Q COSTA RICA – Rentals of houses, apartments and condominiums for a period of less than one month is subject to sales and income tax, indicates the Ministry of Finance (Ministerio de Hacienda) in a clarification of the new law to improve the fight against tax fraud, published in La Gaceta on December 20, 2016.
The tax man says that owners of properties must register as taxpayers of the two taxes, in order not to be subject to fines.
Alan Saborío, Managing Partner of Deloitte, explained that neither the rent of rooms nor of commercial premises (ie retail stores) are subject to sales tax. However, article 1 of the General Sales Tax Law, that calls for rents less than a month to be taxed, was subject to interpretation by the tax department.
For the Cámara Costarricense de Hoteles (CCH) – Costa Rican Chamber of Hotels, who considered private rentals an unfair competition, see the clarification as “an achievement” given the struggle for equality the Chamber has fought. Hotel operators much charge the 13% sales tax on their rooms.
The CCH announced that it will begin, in coordination with the Ministry of Finance, an awareness campaign for property owners. No date was given for the start of the campaign.
According to Saborio, services offered by third-party, such as Airbnb and others who provide short-term rentals for property owners, are much easier to control.
In fact, last month, Airbnb offered to the government to collect and remit the sales tax on transactions in Costa Rica, but it would not give up (to the Ministry of Finance) its client (hosts or property owners) list.
Saborio said the big issue here is how to control the short-term rentals, collect taxes and apply sanctions.
The penalty for not complying with the new tax regulation is a fine of between 50% and 150% of the unreported income. In the event that the fine exceed 440 minimum wages, very unlikely to occur, the law establishes jail time.
Source La Nacion