Requirements for income tax exemption of private educational associationsRequisitos para la exención del impuesto sobre la renta en asociaciones educativas privadas

IX.ON THE MERITS. REGARDING THE ALLEGATION CONCERNING THE NON-TAXABLE NATURE OF THE INCOME GENERATED BY THE PLAINTIFF ASSOCIATION. The plaintiff Association argues, in summary, as a ground for challenging the validity of the decision, that the income generated by Associations dedicated to providing pre-school, primary, and secondary education services is non-taxable according to subsection h) of Article 2 of the Income Tax Law (Ley del Impuesto sobre la Renta). Likewise, it indicates in its support the content of constitutional vote number 2542-2011 and points out, in summary, that the items corresponding to the "physical plant" contribution and uniform sales, as well as the so-called "scholarship fund" and "mutual assistance" funds, and finally the amount corresponding to severance pay paid to the ASECOL Solidarist Association, do not meet the income-product criterion established in the Income Tax Law (Ley del Impuesto sobre la Renta) [...].

Criteria of the Court: Now then, this Chamber considers that regarding the plaintiff Association's subjection as a taxpayer of the Income Tax (Impuesto sobre las Utilidades) established in the Income Tax Law (Ley del Impuesto sobre la Renta) (No. 7092 of April 21, 1988), what was indicated in ruling No. 051-2016-VII of eleven hours and five minutes on May twenty-seventh, two thousand sixteen, issued by the Administrative and Civil Tax Court, Seventh Section (Tribunal Contencioso Administrativo y Civil de Hacienda, Sección Sétima), is important and is shared, which stated the following regarding what is relevant: "(...) On the legal nature of the association and its condition as a passive subject of the utilities tax. In relation to the legal nature of the association, it must be noted that Law No. 218, the current Associations Law (Ley de Asociaciones), states in its first article that those formed for the satisfaction of "(...) scientific, artistic, sports, charitable, recreational, and any other lawful purposes that do not have profit or gain as their sole and exclusive objective (...) guilds and mutual aid, provident, and board associations" shall be governed by said regulations. Likewise, in its second article, it states that if it is an association proposing a merely commercial or civil purpose, in such case it shall not be subject to Law 218, but shall be governed by commercial or civil laws, as the particular case may be. Furthermore, not every association per se, or by virtue of being destined for a purpose other than commercial activity or profit, holds the qualification of being one of public utility. See that Article 32 of the cited law literally states: "Article 32.- Simple, federated, or confederated associations, whose development or activity are particularly useful for the interests of the State and fulfill a social need, may be declared of public utility when they request it from the (*) Ministry of Justice and Peace and the latter deems it convenient. To obtain this benefit, associations must have been registered for at least three years and operate legally in the service of the community. // Associations recognized as of public utility may enjoy the administrative and economic franchises and concessions that, to fulfill their purposes, the Executive Branch grants them. At any time, the (*) Ministry of Justice and Peace shall revoke this benefit if the reasons for which it was granted disappear. This Ministry shall keep the controls of the associations declared of public utility and shall require annual reports from them. // (Thus amended by Article 67 of the Comprehensive Law for the Elderly, No. 7935 of October 25, 1999) // (*)(Its denomination modified by Article 3 of Law No. 8771 of September 14, 2009)". (The underlining does not correspond to the original). From the transcribed legal text, it is deduced without great effort that there are two necessary prerequisites that the organization must satisfy to qualify under the assumption and thus be able to request the respective declaration of public utility before the indicated Ministry. The association in question must comply with two aspects imposed by law, concomitantly; first, it must develop an activity that is particularly useful for state interests and additionally, it must fulfill a detected social need. If the case is that the organization satisfies both elements, it will be eligible to formulate the respective request before the Ministry of Justice, subject to the procedural process provided for in the cited numeral 32 and in Articles 27 to 33 of Executive Decree No. 29496-J, Regulations to the Associations Law (Reglamento a la Ley de Asociaciones), in force. It cannot be overlooked that the association that has achieved such a declaration has the possibility of enjoying a series of benefits enunciated generally in Article 32 of the law at hand, but only the one that has the declaration of public utility. To that extent, the position assumed by the plaintiff, which tries to make this Court believe that because the Lincoln School Association is destined for the financing of the educational activities deployed by that private education center, it per se holds, without having demonstrated compliance with the requirements or the procedures provided for by the current legal system to obtain the declaration of public utility, the exemptions that the same legal norm establishes, when referring to "(...) the administrative and economic franchises and concessions that, to fulfill its purposes, the Executive Branch grants them". The plaintiff is also mistaken in indicating that by reason of being dedicated to educational activity, it is not subject to the payment of the income tax established in Law No. 7092. Said regulation, specifically its numerals 1 and 3, in its version in force as of the month of October 2005, when the activities by the plaintiff giving rise to this litigation occurred, states regarding what is relevant: "Article 1.- Tax that the law comprises, taxable event (hecho generador), and taxable matter. A tax on the profits of companies and individuals who develop lucrative activities is established. (Thus added the preceding paragraph by Article 102 of the Extraordinary Budget Law, No. 7097 of August 18, 1988) // The taxable event of the tax on the profits referred to in the preceding paragraph is the perception of income in money or in kind, continuous or occasional, from any Costa Rican source. (Thus amended and the numbering of the preceding paragraph moved by Article 102 of the Extraordinary Budget Law, No. 7097 of August 18, 1988, which transferred it from the first to the second paragraph) // This tax also levies continuous or eventual income, from a Costa Rican source, received or accrued by individuals or legal entities domiciled in the country; as well as any other income or benefit from a Costa Rican source not exempted by law, among them the income received by the beneficiaries of export contracts for tax credit certificates [...]" We must remember that in tax matters, special principles govern, recognized by this Administrative and Civil Tax Court (Tribunal Contencioso Administrativo y Civil de Hacienda), among them that of economic reality (realidad económica) contemplated in numeral 8 of the Code of Tax Rules and Procedures (Código de Normas y Procedimientos Tributarios, CNPT) and according to which the legal forms adopted by taxpayers do not bind the interpreter, as well as that of the burden of proof (carga de la prueba) provided in numeral 140 CNPT, a numeral that provides regarding said evidentiary burden that it falls on the Tax Administration with respect to the constitutive facts of the material tax obligation, while it falls on the taxpayer with respect to the impeding, modifying, or extinguishing facts of the tax obligation [...].

