Sunday 4 June 2023

Costa Rica government announced “tough actions” on taxation

The government presented five tax reforms and tax incentives that includes changes in income tax, vehicle ownership, exemptions, issuance of external debt and "give teeth" to Taxation for the collection of taxes and sanctions

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QCOSTARICA – The Ministerio de Hacienda (Ministry of Finance) on Thursday presented five tax reforms and tax incentives that include changes in income tax, vehicle ownership, exemptions, issuance of external debt, and “get tough” on tax collection and sanctions.

The bills presented by the Minister of Finance, Nogui Acosta and the Minister of the Presidency, Natalia Diaz, to the Legislative Assembly cover:

  • Reform to the income tax law
  • Strengthening of tax control
  • Elimination of exemptions
  • Strengthening debt management
  • Vehicle Property Tax Law
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The changes announced are incorporated into the strategy called “Hacienda en acción: Trazando la prosperidad fiscal” (Finance in Action: Mapping out fiscal prosperity)

The aim is “to order the Costa Rican tax system, promote public debt management and provide the General Directorate of Taxation with greater control tools,” explained the Finance Minister.

“Over the years it has been said that Taxation has no bite, we are going to make the modifications in the Code of Tax Regulations and Procedures that allow us to have an action and have the muscle to collect it. We are going to tell the people who participate in a company that they are responsible, it is not valid that when it comes to collecting taxes, nobody is responsible, everyone is responsible for paying taxes,” Acosta assured during the presentation of the legal initiatives.

In brief, the proposed changes to taxation would establish a new calculation base where all the income of natural persons is combined, incorporating all the income: salary, retirement and pensions, investment income and capital gains, instead of taking into account only wages when it comes to workers.

In addition, the tax would be collected on annual income, instead of monthly.

To allow the tax department the “bite”, the bill proposes a series of changes to the current law, which includes the joint and several liabilities of a corporation’s shareholders or partners of the tax debt, when it is proven that the company was constituted or used in an abusive or fraudulent manner to avoid paying taxes, which includes a lifting of the veil over the shareholders of a company by a judicial authority.

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“The actions and obligations of the company will be attributed directly to its shareholders or partners, who will be jointly and severally liable with the legal person, depending on the proportion of their participation in the social capital and for equity purposes,” the proposed bill reads.

With respect to the property tax on vehicles, paid annually and included in the Marchamo – the vehicle’s circulation permit – the government proposes a new formula that establishes a depreciation table for the vehicle that will have an impact on the fiscal value and the taxable base of the tax.

For example, it is established that a new vehicle will have a depreciation of 48.1% after the sixth year of purchase.

In addition, the initiative establishes a progressive rate in ranges from 2.5% to a maximum of 7.5% for the excess of vehicles whose fiscal value is greater than ¢19 million colones, for which the tax will be paid.

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For more than 30 years there have been no changes to the fixing of the property tax on vehicles

For 2023, the tax collected with respect to property tax on approximately 1.8 million vehicles amounted to ¢188 billion colones, making it the fifth tax with the highest participation within the Costa Rican tax structure.

The Government’s tax reform package incorporates a first review of tax incentives, modifying the impuestos sobre el valor agregado (IVA) – value-added tax – rate for air tickets that would have a rate of 13%, instead of the current 4%. Likewise, a reduced rate of 2% is proposed for the sale or import of medical equipment, such as dental equipment, radioactive equipment, x-ray equipment, equipment for clinical chemistry laboratories, hospital beds, whose use is exclusive for the performance of non-medical procedures. aesthetic.

The last initiative is a constitutional reform that promotes the repeal of the Government’s obligation to obtain approval from Congress to issue debt bonds in the foreign market or contract a loan with a multilateral organization.

“It is an exercise resulting from the political and social maturity of many actors who set their sights on a distant horizon and on the prosperity of future generations of Costa Ricans. I hope that when the history of this political generation is written, they will see us as individuals with a comprehensive vision, as people who were not tempted by the siren songs of short-termism and populism, but rather because they were Costa Ricans who made the decisions that placed Costa Rica in the right direction,” stated the Minister of Finance, Nogui Acosta.

Incudes reports from La Nacion




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