LATIN AMERICA: Costa Rican government presents wide-reaching tax reforms

Changes to Costa Rican personal, corporate and nonresident income taxes are modified by Bill No. 23,760. Costa Rican tax-resident individuals (those spending 183 days or more in the country during a tax period) would pay a personal income tax on various forms of Costa Rican-source income. This would include salary, pension, business income, capital gains and income from exchange differences. Such assets would be taxed in a single tax base; either via a general base on a progressive scale of between ten and 30 percent or a special base at a 15 percent rate.

The Bill would also establish a corporate income tax of 30 percent, to be levied on Costa Rican-source income received by legal entities. Changes would include the taxation of all passive income from foreign sources and the doubling of the tax rate for capital income and gains. Income obtained from Costa Rican sources by non-residents would be taxed at 30 percent, if obtained through a permanent establishment, or 15 percent, if obtained without a permanent establishment.

The Executive Branch has also put forward Bill No. 23,759, proposing to extend more control to the tax authority. The Bill seeks to modify Costa Rica’s tax liability regime, statute of limitations and debt collection procedures, as well as reforming the tax auditing procedure. If passed, it would also grant the tax authority the power to inspect premises and seize any documents and assets relevant to tax control procedures.

The government also proposes to remove certain tax exemptions via Bill No. 23,762 and modify the current property tax on aircraft, vehicles and vessels under Bill No. 23, 761.

Separately, the tax authority has updated its list of cross-border digital services subject to VAT. The list now contains 148 such services that incur the 13 percent VAT.