Range of Surprising New Tax Laws Introduced in Costa Rica
In a somewhat surprising move, Costa Rican Congress have approved a new tax package called “Law of Strengthening of Public Finances number 9635” which has introduced a number of additional taxes. Effective from 1st July 2019, the number of products and services that will be subject to VAT has significantly increased in the country. Capital gain taxes have also been introduced when selling commercial & residential properties.
Under the new tax system, many professional services will be taxed with VAT. Professions such as lawyers, engineers, consultants and all kinds of independent professionals will be obliged to include an additional 13% onto the invoices they issue.
Other goods & services now subject to VAT
- All commercial property rentals will see an increase of 13%
- Airline tickets to Costa Rica, as well as private health services will pay an additional 4%
- Energy bills will increase with the tariff of 13% for water consumption (when the consumption exceeds 30 cubic meters per month) and the electricity bills (where consumption rates are greater than 280 kilowatts/hour).
The biggest surprise, in a list of surprises
The new law establishes that both active and inactive companies must submit income tax returns. It may seem obvious in the case of inactive companies that the income tax payable would be zero, but there's a catch: if the amount of capital stock differs from the value of the assets that it has in its name, the company is at risk of an unjustified capital increase. This empowers the Ministry of Finance to consider that it generates an increase in the taxpayer’s income, which generates an increase in gross income.
For the tax authorities there are two types of unjustified capital increases: internal and external. The internal is when there is a difference in value between assets and equity. The external ones are those that a taxpayer does not declare and are discovered later. Therefore, it would be advisable to at least make an adjustment in the amount of capital stock so that there isn't a significant difference in relation to the assets it has as inactive company.
Certainly, there are many inactive corporations that have a stock capital of less than US $200 but have assets with a value of hundreds of thousands of dollars, and this may become a real problem in the future.