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.
In order to give individuals and corporations the opportunity to catch up with this obligation interrupted by the pandemic, authorities extended until July 17 the deadline for declaring income tax payments.
The term to cancel this commitment with the Panamanian State expired on March 31, 2020, and an extension was added until May 30, given the circumstances with the effects of covid-19, the difficulties presented by many companies and the time needed by public accountants to submit such statements, explained the representatives of the General Directorate of Revenue (DGI).
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:
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.
In Nicaragua, the government plans to increase employer, labor, and state Social Security contributions, and to approve a tax reform that would increase taxes for medium and large companies.
Although the country has been in a serious economic and political crisis since April 2018, when the government tried to implement reforms to the Nicaraguan Institute of Social Security (INSS), the Ortega administration is once again trying to make changes to the institution, this time through an administrative resolution.
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.
In the absence of a law to renew tax incentives, some 1,223 companies in the maquila sector and the free zone will have to pay income tax in 2016.
After the lapse on December 31 of tax benefits for companies working under these special arrangements, the Superintendency of Tax Administration of Guatemala will officially begin charging ISR, a measure that will bring in revenue to the state in the order of $258.4 million (a Q2 billion).
A bill put forward by Liberal MPs in Costa Rica proposes that during the first three years of operation, new companies would be exempt from paying income tax.
The proposal states that during the first year the new companies would be completely exempt from income, the second year they would be charged 25% of income tax incurred and 50% in the third year.
The Ministry of Finance has postponed until April 17 the deadline for companies to make their comments on the draft legislation reforming income and sales taxes .
Originally the deadline for providing comments on the tax proposal was March 27, but at the request of several sectors it has been extended until April 17, according to the chief of Finance, Helio Fallas.
If the Treasury's proposal succeeds, interest on bank deposits would incur 8% to 15%, while for revenues generated by mutual funds, the tax would rise from 5% to 15%.
This unification is due to the fact that currently there are different taxes for similar types of income, therefore the tax is not neutral, according to the CEO of Taxation. In the case of surplus cooperatives and solidarity associations, the project proposes "...
The Institute of Chartered Accountants has stated that projects to reform VAT and income tax will affect the final consumer by making goods and services more expensive.
From a statement issued by the Institute of Chartered Accountants:
The President of the Institute of Chartered Accountants, Ovares Francisco, believes that the new bills to reform the Value Added Tax (VAT) and income tax (ISR), which the Treasury is submitting to public consultation will have a direct impact on consumers.
The reform under public consultation includes tax on remittances sent abroad, on the payment or crediting of interest, commissions and other financial expenses by natural or legal persons domiciled in Costa Rica.
From the order by the Ministry of Finance published in La Gaceta:
Amendments to the Regulations on the Law on Income Tax
The union of restaurants in the country argues that tipping does not count as part of their profits and are asking for them to be exempt from the 2% retained on card payments by way of advance payment of income.
At the moment the Ministry of Finance is evaluating the request by the Costa Rican Chamber of Restaurants, since according to representatives of this guild more is retained from them than from other stores.
Despite several announcements of new taxes, the government will focus on controlling tax evasion and leave the decision to implement a tax reform to future administrations.
According to authorities at the Ministry of Finance, at the moment there is no consensus for fiscal reform. The priority now will be to pursue and strengthen tax administration in order to meet budget expenditures this year.