By submitting to the Costa Rican Legislative Assembly a new text of the dual global income bill, the Alvarado administration intends to guarantee the tax exemptions that companies operating in the free trade zone regime already benefit from.
The dual global income bill that was sent last January 22 to the Assembly created confusion among the deputies.
As of January 1, 2021, owners of homes whose construction value exceeds the equivalent of $217,000 will have to pay the tax known as the "luxury home" tax.
The modification of the minimum amount was communicated through the executive decree that was published on December 22 in the newspaper La Gaceta. With these changes, between 2019 and 2020 the minimum value of the properties that are subject to this tax was increased from $213,751 to $217,015.
The Legislative Assembly is preparing to consider, in the first debate, a bill aimed at exempting inactive companies from the obligation to file an income tax return.
The file of this legislative proposal is number 22,307 and was presented by Deputy Pablo Heriberto Abarca. The initiative will be discussed in the Assembly, despite the opposition of the Ministry of Finance.
In this scenario of economic crisis, falling tax revenues and the need to finance recovery programs, in Guatemala and Costa Rica it is already proposed to increase current taxes and create new ones.
Guatemalan authorities are already beginning to discuss the fiscal policy they will apply in 2021, when the economy will have to face the effects of the economic crisis generated by the covid-19 outbreak.
In order to access the $1.75 billion credit requested from the IMF, the Costa Rican government proposes to tax financial transactions, increase the tax on the profits of companies and individuals, and increase the tax on real estate.
On the afternoon of September 17, and in the context of a severe economic crisis that had been going on since before the beginning of the pandemic, the Alvarado administration presented the plan with which it intends to mitigate the fiscal impact of the Covid-19 crisis, a proposal to negotiate an agreement with the International Monetary Fund (IMF) to obtain a credit of $1.75 billion.
In order to tax the total amount of profits of individuals or corporations based in Costa Rica, regardless of where their profits are generated, a bill was submitted to the Assembly that seeks to amend the Income Tax Law.
Currently in Costa Rica a territorial income system is applied, which consists of taxing profits produced exclusively at the local level. If the Income Tax Law is modified, the situation could change.
Despite a severe economic crisis, Costa Rican authorities have approved the imposition of a 1% VAT on several foodstuffs in the basic food basket, and 4% on certain tourist activities and construction services.
Before the emergence of the pandemic, the Costa Rican economy was already in a difficult state, and the impact of the covid-19 outbreak ended up hitting it in the worst way, which is evident in the performance of productive activity.
Companies that owe taxes to the Costa Rica Tourism Institute will be granted a moratorium during April, May, June and July.
Regarding the taxes to which the moratorium will apply, the Costa Rican Tourism Institute (ICT) reported they are 5% for the sale of each air ticket originating in Costa Rica for international travel, in addition to the 5% that applies to the purchase of tickets whose destination is our country.
A three-month moratorium on the payment of value added taxes, business income and customs duties is the proposal of the Executive in view of the emergency caused by the spread of covid-19 in the country.
The initiative "COVID-19 Tax Relief Project", which was presented to the Legislative Assembly on March 16, proposes that taxpayers can postpone the payment of taxes for at least three months.
The Assembly approved in first debate a bill that seeks to tax the sale and self-consumption of cement that is imported or locally produced.
The initiative establishes that the tax will be on cement imported and produced nationally, in bags or in bulk, for sale or self-consumption, of any kind, whose destination is the consumption and marketing of the product at the national level, reported the Legislative Assembly.
In Costa Rica, taxpayers interested in benefiting from exemptions or reduced rates of payment of Value Added Tax must register with the Directorate General of Taxation.
The changes were detailed on October 15, 2019, when the resolution of the General Directorate of Taxation (DGT) No. DGT-DGH-R-060-2019, entitled "Procedure for requesting registration, special orders for the authorization of exemption or reduced rate of Value Added Tax (VAT)", was published in the Official Newspaper La Gaceta."
Since October 1, Costa Rican producers and suppliers in the agricultural and fishing sector have a special regime for declaring and paying VAT, which provides that coffee producers, sugarcane and beekeepers will make an annual declaration.
The new Special Agricultural Regime (REA) does not change fiscal obligations, but it allows them to be adapted to the particularities of production processes, so as to facilitate compliance, informed the authorities.
Although Costa Rica and Nicaragua approved fiscal reforms this year, it is predicted that the expected results in terms of tax collection will not be achieved.
The document "Centroamérica: análisis sintético, por país, del desempeño de la recaudación tributaria en 2019", prepared by the Instituto Centroamericano de Estudios Fiscales (Icefi), explains that, in the case of Costa Rica and Nicaragua, the expected results in terms of improved collection are still in doubt.
The tax reform law that would be approved in second debate in the coming weeks, involves the exoneration of arrears and penalties for taxpayers who pay their debts in the first three months after the publication of the law.
The proposed measure consists of exonerating 100% of the interest on arrears and up to 80% of the penalty to taxpayers who pay in the first month after the Law is published in the official newspaper La Gaceta.
The good functioning of the institution in charge of collecting taxes is vital for ensuring economic development, as it means that honest companies who comply with their fiscal obligations are not at a disadvantage to those who don't.
EDITORIAL
In Costa Rica, better administrative management has made possible better income tax collection figures than those foreseen with simple tax increases.