Sunday 24 September 2023

Why do we pay Marchamo?

Where did the first tax on the road come from and how much did it cost in 1961?

Paying the bills


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23 September 2023 - At The Banks - Source: BCCR

Paying the bills


QCOSTARICA – Every person in Costa Rica is has owned or owns a vehicle knows what a Marchamo is. And it is at this time of the year when the following year’s Marchamo – the right of circulation – comes due and among the fixed expenses for hundreds of thousands of vehicle owners, private or corporate.

Last Thursday, October 21, legislators approved in the second and final debate, for the second consecutive year, the bill to reduce the payment of the Marchamo. The reduction for 2022 was approved with a vote of 32 in favor and six against.

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The bill establishes a reduction of the property tax of vehicles that ranges between 9% and 45%, as well as condoning past Marchamos, if the person pays the current before January 1.

The Executive branch, through the Minister of Finance, Elian Villegas, did not support this reduction, and hoped that it would not be approved in second debate. The next step in the legislative process was the required signature of the president, who also has the power of veto, to become law.

Read more: VETO: Carlos Alvarado says no to Marchamo reduction for this year

According to the Treasury, if the initiative got the green light, this would mean a loss of ¢30 billion colones of tax revenue, one of the factors in the analysis prepared by the Ministry of Finance that led to the veto power of President Carlos Alvarado.

Although the bill is required to be sent back to the legislators with reforms, it is too late to take effect as the 2022 Marchamo collection started this Monday, November 1.

But hey, what brings us together here is not the stretch and shrink that exists for the reduction or not of the 2022 Marchamo, but the origin of this payment, in light of some complaints that it usually generates.

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Where did it come from? What exactly is it and why does it exist?

What exactly is the Marchamo?

It’s a permit or right of movement, rather, it is THE official Costa Rican circulation permit, which is identified on the streets through a sticker and which is placed on the inside of the windshield of the vehicle and a paper permit that is obtained when paying.

In addition to the Marchamo sticker, to circulate the vehicle needs a Riteve sticker,  that is vehicle technical review and its accompanying paper confirmation.

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Without the Riteve, the Marchamo can be paid at the Instituto Nacional de Seguros (INS), but no sticker or permit is issued. What this does is avoid late fees, penalties and interest, but the vehicle cannot circulate on public roads.

The word Marchamo, in the dictionary of the Real Academia Espanó (lRoyal Spanish Academy), means “a sign or mark that is put on the bales or packages at customs, as proof that they are cleared or recognized.”

Currently, to obtain the annual Marchamo or right of circulation, you have to pay a fee that varies according to the model year of the vehicle and its weight category. There are also differences if it is a private, public transport vehicle (is bus or taxi), light or heavy commercial, etc.

The Marchamo is paid in advance. In other words, the 2022 Marchamo must be paid at the end of 2021. This grants an annual validity that goes from January 1 to December 31 of the year that is being paid.

Generally, owners of vehicles have two months to pay this right without being fined: November and December of each year. The money from that payment is divided into nine different items:

  • Vehicle property tax
  • Mandatory insurance for motor vehicles (SOA) provided by the INS
  • Contribution to Cosevi
  • Sales tax on Compulsory Automobile Insurance (SOA).
  • Oustanding traffic tickets and parking meters
  • Tax in favor of the municipalities
  • Aresep (Buses y Taxis)
  • Canon de Transporte Público (CTP)
  • and several small items

The first two items (in bold) are where most of the payment for the Marchamo goes.

The vehicle property tax is the only one that goes to the Treasury (to the General Tax Office), while the mandatory automobile insurance (SOA) goes to the INS, which is the authority that administers the Marchamo.

The property tax is determined by the make, year, model and fiscal (tax) value of the vehicle, the SOA is based on the category.

In relation to the SOA, the income received by the INS is used to care for the injuries and death of people who are victims of traffic accidents, as well as the payment of the expenses derived from its administration.

“The National Insurance Institute is responsible for the SOA, this being the only item in charge of the INS,” said Sídney Viales, Deputy Head of the INS Compulsory Insurance Directorate. “The importance of this insurance is that it provides protection to all drivers, companions, owners of vehicles and pedestrians, who suffer injuries or who die due to a traffic accident, up to the amounts and under the conditions that are regulated by law. establish,” he added.

