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.

1000

Related content

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

The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.

Connect with us

 

Want to do business with KPMG?

 

loading image Request for proposal