An important point for companies within their tax planning is the tax regime that affects them, because with a correct choice of this one can have a taxation in an optimal way, which simplifies the fulfillment of their tax obligations before the Tax Administration.
Types of Tax Regime in Costa Rica
In Costa Rica, taxpayers can opt for two types of tax regimes, such as the “Simplified Taxation Regime” and the “Traditional Regime”.
The choice and incorporation in these, by the taxpayers, will depend on their level of expenditures, number of employees, type of activity, among other factors.
The purpose of this article is to briefly develop the main aspects of each of these regimes.
Simplified Taxation System
The Simplified Taxation Regime is aimed at small taxpayers, in order to simplify their tax obligations, access to it is voluntary to the extent that they meet the requirements.
Among the main requirements the taxpayer must meet to access this regime are the following:
- Level of annual purchases of less than 150 base salaries, in order to determine this, the Value Added Tax levied on these purchases will be included.
- The number of persons helping to carry out the operation of the company must not be more than 5.
- The taxpayer’s activity must not be related to the exploitation of a franchise, brand, commercial name, nor must it be the exclusive distributor of another company.
- If the activity is the cab service, it must not have more than one unit.
- The value of its fixed assets must not exceed 350 base salaries.
Taxpayers engaged in the following activities will be eligible for this regime:
- Bars, cantinas, taverns or similar establishments.
- Photographic studios.
- Craft manufacture of footwear.
- Manufacture of furniture and its accessories
- Manufacture of objects made of clay, faience, ceramics and porcelain.
- Manufacture of structural metal products.
- Flower shops.
- Restaurants, cafes, sodas and other establishments that sell food, drinks or both.
- Small-scale artisan fishermen.
- Medium-scale artisan fishermen.
- Small agricultural producers.
- Paid land transport of people in cab mode.
The main benefits of the incorporation to this regime are referred to the simplification of the payment of the taxes, which are calculated based on a factor on the amount of the purchases, the simplicity in the presentation of its affidavits and the not requiring a formal accounting.
Tax Calculation: Income Tax and VAT
In order to determine the tax, the activity of the taxpayer, the amount of its purchases in the quarter and the factor to be used must be taken into consideration.
In this regard, the following factors have been established depending on the activity carried out by the taxpayers:
Type of activity
Bars, cantinas, taverns or similar establishments.
|Craft manufacture of footwear.||0,01||
Manufacture of furniture and its accessories.
|Manufacture of clay, earthenware, ceramic and porcelain objects.||0,01||
Manufacture of structural metal products.
|Restaurants, cafes, sodas and other establishments that sell food, drinks or both.||0,02||
Small-scale artisan fishermen.
|Medium Artisan Fishermen.||0,033|
Small agricultural producers.
|Paid land transport of people in cab mode.||0,50|
Traditional Taxation Regime
Under this regime, all taxpayers can be incorporated regardless of the type of activity they engage in.
Unlike the simplified regime, this one is taxed based on income and not on purchases, so deductions and tax credits are allowed.
Determination of Income Tax
As indicated, the calculation of this tax is related to the net income of the legal entity, which should be multiplied by a rate or fee which in turn will depend on the gross income of the company.
Thus, if the gross income is up to ¢54.303.000,00, the rate to be applied on net income will be 10%, if it exceeds this amount but is less than ¢109.228.000,00, the rate will be 20% and if it exceeds this amount the rate will be 30%.
Determination of the Value Added Tax
Unlike the simplified tax regime, VAT for taxpayers under the traditional regime is not taken into account as a factor on purchases, but is determined on a 13% rate.
The tax regimes in Costa Rica are designed to make an objective differentiation of the tax obligations that taxpayers may have, which will depend on factors such as type of activity, income level, number of employees among others.
In case you are a small taxpayer, as long as the requirements are met, you may opt for the Tax Simplification Regime, which seeks to simplify the tax obligations of this type of taxpayers.