Friday 8 December 2023

Costa Rica clarifies tax treatment of crypto-assets

General Directorate of Taxation issues a private letter ruling

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8 December 2023 - At The Banks - Source: BCCR

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QCOSTARICA – Costa Rica’s tax authority – issued a private letter ruling giving a general opinion on the taxation of crypto-assets.

The ruling, MH-DGT-OF-0460-2023, comes in response to the General Directorate of Taxation’s request for further guidance on the tax treatment of cryptocurrencies and crypto-assets, although it is issued for informational purposes only.

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Generally, the ruling views these assets as virtual or intangible assets, as they are not authorized as legal tender by the Banco Central de Costa Rica (BCCR) – Central Bank of Costa Rica, that may be taxed as ordinary or capital income, depending on the particular circumstances. In some situations, crypto assets also may be subject to Value Added Tax (VAT).

“The private letter ruling states that individuals or legal entities, resident in Costa Rica or nondomiciled, that (i) provide services to safeguard private cryptographic keys on behalf of third parties, (ii) maintain, store, and transfer virtual assets, (iii) exchange virtual assets for legal tender or between different virtual assets, or (iv) assist in carrying out these operations are obligated to fulfill all formal and material tax duties according to their activity,” states EY Global tax law firm in a statement earlier this month.

According to the private letter ruling, if the service provider is a resident in Costa Rica, the income from providing the services is considered subject to the CIT, as it corresponds to the development of business activity (Costa Rican source).

On the other hand, if a service provider is a non-resident providing services to a Costa Rica-resident individual or entity is subject to the country’s withholding tax for remittances abroad.

The above is not intended to be legal or tax advice. Consult your tax lawyer.

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Q Costa Rica
Q Costa Rica
Reports by QCR staff

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