"Anonymous" corporation may be thing of the past

SOURCE:  http://AMCostaRica.com  -  Sept. 10, 2012

Overlooked by many in the crush of local news is the fact that Costa Rica is about to eliminate the anonymous from the corporate structure called a sociedad anónima or S.A.

The S.A. is a popular form of a corporation. Until now the shareholders of most corporations were not known unless they chose to divulge that fact.

Many foreigners own corporations here that do not have their name as the responsible party. A common practice has been to name a lawyer or someone with similar business background to be the president or holder of a power of attorney to handle day-to-day affairs.

Such a person representing a company does not have to own any shares in the entity. All the shares and the benefits derived from them can be held by one or many other parties.

Until now the only listing of shareholders has been on the private books of the corporation. Sometimes they would be disclosed. For example, for a firm to do business with the government, the names of major shareholders must be disclosed to avoid officials bidding on major contracts.

In addition, when a firm seeks to become listed as a small or medium enterprise, a designation that has some economic benefits, the names of shareholders must be disclosed.

Media companies in Costa Rica also must disclose the names of shareholders each year.

Not so the average firm. For that reason the S.A. could be used as a tax evading device. A U.S. citizen could send money to a Costa Rican S.A. without informing the tax authorities. Investigators would not be able to pierce the veil of the corporation.

A proposed law, No. 18.041, awaiting the signature of President Laura Chinchilla Miranda requires corporations to disclose the names of their shareholders to the Registro Nacional. This is the same bill that authorizes officials to assess a tax when the shares of corporations are transferred. Until now such a transfer was tax-free. The bill would assess a sales tax on what is being called an indirect transfer. There are a few exceptions for certain types of transfers.

A.M. Costa Rica may be the only English-language news source to report this information. The bill gained final legislative approval Aug. 27, and this newspaper reported that fact in the edition the next day.

Some readers have expressed surprise at the scope of the measure and the fact that there has been no obvious objection to it by the business community.

Even though an anonymous corporation could be a good money laundering or tax evading device, there also are legitimate reasons for having such a corporate structure. Privacy and not alerting criminals to wealth are among the legitimate reason.

The Chinchilla administration has characterized the bill as one to tighten up tax collection and to attack fraud, so the president is likely to sign it.


.