Special Committee strengthens Public Finance
Costa Rica
30 marzo 2018

This week the Special Committee No. 20.730, in charge of the discussion of the Expte. No. 20,580, passed an alternative text for the Strengthening Public Finances bill. The alternative bill was introduced in September 2017, but it only began to be treated this year considering the next government renewal (scheduled for May) and due to the fiscal crisis that the country is going through.

The regulation is divided into four parts: the Value Added Tax (VAT); the Income and Utilities Tax; Public Salaries; and Fiscal Responsibility. With the exception of the last section, the other three have received significant modifications with the objective of solving the lack of resources that government agencies face, even when paying the salary of public officials.

The changes proposed for the VAT regime are:


  • It increases the number of exemptions planned (compared to the Executive Branch’s bill).
  • Two reduced fares of 4% and 2% will be implemented, subject to different goods and services.
  • Credit and Debit cards must retain the corresponding percentage for purchases in digital platforms, making the legislation more comprehensive.
  • The Tax Administration may also arrange other intermediaries, outside the electronic means of payment initially contemplated.


The tax for income and profits should consider some additional aspects:


  • The income obtained by banking entities and financial companies will be taken as lucrative activities. They must be tributed and take a payment on account the withholdings to which they are bound to.
  • The definition of permanent establishments is more exhaustive, to cover the activities of a company that provides services in Costa Rican territory without formal physical presence or through other companies.
  • Adjusting the new regulations will also mean repealing articles of the Capital Market Regulatory Law and the Income Tax Law.


The title referring to public salaries is intended to be simplified, making clear a greater number of concepts and allocating some points to officials with full dedication to their tasks. The inadmissibility of double payment and presidential remuneration are also regulated under the new drafting of the initiative.

The Committee will meet again at 9:15 am on Monday, April 2nd, to begin reviewing the proposed amendments submitted by the legislators. Ottón Solís (Partido Acción Ciudadana) has proposed 16 changes to the initiative -along with Sandra Piszk (National Liberation Party) in matters of pensions and salaries- with the objective of eliminating the primary deficit. Solís suggests raising the Value Added Tax (VAT) to 16% – with the option to then lower one point every 12 months until returning to 13%.

The new bill also limits the interests that companies can deduct from taxes, sets a solidarity contribution for the pension of former presidents, puts a top to the salary of public officials, creates two new installments to income tax, it will tax with 15% the repatriation of profits by companies located in free zones and will include specific public entities and large cooperatives in the payment of rent, among other alternatives to the text now in force.

Here you can access the alternative version of the file, before new amendments are discussed.

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