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.
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.
On September 2, Costa Rica began the registration of individuals and agricultural producers who wish to opt for the benefits contemplated in the new tax regulations.
The term began on Monday, September 2 and ends on January 31, 2020, and for registration interested parties must submit their physical or legal identity card, and literal certification of the property, informed the Ministry of Agriculture and Livestock (MAG).
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.
In Costa Rica, modifications to the salary tax brackets establish that income of up to $1,394 will be exempt from collection of the tax, and those exceeding $1,394 and up to $2,046 will pay 10%.
On June 25, the Ministry of Finance published in La Gaceta the new income tax brackets to be applied to salaries between July 1 and September 30, 2019.
The publication details that the tranches will remain like this:
For the IMF, the country "may need additional fiscal measures, focused on the short term, to alleviate financing pressures and improve debt dynamics.”
After analyzing the current economic situation in Costa Rica, the directors of the International Monetary Fund (IMF) commended the recent fiscal reform, which is important to restore fiscal sustainability.
Until April 26 will be in public consultation the regulations of the Income Tax Law in Costa Rica.
From the Ministry of Finance statement:
April 12, 2019. As was done with the first proposal of the regulation to the Law of Value Added Tax (VAT), the Ministry of Finance made available on its website, the first draft of the project "Modifications and Additions to the Income Tax Law Regulation", which regulates Title II of the Law to Strengthen Finance, No. 9635, of December 3, 2018.
It is estimated that construction costs in Costa Rica could increase up to 9% once the new fiscal plan comes into effect.
From next July 1, the collection of value added tax (VAT) will be staggered, because in the first year new buildings will not pay taxes, in the second pay 4%, in the third 8% and in the fourth 13%.
Although Costa Rica's fiscal reform has already been approved, the IMF proposes raising some taxes as part of an "additional adjustment" to reduce debt and ease financial pressure in the short term.
"... “We are negatively surprised by the simplistic position of the International Monetary Fund that in the absence of money, taxes should be raised, we consider those words unacceptable, because it has been demonstrated in this country that a large part of the deficit is because of the inefficient use of public funds and an issue of state efficiency that does not allow people to become businessmen," said UCCAEP President Gonzalo Delgado."
Alvarado administration celebrates the approval of the tax reform in Costa Rica by announcing a series of initiatives that include, among other things, a public employment reform Project.
After a year of proceedings in Congress and after having been reviewed by a Constitutional Chamber, the country's Assembly finally approved file 20.580. By endorsing this project, the government intends to strengthen its public finances through changes made to the taxation system.
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 proposal to increase the tax on interest on financial investments in Costa Rica could eventually make credit more expensive for both the private sector and the government.
In the view of the National Securities Exchange (BNV) it is worrisome that initiatives such as an increase in tax on income from financial investments are being discussed without knowing in detail and clearly the impact that something like this could have on the stock market and the country's financial activities.
The new tax reform proposal presented by the Ministry of Finance of Costa Rica includes the creation of a global income system to impose and collect a tax on the profits of companies and individuals.
Taxing all of the profits of natural and legal persons, including those currently paid separately by the identity code income method, is the principal new feature of the new tax reform plan presented by the Ministry of Finance.
The tax burden grew from 13.4% in 2013 to 14% in 2016, both due to the delayed effect of the tax reforms in Honduras and Nicaragua, as well as better management on the part of tax entities in Guatemala and Panama.
From the Regional Economic Report (IER) 2016-2017: Opportunities and challenges for Central America, by the SIECA: