Saturday, 19 September 2020

Government Plans To Create 15% VAT On Goods and Services

vat-value-added-tax
In the proposed Valued Added Tax (VAT) by the Ministry of Finance veterinary services, for example, will be taxed at 15%.

QCOSTARICA – The government on Tuesday proposed transforming the current sales tax of 13% to a Value Added Tax (VAT), levied both on goods and services, at a rate of 15%.

The proposal by the Ministry of Finance (Ministerio de Hacienda) establishes a gradual adjustment: in the first year, the tax would be 13%, for the second 14% and 15% by 2017, if the plan is approved by the Legislature this year.

Fernando Rodriguez, vice-minister of fInance, said the VAT is needed for the government to reduce the fiscal deficit.

- paying the bills -

In addition, the proposal incorporates changes to the income tax for salaried employees, small and medium businesses and large cooperatives.

With the proposed changes, Finance expects to increase revenues equal to 2% of the Gross Domestic Product (Spanish: Producto Interno Bruto – PIB), or about ¢600 billion colones. The VAT will represent 1.4% of the increase and income tax 0.6%, explained Rodriguez.

Alan Saborio, tax specialist with Deloitte, told La Nacion the proposal of Value Added Tax is similar to the initiative of the previous government, except in the rate of the tax.

The most significant change with the creation of the VAT is that professional services will be taxed, with some exemptions such as public transport with rates are regulated by the Regulatory Authority for Public Services (Aresep) and companies operating in free zones (zona francas).
However, all cultural, sporting, artistic, educational and recreational activities for profit are to be taxed under the proposal.

Proposal is available at the Hacienda website

In the case of tourism activities, the proposal is a full exemption during the first year; in the second year the tax is to be 5%, 10% in the third and the full 15% starting in the fourth year.

- paying the bills -

BUT, the exemption and gradual increases apply only to businesses registered by the Costa Rican Tourism Board (Instituto Costarricense de Turismo – ICT).  Tourism related businesses not registered with the ICT pay the full tax from the first year.

Other exemptions to the Value Added Tax:

– Goods and services included in the basic basket “Canasta Basica” as defined by Finance and Mideplan

– Health: medicines and private health services. Hospitalization and surgery at private medical centres will be taxed.

– Rents equal to or less than the base salary (currently ¢403.400 colones or US$760 at today’s exchange rate)

– Electricity consumption equal to or less than 250 kWh; if the user exceeds that, the entire amount is subject to the tax

- paying the bills --

– Water: consumption equal to or less than 40 cubic meters, if usage is exceeded, the entire amount is taxed. Bottled water is not exempt.

Rico
Ricohttp://www.theqmedia.com
"Rico" is the crazy mind behind the Q media websites, a series of online magazines where everything is Q! In these times of new normal, stay at home. Stay safe. Stay healthy.

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