IL Postcard

Racketeers Beware…New Tax, Immigration Regulations Target You

Date: 07/31/2007

Notaries public in Costa Rica must now register all transactions of $10,000 or more, according to a recently approved regulation aimed at combating money laundering in the country.

For the few foreigners in Costa Rica specifically to avoid taxation in their home countries, the new regulation spells trouble. The rule applies to purchases and sales of vehicles, properties, corporations, mortgages, liens, trusts and contracts, among other transactions handled by notaries. All these transactions must now be registered with the Superintendencia General de Entidades Financieras (General Superintendence of Financial Entities, or SUGEF), which oversees Costa Rica's banks and the financial sector.

Mauricio Boraschi, Director of the Instituto Costarricense de Drogas (Costa Rican Drug Institute, or ICD), says the government is concerned that some transactions, including some property investments, are being used to launder money. Notaries are expected to provide more detailed information about their clients to SUGEF, which in turn can share that information with tax authorities in other countries.

Those involved in legitimate transactions stand to benefit from increased supervision of notaries. An outdated national registry, combined with corruption and little oversight, has allowed crooked notaries to fraudulently transfer property (without the consent of owners). Foreigners, who often know little about the ins and outs of the national registry, are regular targets. Costa Rican daily La Nación reported this weekend that over 100 such fraudulent land transactions have been detected over the past four years.

"As a Costa Rican, it shames me that these things happens, but we are not just going to stand there with our arms crossed," said Justice Minister Laura Chinchilla.

Notaries are also feeling the heat for another type of fraudulent transaction. A marriage bill introduced into the legislative assembly last week targets notaries (and lawyers) that perform marriages of convenience between Costa Ricans and foreigners (this is often done to facilitate residency visas for expats wishing to remain in Costa Rica).

Per Costa Rica's Supreme Court, the General Immigration Administration (DGME) cannot deny visas to applicants suspected of entering into marriages of convenience. If the new marriage bill is passed, it would place the onus on notaries and lawyers instead of the DGME. Anyone that repeatedly processes fraudulent marriages will receive five to seven years in prison and both spouses will get three to five years in prison.

Your Latin America Insider,

Suzan Haskins
for International Living

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