City halls enforce old tax law

By: Garland M. Baker B.

Exclusive to A.M. Costa Rica

Editor's Note: While this article was accurate at the time of publication, some information may now be outdated. We are currently preparing a comprehensive update. Sign up for our Alerts to be notified as soon as the revised content is live!

Everyone conducting business in Costa Rica needs a license that is issued by the municipality where they reside. The term used here for the permit is a ‘patente.’ The rule is regulated by Article 79 of Law 7794. Professionals incorporated in their respective legal associations are exempt.

Article 79 is concise and translates by Google into English as follows:

“To exercise any lucrative activity, the interested parties must have a local license, which is obtained through the payment of a tax. This tax will be paid during the entire time the activity is exercised or for as long as the license is active, even if the activity has not been carried out.”

Most people believe a business license is only required if a physical place exists to conduct commercial activity. “Not true,” states attorney Marco Retana. “The spirit of Law 7794 recognizes municipal infrastructure, and Article 79 gives municipalities a way to collect money to pay for it,” he clarified.

New headaches for vacation property owners

By: Garland M. Baker B.

Exclusive to A.M. Costa Rica

Editor's Note: While this article was accurate at the time of publication, some information may now be outdated. We are currently preparing a comprehensive update. Sign up for our Alerts to be notified as soon as the revised content is live!

Nov. 1 was the deadline for everyone doing business in Costa Rica to give and accept electronic invoices. Much to the chagrin of Ticos and expats alike, this includes the renting of rooms, homes, villas, and any other type of temporary lodging for vacationers. 

It is not relevant if Airbnb, Vacation Rental by Owner, Booking.com, HomeAway or another firm provided the service to the customer. Costa Rica still wants the sale input into its system.

Electronic invoicing is all about better control over taking in sales taxes and improving income tax collection. Many people renting to tourists or those here in transit believe in tax avoidance and even outright evasion.

One person who rents to others said, “I use Airbnb, which is transparent to the tax people. I have no intention of using the new system.” This person does not know about the La Dirección de Inteligencia Tributaria. That is the intelligence division of the tax department.

Saved Again by Tax Amnesty

By: Garland M. Baker B.

Exclusive to A.M. Costa Rica

Editor's Note: While this article was accurate at the time of publication, some information may now be outdated. We are currently preparing a comprehensive update. Sign up for our Alerts to be notified as soon as the revised content is live!

People who were caught off-guard and missed the special provision to revive companies that the Registro Nacional killed last year may have a second chance to do so. For those using companies in Costa Rica to do business or hold assets, here is a review of the details.

E-Invoicing Privacy be damned!

By: Garland M. Baker B.

Exclusive to A.M. Costa Rica

Editor's Note: While this article was accurate at the time of publication, some information may now be outdated. We are currently preparing a comprehensive update. Sign up for our Alerts to be notified as soon as the revised content is live!

Costa Rica along with other Central and South American countries now requires the use of electronic invoices. These are called facturas electronicas in Spanish, the buzzword everyone is talking about. The government wants everyone to use them by the end of the year. There are a few exceptions, but not many.

Health professionals, accountants, and lawyers were the first required to use the new system starting in January, February, and March. These groups are the most significant tax cheaters, according to tax department studies. Each month that goes by includes another business type.

The concept behind electronic invoicing comes from e-billing used by corporations and trading partners for many years throughout the world. The term describes any method by which invoices are presented electronically to customers for payment. Countries like Costa Rica have elected to bastardize the concept to collect more taxes.

Hacienda, the finance ministry, and Tributacíon Directa, the tax department, has spent much money promoting the system as easy to use. It is not. They also say people will love it. They do not.

Let the facts speak for themselves. Only 9 percent of big tax contributors and 28 percent of professionals are using electronic invoicing at this time, eight months into the program. Most people hate it. The tax department is surprised and is sending out thousands of emails reminding people the tax penalties for not getting with the program. Penalties range up to 43.1 million colons (around $76,000). The numbers are correct. They are not typos.