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 Elfinancierocr.com, 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.



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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.

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Nicaragua Removes VAT from Central American Products

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Value-Added Tax in Costa Rica

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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.