VAT for Hotels
The approval of the new Tax Package (Law 9635) from Asamblea Legislativa (Costa Rican Congress) introduced new taxes or extended the implementation of existing taxes with the purpose to increase the revenue of the Costa Rican Government. As many of you know, the Government has been struggling to make ends meet, and thus it saw best fit to enact a tax package that is going affect everyone. Today, we will talk about the taxes for the Hotel Industry.
Transitory XI of the law (a Transitory element in the law is a measure that is applicable in a transitory fashion, and thus it is not permanent) provides moratoriums and extensions for people and companies to become compliant with their tax obligations. In addition, this Transitory XI sets forth a time line for the implementation of Valued Added Tax (VAT) for the tourism industry.
This section establishes an exemption for the VAT for the first year for companies which are registered with the Board of Tourism (ICT or Instituto Costarricense de Turismo). In the second year, they must charge a 4% VAT and an 8% on the third year, and the full 13% on the fourth year.
Conversely, the companies in the tourism industry that are not registered with the ICT must charge and therefore pay the 13% VAT from day one of the implementation of the law, which is July 1st. The Revenue Service (Ministerio de Hacienda) will do a cross reference with the ICT to confirm which companies claiming the exemption are indeed registered with the latter. If you have a business that serves tourists, our recommendation is to get your company registered with ICT quickly.
Currently, the Tourism Industry represents 6.3% of the GDP. Analyst expect that the new taxes may have a negative impact on the industry as it will increase the costs for tourist traveling to the country who may find more attractive to travel to other destinations who offer lower costs. Time will tell.
Stay Tunned. Pura Vida