Costa Rica: San JoséFlamingo Tamarindo Nosara


Municipal Tax Breaks Due to COVID-19

August, 2020

All over the world, governments are challenged with finding ways to help their citizens, business owners and local municipalities survive the financial implications from a loss of income due to the spread of COVID-19.  Globally, for a significant amount of time, non-essential businesses were ordered to shut down and domestic and international travel restrictions were put in place.  Costa Rica was no exception.

The good news is that Costa Rica is one of the world leaders in acting early in reducing the curve of corona virus spread.  Furthermore, Costa Rica has also put into place numerous laws which provide financial relief.  One such law is 9848, the 'Law to Support the Local Taxpayer and Strengthen the Financial Management of Municipalities in the Face of the National Emergency due to the COVID-19 Pandemic'.

Law 9848 entered into effect on May 22, 2020 and established measures to support the taxpayer, as well as reinforcing and speeding up the financial management of local municipalities, when facing a decrease in income because of economic strain brought on by the pandemic.

There are four measurements which assist the taxpayer.

Moratorium on Municipal Commercial License ('Patente') payments:

The new law (Article 12) authorizes municipalities to give businesses a moratorium on the payment of taxes on their 'patente' for up to 9 months.  The business owner must show a decrease in their gross income of no less than 20%, compared to the same tax period last year (2019).  Additionally, the business must be current with their obligations corresponding to the tax periods prior to the emergency declaration.
Temporary Operation Permit Suspension:  During the emergency, the law 9848 allows business owners to temporarily suspend their business for a period of up to 12 months.  The business will not generate economic obligations to the municipality during the suspension period.

Moratorium on obligations:  Municipalities are allowed (Article 13) to grant taxpayers a moratorium on different municipal obligations such as fees (for example, garbage collection), payments for public services, municipal taxes, construction, licenses, and others for up to 9 months.  Each municipality can establish which of these obligations are applicable for the moratorium, and its term.  The applicant must prove a decrease of at least 20% in their VAT tax forms of 2020 or a reduction in workday hours, suspension of labor contracts or job layoffs.

Payment arrangements:  Taxpayers may be granted payment arrangements by municipalities for up to 24 months (Article 16) for municipal fees, licenses, municipal services, taxes and concession fees.
The law states that as of June 12, 2020, the municipalities and municipal councils must create and approve a moratorium and fee reduction plan.  Once a financial study has been completed, in case of a moratorium (Article 13), the plan must also determine which specific fees, municipal services, municipal taxes and concession fees the benefit will be applied to.  Furthermore, this plan must establish the terms and conditions:  moratorium period of each type of moratorium and fee reduction, as well as the method and application period that the interested party will have.

Like the other positive actions Costa Rica has taken to support the country during this time, law 9848 provides much needed tax relief for business owners.  This new law may need additional explanation to cover all the important details.  We are here to answer any questions you may have and be support during this challenging time.  Please feel free to reach us at

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