Large Companies to Continue Paying 30% Taxes

September 2, 2005

Legislators approved Wednesday an amendment to the Permanent Fiscal Reform Package that would set the tax rate at 30% for companies that earn more than ¢30 million ($62,240) annually if the tax reforms are passed, according to a statement released by the assembly.This amendment reverses plans to reduce the rate to 25% (from the current 30%) for all companies over a gradual period, as was proposed in the latest versions of the long-debated tax plan. The original version of the tax plan, dating back three years, proposed a 15% corporate tax rate.Legislator Gerardo Villanueva said in a statement that the aim of the reduction to 25% was to continue attracting foreign investment to Costa Rica.“We believe this reduction is no longer necessary,” Villanueva said.The legislator said foreign investment is no longer at risk because of a motion he made, approved last week, which releases foreign companies from paying taxes on capital generated outside of Costa Rica, unless that income is repatriated here. Until last week, the tax plan proposed all companies, foreign and national, pay taxes on all income generated inside and outside of the country. Since the motion was approved, only national companies would have to pay this “global tax” if the tax plan is approved (TT, Aug. 26).The tax plan seeks to overhaul the country’s tax collection system in order to increase the country’s revenue, pay down the debt and reduce the deficit. Originally proposed in 2002, it has been highly debated in and out of legislative commission. Debate has finally begun on the legislative floor, and some legislators have said a vote could take place this month, though problems still plague the plan (see separate story.)

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