations: It is allowed to correct the information presented in case of errors.

Consequences of non-compliance

Failure to declare results in penalties established in article 84 bis of the Tax Code, which include monetary fines (2% of the Company’s gross income), and legal restrictions for the offending entity, such as the inability to register documents in the Public Registry, and to carry out procedures before other public entities. Also, it is common for banks to require a copy of the declaration, as support for their KYC (“Know Your Customer“) process.

Complexities of the Central Directo Platform

Although the System requires reporting Beneficiaries with more than 15% participation, in the case of corporations and LLCs, we have seen that the Platform requires reporting up to 100% of the partners, to authorize the submission of the declaration. Additionally, the Platform is not user-unfriendly, and sometimes tends to fail, so we recommend coordinating the submission in advance, considering that the deadline is the upcoming October 31.

Moreover, we have seen that the Platform requests information that does not conform to the parameters of other jurisdictions; for example, it requires that a value be reported for the shares, or units each partner holds, which is not usual for entities like LLCs in the United States. In these cases, it is necessary to report, at least, a reference value.

At PredictaBill, we are at your disposal to assist you throughout the process and ensure that your declarations are submitted correctly and on time.