New in Costa Rica: Value Added Tax

The tax reform, recently approved on its first reading, introduces Value Added Tax (or IVA in Spanish) to replace the existing Sales Tax (IV in Spanish).

Thursday, March 22, 2012

An article by Carlos Cordero in, has the professional technical support of Mario Hidalgo, a tax partner at Deloitte.

Under the current model the total amount of tax incurred by selling a product or service must be paid to the treasury. With the new Value Added Tax (IVA) each firm charges for what it has already paid on each purchase of raw materials and transfers the balance to the Treasury which corresponds to its share for the sale.

VAT would come into force in the country on approval of the tax reform, which was passed in first debate in the Legislative Assembly on 14th March and is awaiting the decision of the Constitutional Court, and a second debate in which the changes would be ratified.

More on this topic

Guatemala Charges VAT on Tips

March 2014

The Tax Authority has confirmed that these bonuses must be added to bills.

Under a proposed amendment to the Tax Update law, tips must be taken into account when calculating Value Added Tax (IVA by its initials in Spanish).

The Tax Authority has determined that "Taxpayers who give bills for sales or services must include the amounts paid to them by their clients including tips.

Nicaragua: Protests Over Self Transfer of VAT

March 2013

Employers indicate that for some companies, the inadequate implementation of an administrative ruling of the Department of Revenue increases costs by 15%.

"Where the provision of services in general and the use or enjoyment of goods is provided by natural or legal persons or an entity, either resident or nonresident, which are not responsible for collecting VAT (IVA in Spanish), the payer of the service shall make a self transfer of the VAT incurred, which constitutes a tax credit under accreditation rules. "

Nicaragua Removes VAT from Central American Products

January 2013

A Nicaraguan business leader announced that its government will maintain equal tax treatment for products imported from countries in the region.

The affected Central American employers expect the Nicaraguan government to sign the rectifying documents as soon as possible so that the Directorate General of Customs can stop collecting the tax from today.

Value-Added Tax in Costa Rica

August 2010

Inevitable fiscal reform will include the implementation of a value-added tax (VAT), which is basically an extension of the existing Sales Tax.

While a sales tax is only on transfers of merchandise and certain kinds of service, VAT is a generic consumption tax on the sale of all goods and services. Usually exemptions and reduced rates are defined for goods and services that form part of the so-called basic shopping basket.