Pursuant to the “Check-the-Box” Treasury regulations of the US Treasury Department (Treas. Reg Statute 301-7701-2) certain foreign business entities are per se (ie. automatically) corporations such as the Costa Rica S.A. A foreign business entity that is not automatically classified as a corporation (ie. An eligible entity) can elect its classification for Federal (US) tax purposes under certain circumstances by timely filing an IRS form 8832. A Costa Rican SRL is an eligible entity. An eligible entity with at least two members can elect to be classified as either a partnership or as an association taxable as a corporation. A foreign eligible entity with a single member can elect to be classified as an association or as an entity that is disregarded as an entity separate from its owner, ie. A foreign disregarded entity.
If a foreign entity is a per se corporation and has US shareholder(s) as stated above then it is required to file with the IRS a form 5471. Failure to timely file this form with the IRS can lead to the IRS imposing a penalty for each accounting period for failure to file a $10,000.00 penalty. If the form is not filed within 90 days after the IRS has mailed a notice to the taxpayer an additional $10,000.00 penalty per foreign corporation is charged for each 30 day period. The additional penalty cannot exceed $50,000.00 for each failure. Criminal penalties under RS Code Sections 7203, 7206 and 7207 may also apply.
Josh N. Bennett, Esq., PA
tel: 954 779 1661
fax: 954 767 9989
cell: 786 202 5674