There is a law that came into effect October 2019 which aims to oversee tourist rental services such as: homes, apartments, villas, chalets, bungalows, single rooms and any other similar services and to protect the tourists that utilize these types of services. It also seeks to regulate the platforms that provide these services as intermediaries between the owner and occupant.
This law refers to nontraditional rentals, as separate from traditional hotels and motels. The law wants to protect these specific consumers in three principal areas:
a) Accuracy of information between what is promised and what is delivered
b) Providing for minimum safety, health and hygiene requirements under law
c) Protecting the consumer´s privacy and data
Those that would rent these types of temporary nontraditional services, whether they are corporations or individuals, must register with the Institute of Tourism, register with the tax authorities, issue the digital invoice, pay the appropriate taxes, such as: the Value Added Tax (13%) and Income Tax, guarantee security, safety and comply with all related laws. In other words, these activities which were previously seen by renters as temporary unofficial rentals are now considered by the authorities as fully taxable commercial activities.
The authorities aim to work together, especially the Institute of Tourism and the Tax authorities, to create a directory or list of all providers of these services. The law requires that the authorities respect issues such as the confidential information of corporations or individuals which are protected by law and international agreements. The objective is to obtain a clear picture of the magnitude of these services, for tax, commercial, safety and other purposes, without affecting the freedom of commercial competition.
One area that has alerted the authorities to these types of activities is the apparent increase of high-end properties which are rented out on a short-term basis as a means of offsetting maintenance costs or, increasingly, properties destined specifically for this type of short-term rentals. The authorities consider that enough money is collected from these luxury rentals that justifies looking into this area of business. For tax purposes each activity has an activity code. For example, the activity code for traditional hotels is 551002 but the activity code for nontraditional rentals is 551001, but there are many others.
There are many tax issues that persons or corporations need to consider if they are engaged in these types of rentals. Amongst the most important are whether the person is subject to Capital Gains from rentals, which has a specific tax base of 15%. Also, each person must consider how they will handle their income tax which can be reported and paid under different categories and therefore have different items of authorized deductions. These issues need to be analyzed with the help of a qualified accounting and/or legal professional.
The Department of the Treasury (Ministerio de Hacienda) and the Department of Taxation (Dirección General de Tributación) issued a Government Law (Decreto- Decree) which establishes the obligation of nontraditional platforms to report on the vendors that use their platforms.
If and when these platforms file their reports, the authorities will be able to cross check their information for tax and other purposes. This also means that those individuals that do not have a permanent legal status in Costa Rica may need a special Tax Identification Number in order to file and pay the appropriate taxes. This decree is complex and regulates a number of issues far too long to list here.
The Institute of Tourism has a directory in which nontraditional rental providers can register their service with all pertinent details, such as: individual or company name, identification numbers, addresses, emails, websites, zip codes and others. The law intends to make this directory available to the public.
As we can see, there is a strong initiative to regulate and register these types of nontraditional rental options, and this means that those who operate this type of activity should consider looking into these regulations to determine if they may be affected and what would be the best course of action.
About
Attorney- Jorge Montero B. was educated in the U.S.A. and in Costa Rica. He holds various specialties and degrees in Criminal, Commercial, Environmental and Agrarian Law from the University of Costa Rica and has over 30 years of litigation, contract and counsel experience.
Email: acmbalaw@gmail.com
Tel: (506) 8384 2246
WhatsApp: (506) 8384 2246
