Part I
On July 1, 2019, Costa Rica a major Tax Reform went into effect nationwide. The government did not provide enough information before July 1. This has led to quite a bit of mis-information being circulated on social media and elsewhere. Many expats and locals alike were left with questions. Here are some of the most frequently asked questions and our answers.
1. Under the new laws, does having, or forming, a Corporation still protect a business owner or property owner from lawsuits/liability.
Yes.
The tax reforms do not affect the protections provided by forming a Costa Rica corporation. These are protections regarding liability, provides flexibility and is good for estate/probate matters.
2. Are all groceries not a part of 'la canasta básica' (basic food necessities needed for survival) now taxed at 13%?
Yes.
However, important to note: groceries outside of la canasta básica have alwaysbeen taxed at 13%. Therefore, this is not a change. What is changing, in July 2020, is that la canasta básica will be taxed at 1%.
3. Is the new 4% tax on air travel charged on incoming flights, out bound flights, or both?
This is dependent on whether it is an International or National flight and where the flight originates from.
Air travel will be taxed as follows:
International flights originating in Costa Rica will have a 0.4% travel tax applied over ticket value.
A 4% tax will be applied to add-on features/benefits. For example, seat upgrades, checked luggage fees and any other add'l services.
Flights originating elsewhere and landing in CR are exempt.
National flights, for example Tamarindo to San Jose, will have a 4% tax applied to the cost of the ticket.
4. What are the dates of the new Fiscal Year (FY) 2020?
In 2020 there will be an extraordinary FY from October 1st, 2019 to December 31st, 2020. Beginning in 2021, the FY will begin on January 1st and end on December 31st.
5. Do you have to be a natural or legal resident to file electronic facturas (aka electronic invoices)?
No.
However, very important to note: A foreigner must get a NITE (tax ID number) in order to do so. Anyone not registered in the system must file the form D-140 form at the tax office. Once approved and granted a NITE, you must then select a provider for the e-invoices system and purchase the software to calculate the VAT for credits and debits. There are many providers – it's best to look at the track record of each. Due to the complexity of the tax laws, it is highly recommended to hire an accountant rather than attempt to navigate this and do your own accounting.
6. Must all businesses providing goods have a credit card machine?
Yes.
This applies to both goods and services. This regulation is in place to provide transparency to both the customer and the vendor as well as transparency from the vendor to the government.
7. With the new Shareholders registry recently rolled out, does this mean the shareholder will be publicly listed/shown in the National Registry, rather than the name of the corporation?
No.
According to law9416this information is disclosed to the Costa Rica Central Bank not the National Registry. The registry of all shareholders with the Central Bank is necessary to combat potential money laundering, among other concerns. Again, transparency is the objective.
While these were some of the most frequently asked questions, there are several other questions that have come up which we cannot encompass within this article. We are available to serve you and help you navigate all of these changes at info@gmattorneyscr.com