the current Law of Associations No. 218, in its first article, states that those formed for the fulfillment of "(...) scientific, artistic, sports, charitable, recreational, and any other lawful purposes that do not have profit or gain as their sole and exclusive object (...) guilds and mutual aid, welfare, and patronage associations" shall be governed by said regulation. Likewise, in its second article, it indicates that if it is an association that proposes a merely commercial or civil object, in such case it shall not be subject to Law 218, but shall be governed by commercial or civil laws, depending on the particular case. Furthermore, not every association per se, or by being destined for a purpose other than commercial activity or profit, holds the qualification of being of public utility (utilidad pública). See that Article 32 of the cited law literally states: "Article 32.- Simple, federated, or confederated associations, whose development or activity are particularly useful for the interests of the State and fulfill a social need, may be declared of public utility (utilidad pública) when they request it from the (*)Ministry of Justice and Peace and the latter deems it appropriate. To achieve this benefit, associations must have been registered for at least three years and operate legally in service of the community. // Associations recognized as of public utility (utilidad pública) may enjoy the administrative and economic franchise and concessions (franquicias y concesiones) that the Executive Branch grants them to fulfill their purposes. At any time, the (*)Ministry of Justice and Peace shall revoke this benefit if the motives for which it was granted disappear. This Ministry shall keep controls over the associations declared of public utility (utilidad pública) and shall require annual reports from them. // (Thus amended by Article 67 of the Comprehensive Law for the Elderly, No. 7935 of October 25, 1999) // (*)(Its name modified by Article 3° of Law No. 8771 of September 14, 2009)". (The underlining does not correspond to the original). From the transcribed legal text, it is deduced without great effort that there are two necessary requirements that the organization must satisfy to qualify under the assumption and thus be able to request the respective declaration of public utility (declaratoria de utilidad pública) from the indicated Ministry. The association in question must concurrently comply with two aspects imposed by law; firstly, it must develop an activity that is particularly useful for state interests, and additionally, it must fulfill a detected social need. If the organization satisfies both elements, it will be eligible to formulate the respective request before the Ministry of Justice, subject to the procedural process (trámite procedimental) provided for in the cited Article 32 and in Articles 27 to 33 of the current Executive Decree No. 29496-J, Regulation to the Law of Associations. It cannot be overlooked that the association that has achieved such a declaration holds the possibility of enjoying a series of benefits generally enunciated in Article 32 of the law that concerns us, but only the one that has the declaration of public utility (declaratoria de utilidad pública).

