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New
tax applies on goods and
services that previously
did not pay taxes. / A.M.
Costa Rica wire services
photo.
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Value
Added Tax increases the cost
of goods and
services starting today
By the
A.M. Costa Rica staff
Today, July 1, the new Value
Added Tax (VAT) begins replacing
the former General Sales Tax.
The tax rate remains at 13
percent and the sale of goods
that were already taxed is
maintained. The change occurs
with the goods and services that
previously did not pay taxes and
includes:
- The 13 percent tax on rentals
of houses that exceed ¢669,300
colones monthly.
- It also applies 10 percent tax
of air tickets on international
flights. On the case of local
flights, tax is 4 percent.
- Also 4 percent tax on private
health services that are
provided by authorized health
centers, and for professionals
enrolled in the respective
professional colleges.
- A 2 percent tax on raw
materials, medicines, machinery,
and supplies.
- A 2 percent tax on insurance.
- A 2 percent tax on private
education.
- Another increase is 1 percent
on foods that were previously
exempt from taxes, known as the
basic basket.
The basic food basket is a list
of consumer products which are
considered to be the minimum
products that a family should be
able to buy for their
sustenance. Among these products
are milk, rice, sugar, eggs,
beans, coffee, and bread, among
others.
- A 1 percent tax on
agricultural raw
materials/supplies.
In the case of purchases abroad
of intangibles such as
technological platforms, they
will be charged the tax of 13
percent. Intangible services are
such as Spotify, Netflix, online
games, etc, are included. The
Ministry of Finance announced
that in August, the protocol for
the application of this charge
will be made directly to the
credit or debit cards used by
the buyer.
In the case of a house, offices,
or apartments rentals, the
monthly rent payment of
¢669,300+ colones applies for
the 13 percent tax, as A.M.
Costa Rica reported on June
14th.
The Law of Strengthening Public
Finances (Fortalecimiento de las
Finanzas Públicas in Spanish),
applies in some property rental
prices.
The new tax will be due only
when the rental price is greater
than a Basic Salary multiplied
by 1.5. The Basic Salary amount
is ₡426.200 colones this year.
This is a measure used by the
government as a reference for
calculating taxes or fines. The
reference amount for house
rentals is the Basic Salary
multiplied by 1.5 or ₡669.300
colones. For that reason, the
new tax law, monthly house rents
over ₡669.300 colones must pay
13 percent VAT tax.
As an example, taking today's
dollar exchange rate of Banco
Nacional of ₡577 colones for
each dollar, a monthly rental
amount of $1,160 would activate
the VAT tax. Landlord and tenant
must know that if the Colones -
Dollar exchange rate changes it
will affect the calculation of
the minimum amount that will
activate the VAT tax.
For example, in October 2018,
the exchange rate was ₡620.64
colones per dollar. The minimum
monthly rent taxable would have
been $1,078 at that time
(₡669.300/ ₡620.64).
On the case of the rent monthly
payment is over ₡669.300
colones, tax applies. For
example, if a house monthly rent
is $1.500, VAT will be
equivalent to $195 ($1.500 x 13
percent), the new monthly rent
tenant has to pay is $1,695.
The landlord is obliged by law
to collect the tax from the
tenant and then transfer it to
the Ministry of Finance by means
of the tax declaration. A
sanction applies if the owner
does not collect and remit the
tax.
In addition, in case the
landlord does not want to
collect the tax from his
tenants, he must assume payment
of the sum equivalent to the
tax.
The tax must also be charged on
the rental of premises for
commercial purposes (stores,
offices, bars, and clinics,
among others).
The renter should request that
the owner proved an electronic
invoice, approved by the
Ministry of Finance, detailing
the rental amount, the tax
amount being paid and the total
required payment.
If rent is less than ₡669,300
colones per month, the tax is
not required. That means rentals
of under a month are tax exempt.
Companies or individuals that
have registered with the
Ministry of Economy or the
Ministry of Agriculture under
the classification of a small
company are exempt from taxes on
rent.
The Ministry of Finance has
established the call center
number 2539-4000 to resolve
questions about the new tax
Spanish only.
More information on IVA tax can
be reached, also Spanish only,
at Hacienda site
here.*
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Do you rent a home?
If that is the case, will you
have to pay the house rental VAT
tax? We would like to know
your thoughts on this
story. Send your comments
to: news@amcostarica.com
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