New law in Costa Rica provides a comprehensive reform of the tax system. Among the new tax law measures are items related to income tax reform and to the reform of the general sales tax regime by replacing it with a value added tax (VAT) system. These reforms have an effective date of 1 July 2019.
The new law also includes tax amnesty measures.
The new tax legislation includes provisions relating to the income tax treatment of:
The new VAT system replaces the current tax imposed on the sale of goods only (except some exempt goods). The provision of services generally is not taxed. The new VAT system provides for:
The rate of VAT will be 13% with reduced rates for certain goods and services ranging from 4% to 2% or to 1%. For instance, private health services will be subject to a reduced 4% tax rate, and private education services at a reduced rate of tax of 2%.
The new law includes rules for when there will be a right to apply the tax paid as a credit. Taxpayers may be able to recover the tax paid for the goods or services linked to certain activities, with some restrictions.
Read a December 2018 report (Spanish and English) [PDF 77 KB] prepared by the KPMG member firm in Costa Rica
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