In that regard, the position taken by the plaintiff completely lacks any legal basis, which attempts to make this Court believe that, because the Asociación del Colegio Lincoln is dedicated to financing the educational activities carried out by that private education center, it therefore holds, without having demonstrated compliance with the requirements or the procedures established by the current legal system for obtaining the declaration of public utility, the exemptions that the same legal rule establishes, when referring to "(...) the administrative and economic franchises and concessions that, to fulfill its purposes, the Executive Branch grants them." The plaintiff is also mistaken in stating that, by reason of devoting itself to educational activity, it is not subject to the payment of the income tax established in Law No. 7092. Said regulation indicates, specifically its numerals 1 and 3, in its version in force as of October 2005, when the activities by the plaintiff that give rise to this dispute occurred, in what is of interest: "Article 1.- Tax covered by the law, taxable event and taxable matter. A tax is established on the profits of companies and of individuals who carry out profit-making activities. (Thus, the preceding paragraph was added by Article 102 of the Extraordinary Budget Law, No. 7097 of August 18, 1988) // The taxable event of the tax on the profits referred to in the preceding paragraph is the receipt of income in cash or in kind, continuous or occasional, from any Costa Rican source. (Thus, the preceding paragraph was reformed and its numbering run by Article 102 of the Extraordinary Budget Law, No. 7097 of August 18, 1988, which transferred it from the first paragraph to the second) // This tax also levies continuous or eventual income, from a Costa Rican source, received or accrued by individuals or legal entities domiciled in the country; as well as any other income or benefit from a Costa Rican source not exempted by law, among them the income received by beneficiaries of export contracts for tax credit certificates [...]" We must recall that in tax matters, special principles recognized by this Administrative and Civil Treasury Court govern, among them that of economic reality (realidad económica) contemplated in numeral 8 of the Code of Tax Rules and Procedures (Código de Normas y Procedimientos Tributarios, CNPT) and according to which the legal forms adopted by taxpayers do not bind the interpreter, as well as that of the burden of proof (carga de la prueba) established in numeral 140 CNPT, a numeral that provides, regarding said probative burden, that it is incumbent upon the Tax Administration with respect to the facts constituting the material tax obligation, while it is incumbent upon the taxpayer with respect to the facts that impede, modify, or extinguish the tax obligation [...]".

REGARDING THE ALLEGATION CONCERNING THE NON-TAXABLE NATURE OF THE INCOME GENERATED BY THE PLAINTIFF ASSOCIATION. The plaintiff Association argues, in summary, as grounds for challenging the validity of the decision rendered, the non-taxable nature of the income generated by Associations dedicated to providing pre-school, primary, and secondary education services according to subsection h) of article 2 of the Income Tax Law (Ley del Impuesto sobre la Renta). Likewise, it indicates in its support the content of constitutional vote number 2542-2011 and points out, in summary, that the items corresponding to the contribution for "physical plant" (planta física) and sale of uniforms, as well as the so-called "scholarship fund" (fondo de becas) and "mutual assistance" (asistencia mutua), and, finally, the amount corresponding to severance pay (cesantía) paid to the Solidarity Association ASECOL do not meet the criterion of *income-product* (renta - producto) established in the Income Tax Law [...]".

