Have you ever heard about police using phony promotions or classified ads to catch criminals or parking violators? Well, this year, Costa Rica’s tax form D-175 is a bit like that – a "sting operation" for property-holding companies.
For many years, it was common practice in Costa Rica to place property in a company (known as an inmobiliaria or real estate holding company). This allowed properties to be sold quickly by simply transferring the company, often avoiding transfer taxes. However, very few of these companies ever registered with the tax department, the Tributación Directa. There are an estimated 308,000 companies listed at the Registro Nacional (national registry), but a much smaller number are registered for tax purposes. Costa Rica aims to fix this to improve future tax collection.
The Catch for Inmobiliarias
Here's the twist: Most inmobiliarias typically haven't had to file tax returns because they aren't operating businesses – they were created solely to hold property. But this tax year, all companies must file Form D-175 by December 31st, or face a fine of 76,500 colones (roughly $185 USD).
Key Deadlines for Corporate Forms
Here's a quick look at important corporate filing deadlines:
The Real Consequence: Registry Restrictions
The fine isn't the only consequence. The most significant sanction is that companies failing to file Form D-175 will be unable to make any movements at the national registry. This means you won't be able to transfer a property when you want to sell it, nor will you be able to make any changes to the company itself, such as adding or deleting partners, or changing powers of attorney or directors.
Why is this a "Trap"?
This initiative stems from the International Monetary Fund (IMF), which has been pushing Costa Rica for over a decade to improve its tax collection. Simply put, if Costa Rica doesn't improve its tax revenues, the IMF could withhold future loans and loan guarantees. While Costa Rica has made good progress in streamlining its tax system, getting inmobiliarias on the books is crucial to completing the job.
This isn't necessarily about generating huge tax revenues right now. Only companies with equity greater than 35 million colones will pay a one-tenth of a percent tax, and most properties held in companies have a very low book value, falling below this minimum.
Looking Ahead: Future Tax Collections
However, consider the future. Once the tax department has all these companies inscrito (registered), they will begin to collect additional taxes, such as the Timbre de Educación y Cultura (Stamp of Education and Culture), which all registered companies must pay annually. Furthermore, if you look at proposed future laws on the Tributación Directa website, other taxes are being considered.
The Wisest Move
The smartest approach for anyone with a property-holding company in Costa Rica is to file Form D-175 and bring the company up-to-date with the tax authorities. As Benjamin Franklin wisely wrote, "In this world nothing is certain but death and taxes." No one wants to deal with significant tax penalties and interest.
The information provided is for informational purposes and does not constitute legal or financial advice. Consult a qualified Costa Rican professional for your specific situation. ©2004-2025 Costa Rica Expertise. Free use permitted with attribution (CC BY 4.0). 1031110 XX!
