VAT at 13% in Costa Rica

Under Law 9635, the Law of Strengthening of Public Finances, published in La Gaceta on December 4, 2018, Costa Rica implemented a Value Added Tax (VAT) system effective as of July 1, 2019. The following provides a general overview of how VAT operates, the applicable rate, and the obligations arising from its implementation.

New Value Added Tax (VAT)

The Value Added Tax applies to:

• All sales of goods

• The provision of services

VAT is structured to tax each stage of production or service delivery. Under this system, each participant in the economic chain charges VAT on the value they add and may deduct the VAT already paid at prior stages.

This mechanism allows the producer or service provider to credit the VAT paid on deductible expenses against the VAT collected from customers.

VAT and Professional Services

Private services offered by professionals are subject to VAT. This includes, among others:

• Lawyers

• Doctors

• Dentists

• Engineers

• Surveyors

• Accountants

• Economists

Professionals who charge VAT on their services may deduct, from their monthly VAT obligation, the VAT paid on invoices corresponding to deductible expenses from suppliers.

Applicable Tax Rate

The general VAT rate is thirteen percent (13%) for all taxable operations.

Sales of Goods

• The tax is calculated based on the net sale price of the goods.

Rendering of Services

• The tax is calculated based on the sale price of the service rendered.

Transactions in Foreign Currency

For transactions where the price is set in a currency other than the Costa Rican colón, the applicable exchange rate is the reference exchange rate issued by the Central Bank of Costa Rica, in force at the time the taxable event occurs.

Liquidation and Payment of VAT

Taxpayers are required to:

• File a monthly sworn statement reporting sales of goods and services corresponding to the previous month

• Pay the corresponding VAT no later than the fifteenth (15th) calendar day of each month

The tax is declared and paid at the time of filing the affidavit.

Registration as a VAT Taxpayer

The Ministry of Finance automatically registers taxpayers for VAT purposes if they are already registered for income tax.

As of July 1, 2019:

• Taxpayers registered for income tax are registered ex officio for VAT

• No individual or additional registration process is required for VAT purposes

Final Notes

The implementation of VAT under Law 9635 introduced a comprehensive tax framework affecting both goods and professional services in Costa Rica. Understanding the scope, rate, and compliance obligations is essential for taxpayers subject to this regime.

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