Consider VAT on Digital Services as Deductible Expenses in Favor of your Company in Costa Rica

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    If you are an entrepreneur or freelancer, you may see the 13% VAT on cross-border digital services as an additional expense that you must add month to month, however, consider the possibility that it is part of deductible expenses. This is money in favor of the taxpayer, as they are amounts that can be subtracted from the debt or tax debit when paying taxes.

    But it is not just any activity, since, for example, Netflix, if it is for mere entertainment at leisure, cannot be included as a deductible expense. For this to be the case, consider the digital service you want, and verify that it meets these requirements, according to experts: it is useful, necessary and relevant for your activity, you have reliable proof that this is the case and the withholdings have been made.

    It´s the law


    For example, if you have a financial institution or are part of a stock exchange, you could apply it to Bloomberg, which is a company that was registered in Costa Rica to collect VAT directly, and which is useful for those entities, as it requires a count with this data at hand for its daily management.

    Or, Dropbox, for a company that requires information storage to back up its files or access to secure data; LinkedIn, for a company that is dedicated to recruiting staff, as it is a tool to search for professionals or profiles, arrange job interviews, or publish vacant positions, among others.

    One that in theory could be a deductible expense is UBER, which, although the transport that can be hired may be useful for the activity of a taxpayer, although experts doubt that it can be included.

    “The service will be taxed with 13% VAT, but the deductibility of the expense will be subject to other legal assessments, since there is no clarity on how the income not only of the platform will be taxed, but also of the associates that perform the service” said Silvia González, Grant Thornton Tax and Legal partner.

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