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Costa Rica: Limited deductions for certain expenses

Costa Rica: Limited deductions for certain expenses

The tax law in Costa Rica limits the ability of taxpayers to deduct certain expenses. For instance, the deduction of expenses related to transactions with related parties that are residents of “non-cooperative jurisdictions” as well as certain expenses not recorded in electronic invoices generally are disallowed.


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Recent guidance, however, addresses or adjusts the limitation imposed on these deductible expenses.

Non-cooperative jurisdictions

The tax administration issued guidance (N° DGT-R-02-2020 (6 February 2020)) providing an updated list of “non-cooperative jurisdictions.”

In general, amounts paid with respect to transactions with entities that are residents of these listed non-cooperative jurisdictions are not eligible to be claimed as deductible expenses. The countries on the list of non-cooperative jurisdictions are:

  • Bosnia Herzegovina
  • Cuba
  • Iraq
  • Kyrgyzstan
  • Maldives
  • Montenegro
  • Norfolk Islands
  • North Korea
  • North Macedonia
  • Oman
  • Palestine
  • Timor-Leste
  • Uzbekistan
  • Wallis and Futuna

Countries have been removed from this list (compared to the list issued in September 2019). Read TaxNewsFlash

Electronic invoices

The tax administration issued guidance providing for expense deductibility purposes, the electronic invoice requirements (i.e., those that generally are indispensable for a taxpayer to claim an expense is deductible) do not need to be satisfied for purposes of supporting a claim for deductible expenses for purchase transactions from operators under the “special tax regime” for the period 1 July 2019 through 31 December 2019.

The requirement for electronic purchase invoices was effective 1 January 2020.

Another amendment concerns the “exceptional confirmation” of electronic invoices. With this change, taxpayers only need to confirm or reject electronic invoices when they purchase goods or services related to their businesses and when they are covered by a tax benefit. In all other cases, the content of the invoices will be presumed to be fully accepted if the taxpayer does not confirm it or reject it within the required time period.

Read a February 2020 report (Spanish and English) [PDF 83 KB] prepared by the KPMG member firm in Costa Rica

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