**Criteria of the Tribunal:** Now then, this Chamber considers that regarding the subjection of the plaintiff Association as a taxpayer of the Profits Tax established in the Income Tax Law (No. 7092 of April 21, 1988), it is important and this Chamber shares what was indicated in ruling No. 051-2016-VII at eleven hours and five minutes on May twenty-seventh, two thousand sixteen, issued by the Administrative and Civil Tax Tribunal, Seventh Section, which stated in relevant part as follows: *"(...) **On the juridical nature of the association and its condition as a taxable person for the profits tax.*** In relation to the juridical nature of the association, it should be noted that the current Law No. 218, Law of Associations (Ley de Asociaciones), states in its first article that those formed for the satisfaction of ends "(...) scientific, artistic, sports, charitable, recreational and any other lawful purposes that do not have as their sole and exclusive object profit or gain (...) guilds and associations of mutual aid, providence, and patronage" shall be governed by said regulation.* *Likewise, in its second article, it states that if it is an association that proposes a merely commercial or civil object, in such case it will not be subject to Law 218, but will be governed by commercial or civil laws, according to the particular case. Furthermore, not every association per se, or by being destined for a purpose other than commercial activity or profit, holds the qualification of being one of public utility. See that article 32 of the cited law states literally: "Article 32.- Simple, federated or confederated associations,* ***whose development or activity are particularly useful for the interests of the State and fulfill a social need** *- may be declared of public utility when they request it from the (*) Ministry of Justice and Peace and it deems it appropriate. To achieve this benefit, associations must have a minimum of three years of being registered and operating legally in the service of the community. // Associations recognized as of public utility may enjoy the administrative and economic franchises and concessions that, to fulfill their purposes, the Executive Branch grants them. At any time, the (*) Ministry of Justice and Peace will revoke this benefit, if the reasons for which it was granted disappear.*" This Ministry shall maintain oversight of associations declared to be of public utility and shall require annual reports from them. // (As amended by Article 67 of the Comprehensive Law for Older Adults, No. 7935 of October 25, 1999) // (*)(Its name amended by Article 3° of Law No. 8771 of September 14, 2009)". (The underlining does not correspond to the original). It follows without great effort from the legal text transcribed above that there are two necessary prerequisites the organization must satisfy to qualify under the provision and thus be able to request the respective declaration of public utility (declaratoria de utilidad pública) from the indicated Ministry. The association in question must comply with two aspects imposed by law, concomitantly; firstly, it must develop an activity that is particularly useful for State interests and, furthermore, it must fulfill a detected social need. If the organization satisfies both elements, it will be eligible to formulate the respective request before the Ministry of Justice, subject to the procedural process provided for in the cited numeral 32 and in Articles 27 to 33 of the current Executive Decree No. 29496-J, Regulation to the Associations Law. It cannot be overlooked that the association that has achieved such a declaration has the possibility of enjoying a series of benefits generally listed in Article 32 of the law at hand, but only the one that has the public utility declaration. To that extent, the position taken by the plaintiff is entirely devoid of any legal basis, as it tries to make this Tribunal believe that, because the Lincoln School Association is dedicated to financing the educational activities carried out by that private educational center, it, per se, holds the exemptions that the same legal norm establishes, without having demonstrated compliance with the requirements or the procedures provided for by the current legal system to obtain the declaration of public utility, when referring to "[...] the administrative and economic franchises and concessions that, to fulfill their purposes, the Executive Branch may grant them". The plaintiff is also mistaken in indicating that, by reason of engaging in educational activity, it is not subject to the payment of the income tax established in Law No. 7092. Said regulation, specifically its numerals 1 and 3, in its version in force as of October 2005, when the activities by the plaintiff that give rise to this dispute occurred, states what is of interest: "Article 1.- Tax covered by the law, taxable event and taxable matter. A tax is established on the profits of companies and natural persons who engage in lucrative activities. (Thus added the preceding paragraph by Article 102 of the Extraordinary Budget Law, No. 7097 of August 18, 1988) // The taxable event of the tax on the profits referred to in the preceding paragraph is the receipt of income in money or in kind, continuous or occasional, from any Costa Rican source.

(As thus amended and the numbering of the preceding paragraph corrected by Article 102 of the Extraordinary Budget Law, No. 7097 of August 18, 1988, which transferred it from the first paragraph to the second) // **This tax also levies continuous or occasional income, from Costa Rican sources, received or accrued by individuals or legal entities domiciled in the country; as well as any other income or benefit from a Costa Rican source not exempted by law**, including income received by beneficiaries of export contracts through tax credit certificates [...]

