Tourist services will not have to pay the Value Added Tax (IVA in Spanish) until July 1st, 2021, once the law that imposed a new moratorium on the tax comes into force, as part of the extraordinary measures to support the sector in the middle of the novel Coronavirus Pandemic. The Office of the Presidency reported that the moratorium will be in effect from midnight August 18th.

The Law for Strengthening Public Finances had established that tourist activities registered with the Costa Rican Tourism Institute (ICT) should pay a reduced rate of 4% from the second year after the entry into force of the IVA; that is, from last July. A year later they would have to pay another reduced rate, but 8%; and a year later they would begin to discount the basic 13%.

However, the new wording modified the planned calendar, and now the import will be charged as of July 2021, although with the same annual graduality. The Government did indicate that tourist activities were subject to the initial 4% between July 1st and August 18th, so these obligations would have to be declared and paid promptly.  From the moment of the publication of the law, they will be exempt again for the said period provided.

The moratorium on the tourism sector was approved at the same time as another in the construction sector, which would be governed by the same conditions. This reform does not yet have a publication date. Both moratoriums had been supported by the Ministry of Finance, whose leader, Elian Villegas, only asked the deputies to work on compensatory measures if new provisions are approved that subtract income from the state coffers.

In a letter sent to the National Assembly, Villegas reminded legislators that tax collection would fall by 1.16 trillion colones this 2020 and that the elimination of new taxes would further decimate the State’s finances, which has already had to devise an external financing plan and budget cuts to meet this year’s obligations.

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