VAT on Digital Services in Costa Rica

VAT on Cross-Border Digital Services in Costa Rica

Costa Rica introduced VAT on digital services supplied by foreign companies in August 2020. Foreign digital service providers should collect and remit VAT on their B2B and B2C supplies.

Foreign companies supplying digital services to Costa Rica are expected either to register and charge VAT on sales of digital services to end consumers or request that credit cards or financial institutions withhold VAT.

VAT Rate: 13% VAT is typically applied to selling affected digital services.

Digital Services in Scope

A digital service should be taxable in Costa Rica if a non-resident supplies it and the recipient is located in the country.

Examples of digital services in Costa Rica:

• Audiovisual services (e.g. music, videos, movies and games)
• Broadcasting of events of any kind
• Services provided through a digital platform
• Online advertising
• Services of long-distance teaching and/or training
• Use or exploitation of non-tangible rights
• Other electronic or digital services that are destined and/or delivered to users located within Costa Rica

Determining the Location of the Costa Rican Consumer

When registering, the digital service provider should indicate to the tax authority how it will determine that a transaction is being performed in Costa Rica. The provider may choose one or more of the following options:

1. The address where the digital service or part of it is rendered corresponds to a location in the territory of the Republic.
2. In the case of intermediaries, when the final provider of the service or intangible good is domiciled in the territory of Costa Rica.
3. The location of the client's fixed landline through which the digital service is provided to the client, corresponds to Costa Rica.
4. The Internet Protocol (IP) address of the electronic device through which the product, digital service or intangible good is acquired or downloaded, corresponds to a location in the territory of the Republic.
5. The Mobile Country Code (MCC) of the International Mobile Subscriber Identity (IMSI) stored in the Subscriber Identity Module (SIM) card of the mobile device used by the client, corresponds to Costa Rica.
6. The address or domicile registered by the customer corresponds to a location in the territory of the Republic.
7. The location of the bank account used for payment or the customer's billing address held by that bank corresponds to a location in the territory of the Republic.
8. Any other information in possession of the supplier or intermediary that would reasonably identify the place of consumption.

When there is more than one way of determining the location of consumption, and they cannot be complemented, the one found first in the previous paragraphs should prevail.

VAT Registration for Foreign Companies

Foreign companies supplying digital services in Costa Rica are expected to either register and charge VAT on sales of digital services to final consumers or request that credit cards or financial institutions withhold VAT.

• VAT registration threshold for non-resident suppliers of Digital Services: No registration threshold
• Fiscal representatives: No requirement to appoint a fiscal representative

An application for VAT registration can be made to this email: direccionrecauda@hacienda.go.cr

VAT Returns and payment of taxes

VAT returns for non-residents

VAT Returns for Non-residents

Once registered, businesses will need to collect and remit taxes to the Costa Rican tax authorities. Note that these are returns for non-resident companies - not to be confused with VAT returns of local companies.

Digital Reporting Requirements for Cross-Border Digital Services

Foreign residents providing digital services should not be required to issue e-invoices and, consequently, should not report their transactions to the MoF.

For more information about digital reporting requirements in Costa Rica see Costa Rica E-invoicing & Digital Reporting Guide.

Foreign Intermediaries Withholding VAT

If the foreign entity providing digital services opts to be subject to the VAT withholding scheme, the MoF communicates this choice to credit card and financial institutions. Those companies will withhold the VAT, and the digital services provider should not be required to collect and remit that tax.

Income Withholding VAT

Income withholding tax is not applicable in Costa Rica.

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