We must remember that in tax matters, special principles govern which are recognized by this Administrative and Civil Tax Court, among them the principle of **economic reality (realidad económica)** set forth in numeral 8 of the Code of Tax Rules and Procedures (Código de Normas y Procedimientos Tributarios, CNPT), according to which the legal forms adopted by taxpayers do not bind the interpreter, as well as the principle of **burden of proof (carga de la prueba)** provided in numeral 140 CNPT, a numeral which provides regarding said evidentiary burden that it falls to the Tax Administration with respect to the facts constituting the material tax obligation, while it falls to the taxpayer with respect to the facts that impede, modify, or extinguish the tax obligation [...]".

"IX.SOBRE EL FONDO. ACERCA DEL ALEGATO REFERENTE AL CARÁCTER NO GRAVABLE DE LOS INGRESOS GENERADOS POR LA ASOCIACIÓN ACTORA. La Asociacion actora aduce, en síntesis, como motivo de impugnación de la validez de lo resuelto el carácter no gravable de los ingresos generados por las Asociaciones que se dedican a impartir servicios de educación pre - escolar, primaria y secundaria según inciso h) del artículo 2 de la Ley del Impuesto sobre la Renta. Asimismo, indica en su respaldo el contenido del voto constitucional número 2542-2011 y señala, en síntesis, que los rubros correspondientes a la contribución de "planta física" y venta de uniformes, así como los denominados "fondo de becas" y de "asistencia mutua", y, finalmente lo correspondiente a cesantía pagada a la Asociación Solidarista ASECOL no cumplen con el criterio de renta - producto establecido en la Ley del Impuesto sobre la Renta [...]".

