Double Collection of the Value Added Tax (IVA) will be Refunded in Costa Rica

The General Directorate of Taxation will modify the way in which the double collection or undue collection of the value added tax (VAT) for digital services such as Airbnb would be returned to taxpayers.

From October 1st, the 13% VAT is applied to the consumption of a list of digital providers, when they are paid through debit and credit cards. During that first month ¢ 1,023 million were collected, however, Taxation has identified “undue withholdings” since its introduction, according to the resolution.

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The first list of services to which VAT is applied includes fewer than 20 companies, including gaming platforms such as Playstation, Riot Games and Nintendo as well as movie and music services such as Netflix, Spotify and HBO. Airbnb and software sites like Norton and Microsoft were also included.

These improper cases are not identified, but they may include Costa Ricans who consume cross-border services while abroad, but who still receive 13% deductions from their cards. It is also possible that a good was acquired, instead of a service, through one of these companies.

New procedures

The process to request the refund will include five requirements, as explained in the new resolution put up for consultation on the Treasury page on November 23rd

1. Be up-to-date with your material and formal duties before the Tax Administration.

2. Fill out Form D-402: “Tax Refund Request”, which must be signed digitally or physically and sent in Pdf format by the Virtual Procedure platform (TRAVI).

3. Attach a file of the respective purchase invoice in Pdf format.

4. Attach a file of the bank account statement showing the perception of the Value Added Tax and its amount, in Pdf format.

5. Indicate the IBAN account number in the name of the interested party in the same currency in which the collection was made.

In a version of the procedures published last year, a certification issued by the General Directorate of Migration and Foreigners was originally requested to confirm the exit and entry of the national territory. A following version eliminated that requirement but still asked for a copy of the passport to verify the exit and entry to the national territory.

Digital services with VAT

In the new resolution, signed by Carlos Vargas, General Director of Taxation, it is explained that the request will be made through the Virtual Processing platform (TRAVI). When filling out the Form D-402, the person must justify in detail the origin of the credit.

“Due to the fact that improper withholdings for said tax have been detected, and given that the legislator’s spirit aims to establish the perception and collection of purchases made through the Internet and any other digital platform, on intangible assets, which are consumed in the national territory, it is considered necessary to establish, by means of this resolution, the requirements that allow identifying the origin or not, of the credit, so that the refund proceeds , in order to protect the rights and guarantees of the taxpayer”, says the resolution.

The list of suppliers was published as part of resolution DGT-R-27-2020 in La Gaceta on September 22nd. However, the list will be under “constant review” and new services will be included when appropriate, by the Tax Administration. In addition, suppliers who wish to collect the tax directly, can register as taxpayers with the Tax Administration.

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