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 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".

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