Costa Rica lists 71 foreign digital businesses for whom payment intermediaries have VAT withholding obligations
Since October 1, 2020, VAT at 13% must be applied to digital sales from foreign digital service providers and intermediaries to consumers in Costa Rica.

Costa Rica's tax authority has revealed the names of 71 non-resident digital businesses whose transactions are subject to VAT with their payment intermediaries (payment card companies) responsible for withholding the 13% VAT due.
It is important to note that the names on the list issued by Costa Rica's Ministerio de Hacienda (Treasury) are not considered to be VAT-registered in Costa Rica.
It is the second such publication since new VAT rules in Costa Rica came into effect on October 1, 2020. In December 2020, Costa Rica's tax authority issued a resolution listing the names of seven foreign digital service providers on which their financial intermediaries had to withhold VAT on their transactions to customers in Costa Rica.
The seven business names were Uber, Didi, Disney+, Expedia, Booking, Despegar, and Aplaudir.com. Obligations of VAT withholding for these digital businesses were to commence within three business days of appearing on the list, so from December 18, 2020.
Costa Rica's Treasury also stated that the new VAT rules that have applied since October 1, 2020, recouped more than ¢1 billion Costa Rican Colones (circa USD1.6million) in the first month.
Since October 1, 2020, VAT at 13% must be applied to digital sales from foreign digital service providers and intermediaries — that are included on a government list — to consumers in Costa Rica. The confirmation of this obligation was revealed on June 12, 2020, when resolution 13-2020 was published by the Costa Rica tax authorities.
August 1, 2020, was the original introduction date but this was changed to October 1 by a government directive published on July 31. Foreign digital service providers and intermediaries on a published Costa Rica list were able to register ahead of the October 1 introduction date.
Two-fold approach to registration
We understand that registration can be two-fold. One, a voluntary compliance approach for affected foreign digital service providers and intermediaries responsible for digital sales to consumers based in Costa Rica. Two, for those affected that do not register the resolution allows for a withholding of 13% VAT by the payment card issuers (e.g. Visa, MasterCard, etc).
These developments are part of a larger tax reform in Costa Rica, where the authorities are replacing an outdated sales tax system with a new VAT regime.
Costa Rica VAT simplified registration
For those on the list that wish to register they can do so via a simplified registration system. In doing so they will be able to apply Costa Rica VAT on B2C and B2B sales.
The creation of such a simplified registration system is – according Priscilla Zamora Rojas, Costa Rica’s General Taxation Director – in line with OECD recommendations: "This resolution establishes a specific date from which VAT will be applied on cross-border digital services, which was established following the OECD recommendations to address the challenges of taxing the digital economy.”
Registration will not create a Permanent Establishment. Likewise, registration will not open up foreign digital service providers and intermediaries to any new Costa Rica taxes.
In relation to customer location determination, foreign digital service providers or intermediaries will determine the location of the consumption of the digital services through the collection of one or more pieces of evidence. When none of the pieces of evidence collected match then the piece of evidence that is listed first in Article 7 of the resolution shall prevail.
Therefore, the list of acceptable pieces of evidence in the resolution acts as a hierarchy of evidence in Costa Rica.
Other interesting points to note include the following:
- Payment: VAT due must be paid on a monthly basis, and payment must be received within 15 days of the end of the month following the tax period. For example, for October 2020 - payment must be received by November 15, 2020. Payments are to be made via a new Virtual Tax Administration (ATV) platform.
- Refunds: Refunds can correspond to the month in which the refund to the customer was applied.
- Invoicing: There is no obligation for affected digital service providers or intermediaries to issue e-invoices.
Costa Rica VAT background
A Costa Rica VAT introduction has been on the cards for some time now. Draft rules were originally released back in July 2019. By December 2019, however, the rules remained in draft form and a public consultation was opened until mid-December 2019.
In this December 2019 draft update a list of affected foreign digital service providers was published by the Costa Rica tax authority (Dirección General de Tributación (DGT)). That list (originally containing 191 company names) was published in annex 6 here.
In a move that mirrored the approach of Argentina this list showed which foreign digital service providers were potentially within the scope of these new VAT rules in Costa Rica.
Foreign suppliers have been waiting for the publication of the list to understand if they are within the scope of Costa Rica's new VAT rules before taking any necessary action.
We will, of course, keep you updated on developments in Costa Rica and elsewhere.
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