After the entry into force of the Law to Strengthen Public Finances (Law) on July 1st, 2019, an exception was included in the treatment of the Value Added Tax (VAT) for those companies in the tourism sector duly registered before the Costa Rican Tourism Institute (ICT). Under this exception, the services provided by these companies were exempted from paying VAT during the first year of application of the Law, and then this treatment was extended by the Law of Attention to the Tourism Sector due to the Covid-19 National Emergency to maintain this exemption during the first two years of application of the VAT.
However, starting the third year after the entry in force of the Law, the services provided by companies registered with the ICT will be subject to a reduced VAT rate of only 4%, which will increase to 8% during the fourth year until reaching the general VAT tax rate of 13%, starting the fifth year after the entry into force of the Law.
As a result, on the third year after the entry into force the Law will start on July 1st 2021 and therefore the tourism sector services will be subject to a 4% VAT. The tourism sector must be prepared to make the necessary changes on its billing system and its tax compliance procedures to adapt to the new VAT treatment.
DV Business Solutions is always up-to-date and ready to provide timely legal and tax advice and assistance to our clients. We are ready to work together and support our clients in the process of updating and filing their tax returns. If you have any doubts or questions with respect to these obligations, do not hesitate to contact us.
Socio / Partner
Socio / Partner