When thinking about investing in the region, companies must not only take into account the tax systems of each country, but also the oversight power of the Tax Administrations to ensure tax compliance. In this sense, this article aims to give an overview of the determination processes in the different countries of the region and general recommendations on how to deal with a possible tax audit.
Any entity that is considered a Tax Administration in its capacity as an active subject of a tax, has the possibility of inspecting the taxes it administers. As a general rule, the General Directorate of Taxation has a statute of limitations of 4 years to determine any difference with what is self-declared by the taxpayer. Term that is extended to 10 years in case returns have not been submitted or they are declared fraudulent.
In Costa Rica, in general, there are two classes of determinative processes. Prior settlements are abbreviated procedures carried out based on information held by the Tax Administration, such as information cross-control processes and arithmetic verification. This type of process can last from 2 to 3 months.
On the other hand, in the case of final settlements, the Tax Administration is empowered to require accounting and legal books, auxiliary books, tax reconciliation, accounting entries, supporting documentation, as well as any information that may be relevant to verify the correct determination of tax obligations in relation to a particular fiscal period. This type of inspection processes are more extensive since they can last approximately 2 to 15 months from the start of the communication.
