QCOSTARICA — The collection of the global minimum tax for all multinational companies with revenues of at least 750 million euros poses a scenario of threat, great challenges and unfair competition for the efforts that Costa Rica makes to attract and retain foreign investment, and with it, thousands of well-paid jobs.
This is a 15% tax obligation that all companies with investments in the Organisation for Economic Co-operation and Development (OECD) and G-20 countries that exceed this threshold in at least two of the last four fiscal periods will have to pay.
For the calculation, income is accounted for in various jurisdictions and not only in the country where they are operating.
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In the case of Costa Rica, the impact would not be extensive, since the large foreign business parks located in free zones generate much smaller profits.
“It does pose a scenario in which the country will have to compete with other jurisdictions where the tax will not be charged, which generates a kind of unfair competition,” said Marco Vinicio Ruiz, former Minister of Foreign Trade.
Also, in the future, it raises an issue that generates a lot of noise to attract large companies to the country.
This implies that Costa Rica has an important challenge to improve its competitiveness and continue to be successful in attracting investment.
Improving roads, lowering social security charges, guaranteeing electricity at a competitive price, and, of course, training the human talent necessary for the various industries are some of the urgent tasks.
Costa Rica registered a record figure of Foreign Direct Investment (FDI) last year, reaching US$3..78 billion.
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Difficult decision
The global minimum tax that is already in force raises the possibility that Costa Rica will not collect the tax from companies already established or from new investment that arrives in the country, but that does not mean that the company will not pay the tax, since the OECD tax rules are designed so that multinational companies pay the tax in the country of origin of the parent company or where the other entities of the multinational group are located.
In other words, if Costa Rica does not collect the global minimum tax, another country will collect it for us.
In this regard, Carlos Wong, president of the Association of Free Trade Zones, points out that the country must evaluate whether it is truly convenient to collect the tax in question and, if it reaches that conclusion, the entire investment attraction system must be protected so that Costa Rica remains competitive.
“The country has the option of implementing a Domestic Qualified Minimum Tax so that said effective minimum tax is collected in the country. However, it is crucial that this measure be complemented by a well-structured fiscal and non-fiscal incentive strategy in line with the new reality, in order to mitigate the impact of a new tax burden, as well as facilitate the retention and attraction of investments,” said Wong.
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The country has not yet made a decision on the matter, but any decision that is made will involve the approval of a law.
Souce: Larepublica.net
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