Costa Rica has taken another step toward preventing tax fraud by legislatively approving a bill entitled the "Law Against Tax Fraud." If enacted, taxpayers would be required to record information digitally.

On September 8, 2016, the Costa Rican Congress took an important step towards approving the "Law Against Tax Fraud"¹ (the Bill) by approving it in its first vote. The Bill is now expected to be sent to the Supreme Court for constitutional review before being submitted for a second and final vote.

This is an important piece of legislation that has been under debate for the past two years. The Bill is intended to provide the Tax Administration with new mechanisms to fight tax fraud. The Bill would:

— Require the creation of a registry of ultimate beneficiary owners for any legal entity within the country

— Require all individuals and legal entities with a for-profit activity that provide services to the general public to accept credit cards as a form of payment

— Require all taxpayers to book transactions digitally and issue digital invoices

— Treat third parties (e.g., advisors) as responsible for omissions or false information reported by taxpayers to reduce or avoid taxes

— Make certain amendments to the computation of the statute of limitations

— Make certain amendments to the rules relating to penalties

— Allow the Tax Administration to preemptively freeze a taxpayer's assets when, during the process of making an assessment, it determines that there is a risk that the assets may be transferred to avoid paying taxes

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¹ In Spanish: Ley para Mejorar la Lucha contra el Fraude Fiscal