The reform included the following:
- Capital gains derived by Costa Rican residents would be subject to a 15% tax (3% for nonresidents) if the gains do not arise from the disposal of assets used in a normal trade or business. Under current law, capital gains are not subject to tax unless the gains arise from “habitual” transactions or the transfer of an asset subject to depreciation (or amortization in the case of intangibles).
- Foreign exchange gains and losses would be considered taxable/deductible for income tax purposes in the fiscal year in which they are realized. Existing law is unclear as to whether such gains are taxable or nontaxable income, with several cases pending before the national tax courts.
- Formal transfer pricing rules that follow the OECD guidelines would be introduced.
- Formal thin capitalization rules that include a 3:1 debt-to-equity ratio would be introduced. Costa Rica currently does not have any restrictions on interest deductions if interest rates on related party debt are in accordance with market standards.
- The double taxation relief rule would be abolished. The rule currently allows companies in certain countries (including Mexico and the U.S.) to obtain a 100% exemption from withholding tax on dividends, interest, royalties, commissions and insurance premiums.
- A 15% withholding tax on dividend distributions would be introduced for free trade zone companies that begin operations in 2015; currently, dividends are covered by tax holiday rules.
- The standard rate of VAT would increase from 13% to 14%, the list of exempt products would be significantly curtailed and the provision of services, with limited exceptions (i.e. certain cases of public transportation), would be brought within the scope of VAT.