In the last 40 years, the Costa Rican tax system has retained the same regulatory framework, which was established in the 1980s, when the national economy was concentrated on trade in agricultural products. As a result, services, including digital services, were not taxable. However, Ley de Fortalecimiento de las Finanzas Públicas (Law of Strengthening Public Finances, Law 9,635) enacted on 3 December 2018 and in force as of 1 July 2019, amended the sales taxation system by abolishing the Ley de Impuesto General sobre las Ventas (General Sales Tax Law, LGIV) and introducing the Ley del Impuesto al Valor Agregado (the VAT Law, Costa Rican LIVA) , which encompasses the taxation of digital services.

The new regulatory framework introduced by Law 9,635 instituted several important changes, including, as a general rule, the taxation of all goods and services, including cross-border digital services, at a standard rate of VAT of 13%. With regard to the collection of VAT on digital services, the Costa Rican Dirección General de Tributación (General Directorate of Taxes (tax administration), DGT), based its regulations on the OECD International VAT/GST Guidelines (2017), which proposed the creation of simplified registration and compliance mechanisms to facilitate tax collection in respect of transactions between non-domiciled suppliers or intermediaries and final consumers.

Consequently, the DGT is authorized by article 30 of the Costa Rican LIVA to determine tax collection by individuals serving as suppliers or intermediaries providing the final consumers with digital services. In this sense, Decreto 41,779 que establece el Reglamento de la Ley del Impuesto al Valor Agregado (Value Added Tax Law Regulations, the VAT Regulations) define as a “digital service provider” any individual or legal person that makes digital services or intangible assets available through the internet or any other digital platform. For this purpose, article 47, paragraph 2 of the VAT Regulations introduces a particularity, i.e. the possibility for non-domiciled digital services providers or intermediaries to request registration as a VAT taxpayer with the DGT. The VAT Regulations explicitly state that such registration does not assume that there is a PE for income tax purposes, which provides legal certainty to the non-domiciled supplier in terms of income tax and facilitates registration.

If a digital service provider does not register as a VAT taxpayer, given the difficulties that the digital economy presents for tax administrations, the Costa Rican LIVA establishes the credit or the debit card processors as being responsible for the collection of tax in respect of the cards that consumers use to pay for digital service, either on service purchases by way of the internet or any other digital platform, and as long as they are used in the national territory.

Consequently, the responsibility for tax collection is transferred to the card processors. However, due to the physical impossibility for processors to identify which payments relate to digital services used in the national territory, the DGT has defined by way of a Resolución General (General Resolution), the list of companies that should collect tax when payments are processed.