Costa Rica's Ministry of Finance has released a statement clarifying its decision to exclude a number of territories with low effective income tax rates from its list of non-cooperative territories.
Companies doing business, directly or indirectly, with legal or natural persons situated in one of the listed territories may not deduct expenses for Costa Rican corporate tax purposes, effective October 1, 2019.
The listed territories in Resolution DGT-R-55-2019 are:
- Bosnia and Herzegovina
- French Polynesia
- Norfolk Islands
- North Korea
- North Macedonia
- Saint Pierre and Miquelon
- The US Virgin Islands
- Uzbekistan; and
- Wallis and Futuna.
The jurisdictions have been listed because the effective tax rate on corporate profits is less than 40 percent of the corporate tax rate in Costa Rica and the territory has not agreed a tax information exchange agreement with Costa Rica. Expenses will only be allowed in respect of these territories if the taxpayer can demonstrate that the expenses are for arrangements that are not artificial.
In an October 11, 2019, statement, the Ministry said Bermuda, the Cayman Islands, the Bahamas, the British Virgin Islands, Mauritius, Cyprus, Switzerland, Singapore, Ireland, Barbados, and Hong Kong had been excluded from the list because they have signed up to and enforced the terms of multilateral agreements for the exchange of information.
The Ministry said that exclusion of any of the territories from the decision would amount to an arbitrary interpretation of the rules for placement on the list.