Value-Added Tax in Costa Rica

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

Monday, August 2, 2010

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.

The amount each economic agent pays is calculated as the difference between the VAT on purchase and VAT on sale in the manufacturing process.

Diego Salto comments in his Elfinancierocr.com blog that debate centers on what level will VAT will be set at: "One of the big unknowns is what the tariff will be. Will there be an increase on the current 13% rate? It is worth remembering that the current Treasury Secretary, Fernando Herrero, raised Costa Rica's sales tax from 10% to 13% when he occupied the same same position in José María Figueres' government. At that time a rise to 15% was considered".



More on this topic

Entrepreneurs in Favor of Value Added Tax

February 2013

The Costa Rican Union of Chambers and Associations of the Private Business Sector is proposing that the current sales tax becomes the Value Added Tax.

A statement from the Costa Rican Union of Chambers and Associations of the Private Business Sector (UCCAEP) reads:

- Production sector indicates that the bill to limit capital inflows is necessary but not sufficient.

New Tax Reform Being Studied in Costa Rica

November 2012

In circulation is a "light" version of the tax plan that failed in the Costa Rican Legislative Assembly, which would impose VAT on a financial basis and not on physical incorporation.

Keeping the imposition of value added tax as a key factor in achieving an increase in tax revenues, the current draft of a new tax reform bill, is circulating clandestinely, due to the fact that the tax authorities’ priority is to improve external debt management by issuing Eurobonds and not domestic tax collections.

New in Costa Rica: Value Added Tax

March 2012

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).

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

Chamber of Commerce Against Tax Reform

November 2011

According to the Costa Rican Chamber of Commerce goods and services and therefore consumers will be the biggest losers if the tax reform is approved.

A press release from the Chamber of Commerce of Costa Rica reads:

Goods and services in our country, and therefore consumers, will be the biggest losers if the Solidarity Tax Bill is approved, due to fixation of new value-added tax, which will increase prices.

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