Banks Win Tax Lawsuit

In Costa Rica, the banking sector won a lawsuit it imposed against the Ministry of Finance, arising from disagreements over the method used to calculate tax payments.

Thursday, May 9, 2019

The legal dispute dates back several years, since in 2003 the General Directorate of Taxation (DGT) validated the methodology suggested by the Costa Rican Banking Association (ABC) to calculate the payment of taxes on the income of financial intermediaries. However, in 2005 the authorities reversed the decision. reports that the decision of the Contentious-Administrative Tribunal, dated May 6, 2019, determined that "... when the Treasury reversed its decision and misapplied the act retroactively for all fiscal periods, it violated the principles of legitimate confidence, bonafide and juridical security, as well as the due process of the Right of Defense."

You may be interested in "Financial System Reform"

María Isabel Cortés, executive director of ABC, told that "... The ruling recognizes that the Tax Administration issued a criterion that established how financial institutions should proceed, and that this criterion could not be unknown."

Cortés added that it is important that there are clear rules for the application of the law, because it is "a basic principle in the relationship with public authorities that must follow the procedures established by law to change the criteria based on which economic agents make their decisions."

See also "Bank credit slows down"

Among the most important effects of the judgment, which is still subject to an eventual appeal before Chamber I, is the refund of the amounts paid in excess of the income tax by the banks audited by the DGT.

¿Busca soluciones de inteligencia comercial para su empresa?

More on this topic

Costa Rica: Tax Declaration Needed for Loan Applications

July 2016

Presenting a tax declaration will be a requirement for some companies seeking bank loans.

The move is part of the Regulation on the Qualification of the Debtors, which has been in effect since June 17. The companies that will be asked for this requirement are those who "...

Costa Rica: Exemptions for Tourism Activities

September 2015

A ruling by the Administrative Court prevents the Treasury from levying sales tax on tourism activities carried out in protected areas.

Activities such as rafting and canopy tours carried out in protected areas remain off the list of taxable activities for sales tax, according to a ruling by the Administrative Court, in response to a lawsuit filed by the National Chamber of Tourism in 2014.

Costa Rica: Banks Facing Tax Reform

April 2015

In its comments on the bill on income tax and sales reforms currently under public consultation, a request has been made that financial institutions be subject to a system of global and not published income.

From a statement issued by the Costa Rican Banking Association (ABC):

Costa Rica: Retention of 1.77% on Card Payments

November 2014

Bankers and businessmen are pressuring the government to remove the guideline which aims to retain 1.77% of each transaction as advance payment of income tax, scheduled to start on December 1.

The private sector argues that "...The decision of the Directorate General of Taxation (DGT) ignores the fact that neither card issuers nor financial institutions in the country can be considered as 'withholding agents' as this must be defined by the appropriate Act. "