Friday 14 May 2021

Government refuses to charge VAT on Uber trips

Uber says it will, starting July 1, charge the 13% VAT tax to its customers, however, the taxman says it will not collect it until the activity is legalized

As of July 1, Uber users will pay a 13% Value Added Tax (VAT) for each of their trips, as the company plans to collect the tax even though the taxman says it will not collect it from the company until the activity is legalized in the country.

Uber says it will starting July 1 charge the 13% VAT tax to its customers, however the taxman says it will not collect it until the activity is legalized

The VAT, a tax on all services created by the Ley de Fortalecimiento de las Finanzas Públicas (Law of Strengthening Public Finances), approved in December, goes into effect on July 1.

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On Tuesday, the company assured the legislators of the Economic Affairs Committee of the Legislative Assembly, that from July it would charge users the VAT in order to comply with the provisions of the tax reform.

However, the Ministerio de Hacienda (Ministry of Finance) says it will not collect the tax from Uber.

“The Law of Strengthening of Public Finances authorizes the Ministry of Finance to be collect the tax from services that are legal, such as Netflix, or those that do not have a problem of illegality such as Airbnb, Booking, or some others, ” said Deputy Finance Minister Nogui Acosta.

The problem for the Government is that if it charges the VAT on each trip reported by Uber, it would be tacitly legalizing the transportation service, when last August it made the decision to declare it (Uber) illegal.

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Uber argues that the tax reform establishes the obligation of these platforms to pay the value added tax and took the initiative, announcing that it will withhold the tax of each trip to later transfer it to Hacienda.

“As of July, 13% will be charged and we will send it to the Treasury. We are working to be in compliance with that law. The Uber companies pay their taxes daily,” said Zoraida Rodríguez, director of Government Relations at Uber.

Even so, the representatives of the transnational recognized that the company does not pay the income tax corresponding to 25% that the platform is reserved as a profit for each trip.

However, given that Uber is not yet legal, the Ministry of Finance acknowledged that it has not approached the company to establish the VAT collection method for each trip.

“At the moment there is no approach, because there are two schemes in which you can charge. One is in agreement with the company and another is through electronic means of payment. We are evaluating both options to see which allows us greater agility and certainty of the amount,” said Acosta.

Legalizing Uber

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The Economic Affairs Committee of the Legislative Assembly is currently discussing the bill presented by the Government to regulate the Empresas de Plataforma de Transporte (EPT) – Transport Platform Companies – such as Uber.

The objective of the bill is to allow the coexistence between the red (formal) taxis and the EPTs.

  • The EPT would be subject to the collection of value-added-tax (VAT), of 13%, as well as to the tax on remittances abroad (8.5%)
  • In the case of the EPT that has operated prior to the effective date of the law, such as Uber, they will have to pay ¢8.299 billion colones (18,600 base salaries of the Judicial Power) to register
  • EPTs that enter the market after the law takes effect would pay ¢44.6 million for (100 base salaries) and ¢22.3 million for renewing enrollment (50 base salaries).
  • An additional 3% would be charged on each service to finance a fund to modernize public transport.
  • All drivers would have to register as independent workers before the CCSS – Caja or Social Security
  • All EPTs would be declared as a public service, but will not be subject to the tariff regulation of Aresep, as formal taxis area
  • EPTs must register with the Public Transportation Council (CTP) in order to operate legally.
  • EPTs should issue standardized policies and procedures to promote user safety, as well as avoid sexual harassment and discrimination. They must also guarantee compliance with the Equal Opportunities for Persons with Disabilities Act (Law No. 7600)

Currenlty Uber Costa Rica employs 700 people directly and has 22,000 driver partners and 783,000 users.

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"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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