Thursday 23 September 2021

New Motel (Sin) Tax Law Gets First Approval

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(qCOSTARICA) The approval of the law changing the taxation of motels is expected to generate between ¢800 and ¢900 million colones in tax revenue, that will be administered by the  Instituto Mixto de Ayuda Social (IMAS), for programs to support the needy, children and housing.

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The bill, that was approved Tuesday in first reading, changes the income tax paid by motel operators from one based on monthly profit to a flat tax rate based on the number of rooms

The change also affects strip clubs (called night clubs or “nights” in Costa Rica) and massage parlours (with or without a happy ending), among others.

Under the bill, if approved in second and final debate, motels are divided into three categories: A, establishments with more than 100 rooms; B, from 50 to 100 rooms; and C, less than 50 rooms.

The tax for category A motels the tax is equivalent to 13% of the income of a clerk fo the Judiciary (currently around ¢400.000 colones monthly); in category B, the tax rate is 10%; and in category C, 5% per month.

Under this formula, a category A motel would pay a tax of ¢52.000 colones, per room, per month. B motels ¢40.000, and C motels ¢20.000.

The use of a percentage based on a minimum particular public sector salary is a popular use of lawmakers, taking advantage of twice year increases in wages.

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