For his part, Daniel Pelecano, Tax and Legal Manager of the Grant Thornton Costa Rica, recalled that the existence of the Marchamo and its different components responds to laws and regulations, but paying everything at once can be a convenient solution for vehicle owners.

“The fundamental purpose of the taxes is the satisfaction of public needs, before which it should be pointed out that, directly or indirectly, each and every one of the items included in the collection of the Marchamo seeks to cooperate with the fulfillment of public needs,” said Pelecano.

The expert added that all the items that through different laws were added to a single charge, respond to specific moments, needs and purposes that ended up creating what the Traffic Law defines as a Marchamo. And that the fact that everything converges in a single payment, is pragmatic for vehicle owners.

The vast majority of countries have similar payments, although they are not necessarily merged into a single annual payment.

The Marchamo must be understood as the delivery of plates and license plates to vehicles so that they can circulate freely throughout the country. Something basic and common practice throughout the world, and that is renewed annually in Costa Rica.

“The traffic rights, popularly known as the Marchamo, consider a set of items from different institutions, such as the Ministry of Finance, the National Insurance Institute, the Road Safety Council and others. The Traffic Law establishes that, for the circulation of motor vehicles on public land roads, two requirements must be met, one of them being the payment of the right of circulation,” added Sídney Viales, from the INS.

The origin: where did the Marchamo come from?

Currently, the mandatory payment of the Marchamo appears in subsection 34 of article 235 of the Law on Traffic on Public Land Roads (No. 9078). But this payment, or rather a similar one, has its origin in the last century.

According to Grant Thornton’s Daniel Pelecano, a different version of what we know today as a Marchamowas established in 1961, with the Road Plan Law (Ley de Plan Vial).

In that law, in article 11, the creation of a circulation tax for Costa Rica was indicated.

This was the verbatim statement of the defunct Highway Plan Law, available in the Costa Rican Legal Information System:

Article 11.- Create the Wheel Tax that must be paid by all vehicles registered in the General Directorate of Traffic, which will be governed by the following rules:

a) Private passenger vehicles will pay annually in accordance with the fiscal power of the engines:

  • Less than 20 tax horses …. ¢ 60.00
  • From 20 to 31 tax horses ….. ¢ 90.00
  • From 32 to more tax horses onwards will pay at a rate of ………. ¢ 4 for each tax horse

The fiscal power is defined by the following formula:

  • P. F. -0.062 x N x D2 (Where P.F. – Fiscal power in fiscal horses, N. – Number of cylinders, D – Diameter of the pistons in centimeters.

Using the Consumer Price Index (CPI) prepared by the National Institute of Statistics and Censuses (INEC), two calculators available on the Internet, one from El Financiero and another from the website, can help us to have a reliable idea how much money those amounts would currently represent.

Of course, both tools have the year 1976 and 1977 as the most distant date from which we can compare a value. However, the prices paid by private vehicles were the same in the 70s. The Traffic Law of 1973 kept the same values, but abandoned the categorization by fiscal horsepower and changed it to a category by pesos, similar to the one that we have today.

Well, this is the equivalent in 2021 of the rolling tax paid by the Ticos for private vehicles between 1973 and 1977:

  • From 0 kg to 900 kg: ¢60.00 = ¢12.620
  • From 900 kg to 1,500 kg: ¢90.00 = ¢18,930
  • *Over 1,500 kg: ¢0.25 for each additional kg. So if the vehicle weighed 2,100 kg, the tax was ¢150 = ¢31,550

(*) in 1961 it was ¢ 4 for each additional fiscal horsepower.

Technically, the Marchamo we pay today cannot be called a tax, because, as we have seen, it is a payment that includes nine different items. It is not a road tax as such but a right of circulation.

Whatever you want to call it, aren’t you glad that all the elements that make up the Marchamo are all in one place and not have to pay each one of the items individually?

The question, right now, of every owner of a vehicle in Costa Rica, is what will the 2022 Marchamo cost me? To get the answer, visit the INS website here. Click on “mas información” for the detailed charges.

The Marchamo can be paid directly to the INS (online or any INS office) or at most financial institutions, online or in person.


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Paying the bills
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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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