Wednesday 22 September 2021

The ‘Netflix Tax’ Will NOT Start On July 1; Amazon To Be Excluded From The VAT

The Ministry of Finance still has to define the list of service companies such as Airbnb, Netflix, and others to which the 13% tax must be applied.

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Services such as Uber, Airbnb, and Netflix, among others,  will continue without the 13% Value Added Tax (VAT), according to a report by La Republica, at least while the Ministerio de Hacienda (Ministry of Finance) defines the list of companies to which the tax will be applied.

The Ministry of Finance still has to define the list of service companies such as Airbnb, Netflix, and others to which the 13% tax must be applied.

According to Giovanni Tencio, deputy general director of Taxation, the problem arises when entrusting the payment of the tax of services of digital platforms to the issuers of credit and debit cards, that would not have a way to verify in which country they are being used.

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Due to these difficulties, and to give the banks more time to prepare their systems, the VAT will not be extended to this type of services on July 1, when the new tax goes into effect.

“Definitely, it will not be something that will apply from the first (July 1), because the banks have to define the list, then they have to adapt their information systems to incorporate the 13% (tax),” said Tencio.

In addition, he clarified that Hacienda does not contemplate applying it to companies such as Amazon, an uncertainty that was generated by detailing in a draft the procedures for the VAT refund on products purchased online.

“The perception will be made by the issuer of the card only in transactions that the Administration will specifically indicate, and so far, based on the analyzes that have been made, it does not seem appropriate to include Amazon,” he said.

Ideally, cross-border service companies would be registered in Costa Rica to directly charge them for VAT, thus avoiding problems due to their use in other countries.

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