Criterio del Tribunal: Ahora bien, esta Cámara considera que sobre la sujeción de la Asociación actora como contribuyente del Impuesto sobre las Utilidades establecido en la Ley del Impuesto sobre la Renta (N° 7092 de 21 de abril de 1988), resulta de importancia y se comparte lo indicado en el fallo N°051-2016-VII de las once horas con cinco minutos del veintisiete de mayo del dos mil dieciséis, dictado por el Tribunal Contencioso Administrativo y Civil de Hacienda, Sección Sétima, que señaló en lo que interesa lo siguiente: "(...) Sobre la naturaleza jurídica de la asociación y su condición de sujeto pasivo del tributo a las utilidades. En relación con la naturaleza jurídica de la asociación, debe señalarse que la ley No. 218 Ley de Asociaciones vigente, señala en su artículo primero que se regirán por dicha normativa las conformadas para la satisfacción de fines "(...) científicos, artísticos, deportivos, benéficos, de recreo y cualesquiera otros lícitos que no tengan por único y exclusivo objeto el lucro o la ganancia (...) los gremios y las asociaciones de socorros mutuos, de previsión y de patronato". Así mismo, en su artículo segundo señala que si se trata de una asociación que se propone un objeto meramente comercial o civil, en tal caso no se someterá a la ley 218, sino que se regirá por las leyes comerciales o civiles , según sea el caso particular. Además, no toda asociación per sé, o bien por destinarse a un fin diverso de la actividad comercial o el lucro, ostenta la calificación de ser una de utilidad pública. Véase que el artículo 32 de la ley citada, señala en su literalidad: "Articulo 32.- Las asociaciones simples, federadas o confederadas, cuyo desarrollo o actividad sean particularmente útiles para los intereses del Estado y llenen una necesidad social, podrán ser declaradas de utilidad pública cuando lo soliciten al (*)Ministerio de Justicia y Paz y este lo estime conveniente. Para alcanzar este beneficio, las asociaciones deberán tener tres años de inscritas como mínimo y operar legalmente al servicio de la comunidad. // Las asociaciones reconocidas como de utilidad pública podrán gozar de las franquicias y concesiones administrativas y económicas que, para cumplir con sus fines, el Poder Ejecutivo les otorgue. En cualquier momento, el (*) Ministerio de Justicia y Paz revocará este beneficio, si desaparecen los motivos por los cuales fue concedido. Este Ministerio llevará los controles de las asociaciones declaradas de utilidad pública y les exigirá informes anuales. // (Así reformado por el artículo 67 de la Ley Integral para la Persona Adulta Mayor, N° 7935 del 25 de octubre de 1999) // (*)(Modificada su denominación por el artículo 3° de la ley N° 8771 del 14 de setiembre de 2009)". (El subrayado no corresponde al original). Del texto legal transcrito se deduce sin mayor esfuerzo que son dos los presupuestos necesarios que debe satisfacer la organización para calificar en el supuesto y poder así requerir ante el Ministerio indicado, la respectiva declaratoria de utilidad pública. Debe la asociación de la cual se trate, cumplir con dos aspectos impuestos por ley, de manera concomitante; primeramente, debe desarrollar una actividad que sea particularmente útil para los intereses estatales y además, debe llenar una necesidad social detectada. Si es del caso que la organización satisface ambos elementos, será susceptible de formular la solicitud respectiva ante el Ministerio de Justicia, con sujeción al trámite procedimental previsto en los numerales 32 citado y en los artículos 27 a 33 del Decreto Ejecutivo No. 29496-J Reglamento a la Ley de Asociaciones vigente. No puede dejarse de lado, que la asociación que haya alcanzado tal declaratoria, ostenta la posibilidad de disfrutar de una serie de beneficios enunciados de manera general en el artículo 32 de la ley que nos ocupa, pero sólo la que tenga la declaratoria de utilidad pública. En ese tanto, carece de todo asidero jurídico la posición asumida por la parte actora, que trata de hacer creer a este Tribunal, que por destinarse la Asociación del Colegio Lincoln a la financiación de las actividades educativas desplegadas por ese centro de educación privada, per sé ostenta, sin haber demostrado cumplir con los requerimientos ni con los procedimientos previstos por el ordenamiento jurídico vigente para obtener la declaratoria de utilidad pública, las exenciones que la misma norma legal establece, al referirse a "(...) las franquicias y concesiones administrativas y económicas que, para cumplir con sus fines, el Poder Ejecutivo les otorgue". También se equivoca la accionante al indicar que en razón de dedicarse a la actividad educativa, no resulta sujeta al pago del impuesto sobre la renta establecido en la ley No. 7092. Señala dicha normativa, puntualmente sus numerales 1 y 3, en su versión vigente al mes de octubre del año 2005, cuando se dieron las actividades por parte de la accionante que dan origen a esta litis, en lo que resulta de interés: "Artículo 1.- Impuesto que comprende la ley, hecho generador y materia imponible. Se establece un impuesto sobre las utilidades de las empresas y de las personas físicas que desarrollen actividades lucrativas. (Así adicionado el párrafo anterior por el artículo 102 de la Ley de Presupuesto Extraordinario, N° 7097 del 18 de agosto de 1988) // El hecho generador del impuesto sobre las utilidades referidas en el párrafo anterior, es la percepción de rentas en dinero o en especie, continuas u ocasionales, provenientes de cualquier fuente costarricense . (Así reformado y corrida la numeración del párrafo anterior por el artículo 102 de la Ley de Presupuesto Extraordinario, N° 7097 del 18 de agosto de 1988, que lo traspasó del párrafo primero al segundo) // Este impuesto también grava los ingresos, continuos o eventuales, de fuente costarricense, percibidos o devengados por personas físicas o jurídicas domiciliadas en el país; así como cualquier otro ingreso o beneficio de fuente costarricense no exceptuado por ley, entre ellos los ingresos que perciban los beneficiarios de contratos de exportación por certificados de abono tributario [...]

Debemos recordar que en materia tributaria rigen principios especiales reconocidos por este Tribunal Contencioso Administrativo y Civil de Hacienda, entre ellos el de realidad económica contemplado en el numeral 8 del Código de Normas y Procedimientos Tributarios (CNPT) y según el cual las formas jurídicas adoptadas por los contribuyentes no obligan al intérprete, así como el de la carga de la prueba dispuesto en el numeral 140 CNPT, numeral que dispone respecto de dicha carga probatoria que incumbe a la Administración Tributaria respecto de los hechos constitutivos de la obligación tributaria material, mientras que incumbe al contribuyente respecto de los hechos impeditivos, modificativos o extintivos de la obligación tributaria [...]".