Costa Rica Expected To Keep Rate For New VAT At 13 Percent

by Mike Godfrey, Tax-News.com, Washington

17 May 2017

Costa Rica may opt for a lower value-added tax rate when it implements the levy.

The International Monetary Fund (IMF) noted the plans in its Article IV consultation with the country.

In December 2016, the IMF urged Costa Rican lawmakers to agree on "much-needed" consumption tax and income tax reforms currently before parliament. However the regime has yet to be approved.

It was previously proposed that the rate would be increased from 13 percent, as under the current general sales tax regime, to 15 percent.

The IMF said that it has heard from authorities that Costa Rica will no longer increase the rate by two percent over two years, significantly reducing the revenue that could be received from replacing the general sales tax with VAT. The IMF estimates that the new VAT will boost revenues by just 1.5 percent of gross domestic product, despite plans to more broadly apply the headline rate, "mainly due to the removal of the VAT rate increases."

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