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In the Press


24 Oct 2018





Costa Rica is currently on the verge of enacting one of the most important Tax Reforms in its history, as the country’s tax deficit is at its highest (it will reach a 7.1% of the national production at the end of 2018 and 7.9% in 2019, according to estimates).

Thus, the Tax Reform aims to generate fresh income and reduce expenses. The Bill, under discussion at Congress, includes four key elements: two oriented to increase income and two aiming to build fiscal discipline and efficiency of public expenses.

The following are amongst the major changes:

  • Transformation of the existing sales tax to a Value Added Tax (VAT) at the same 13% rate.
  • Another significant change is that with the new VAT, not only goods will be taxed, but services also. Taxed services shall be required to pay this new tax, unless exempted by law.
  • In terms of the income tax, the Bill provides that capital income (asset-related income) will be subject to a 15% tax, as well as capital gains (investment-related gains). It is important to highlight that both individuals and corporations that own property (such as houses, lots, stock, software, or licenses) will be subject to a 15% tax in the event of a sale thereof.
  • Global Income Taxation is created, which, in general, means that taxpayers are required to add their various income, deduct any expenses, and pay income tax over the resulting difference. It is important to consider that any such income may originate from different sources, e.g. salary, independent worker income, interest on savings, stock dividends, leases, among others. (Consider that at this time each income is taxed separately and subject to different rates). For example, an individual who earns ¢2,000,000 in one month for his/her professional-related activities and receives ¢100,000 of interest, will now pay a ¢15,000 tax on said interest. Thereafter, he/she will have to add the ¢2,000,000 plus the ¢100,000 and calculate his/her income tax over the basis of ¢2,100,000. The ¢15,000 tax already paid may be deducted from the corresponding income tax amount.
  • In terms of salaries, individuals reporting a salary in excess of ¢2.1 million will now pay a 20% salary tax instead of the former 15% if his/her salary is between ¢2.1 million and ¢4.2 million, and a 25% tax if his/her salary exceeds the above threshold.
  • Provisions to fight tax avoidance are included (especially oriented towards transnational companies), adopting international parameters (recommendations such as OECD BEPS standards) that include a ban to deduct expenses from operations carried in countries classified by the Tax Administration as non-cooperative jurisdictions or tax havens.
  • A Tax Amnesty is further included for the remission of penalties and interest accrued by tax-debtors, provided they pay their tax debts.
  • In relation to the Free Trade Zones (FTZs), the Value Added Tax (VAT) exemption for local-market purchases and, of course, exports, is expected to be upheld. Likewise, other benefits granted to FTZs remain unvaried.


* The above Tax Reform was approved in first debate by Congress and is currently undergoing constitutionality consultation at the Costa Rican Supreme Constitutional Court.


PKF “Despacho Murillo Marchini & Co. Ltda”

San Pedro de Montes de Oca 
Avenida 2da calle 1era y 3era 
San José, Costa Rica 
Tel: +506 -2234-1411 
Fax: +506-2283-1705/ 2234-1494 





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