Costa Rica's Constitutional Chamber of the Supreme Court found the 2012 version of Section 144 of the Tax Code, which required a taxpayer to pay additional taxes within 30 days of receiving a letter of determination, regardless of whether the taxpayer planned to appeal, unconstitutional. The pre-2012 version is now in force.

Costa Rica's Constitutional Chamber of the Supreme Court (the Supreme Court) has ruled the 2012 version of Section 144 of the Tax Code unconstitutional.

Background

In September 2012, Costa Rica amended Section 144 to require taxpayers who underwent a tax examination and received a letter of determination to pay additional taxes requested by the Tax Authorities within 30 days of receiving the letter of determination. Taxpayers were required to pay regardless of whether they decided to challenge the tax assessment before the Administrative Tax Court.

On September 24, 2014, the Supreme Court ordered the Tax Authorities to suspend the issuance of letters of determination¹ while Section 144 underwent constitutional analysis.²

Since then, all tax proceedings that reached the letter of determination phase have been suspended awaiting the Supreme Court's ruling on the constitutionality of Section 144.

Final ruling

On August 31, 2016, through Ruling No. 2016-012496 (the Ruling), the Supreme Court declared Section 144 of the Tax Code unconstitutional.

According to the Ruling, the pre-2012 version of Section 144 of the Tax Code is in force (i.e., before the September 2012 reform). Under this version, taxpayers must pay the additional taxes requested by the Tax Authorities only once all administrative channels have been exhausted, i.e. after a resolution of the Administrative Tax Court.

To date, the full text of the Ruling has not been disclosed. Once available, we will be in a position to comment on its implications to ongoing tax audits.

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ENDNOTES

¹ In Spanish: Acto de liquidación de oficio. The letter of determination is issued by the Tax Authorities at the end of a tax examination and sets out the amount of taxes due by the taxpayer.

² Through Resolution No. 2014-15684. See Tax Alert, Costa Rica's Constitutional Chamber of the Supreme Court suspends issuance of letters of determination dated October 16, 2014.