Costa Rica to Issue Regulation Listing Foreign Suppliers Subject to VAT Withholding

Back in July 2019 Costa Rica enacted a new VAT law that, among other things, taxed digital goods and services. The law provided that in the cases of trans-national supplies of digital goods and services where the supplier was not established in Costa Rica, VAT would be withheld by the financial entities/credit card companies used by the purchaser for payment. However, if a foreign supplier chose to register, they could collect and remit on their own. 

In December 2019, the Costa Rica VAT Administration (DGT) released a proposed resolution that lists the entities subject to withholding and describes the filing and remittance requirements imposed on the credit card companies under the new law. The proposed resolution also describes the procedure that non-established suppliers of digital goods and services would follow in case that they opt to register so as to directly collect and remit VAT. The DGT has not specified when such Resolution would be enacted and when it would be effective, but it is understood that it would be early 2020. 

You may find the proposed resolution (in Spanish) at this link.

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Author

Ramón Frias

Ramón is a Tax Counsel on the Regulatory Analysis team at Sovos. He is licensed to practice law in the Dominican Republic and is a member of the Dominican Bar Association. He has a Certificate Degree from Harvard University as well as a J.D. from the Universidad Autonoma de Santo Domingo. Ramon has written a number of essays about tax administration and has won the first prize in the international essays contest sponsored by the Inter American Center of Tax Administrations (CIAT). Prior to joining Sovos, Ramon worked for more than 10 years in the Department of Revenue of the Dominican Republic where he served as Deputy Director. He is proficient in French and Spanish.
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