The tax laws in Costa Rica are changing and it is important to know and understand the new obligations so your business remains compliant when operating in the country.
The tax laws in Costa Rica are changing and it is important to know and understand the new obligations so your business remains compliant when operating in the country. Costa Rica's tax reform law is called "The Law on Strengthening Public Finances" (Law #20.580) and will fully come into effect starting on 1 July 2019. This law contains four parts made up of two laws with the goal of helping to increase revenue and the other two are intended to manage costs for the country.
The four parts are:
a change from general sales tax to Value Added Tax (VAT) new income tax law that includes capital revenues modification of public administration salaries fiscal responsibility laws General sales tax to VAT tax
The current sales tax rate in Costa Rica is 13% and it only applies to a limited number of products. Changing to a Value Added Tax will cover products and services. The general tax rate will remain at 13% while there will be a 4% tax on airline tickets and healthcare services. A 2% tax will be levied on medical products, raw materials and machinery used for production, insurance premiums, purchase and sale of university issued products. Basic food necessities from a specific list will be charged a 1% tax.
There are some exceptions that will not be charged the 13% VAT. These include, but are not limited to:
electricity consumption of less than 280 kW / h; water consumption less than 30 cubic meters; exports of goods and sales of goods or services for free trade zones; commissions paid to complementary pension operators; rental of housing where the rental amount is less than the equivalent of 1.5 base salaries (646,000 Colones); Orthopedic equipment, rehabilitation and wheelchairs; the goods and services provided or acquired by the Red Cross, the Costa Rican Fire Department, the Association Works of the Holy Spirit, the Earth University, the Boards of Education, the Community Development Associations and the Asadas; Enrollment in public universities and private education; internal advertising space of radio and television programs; interest and fees for loans and credits; books in any of their formats; the fees and monthly payments of professional associations; premiums for labor, agricultural and social interest housing; services of livestock auctions; care and...