A basic principle for the determination of the taxable income tax base is that the expenses we incur to generate income, i.e., deductible expenses, must meet certain requirements.
In a consultation made to the General Directorate of Taxation (DGT) in May 2025, a taxpayer asked if the per diem, hotels and transportation paid to its salesmen abroad were deductible. Most importantly, whether they had to make purchase invoices to support such expenses.
Such concern of the taxpayer is normal and is consulted quite regularly in ICS. In view of this, I would like to review aspects related to this type of expenses.
Foreign travel expenses
The Income Tax Law allows the deduction of representation expenses and others of a similar nature, provided that they comply with the requirements established in the law.
And not only for employees, but also for “owners, partners, members of boards of directors or other management bodies”. (excerpt from Article 8 paragraph m of Law 7092).
I would first like to draw attention to the fact that the above rule does not limit the application of these expenses only to officials or employees, an issue that unfortunately is not always respected by the DGT audit bodies.
In fact, in one case we handled, expenses incurred by the owners of the company for a trip to China were disallowed.
This was because the auditor considered that it had not been proven that it was a business trip (suspicion based on the fact that it was the owner and his son who were traveling). This despite the evidence provided of attendance at a suppliers' fair.
Therefore, despite this position of the tax authorities, it is clear that if the owners or managers make a trip whose purpose is to generate income, the expense is deductible.
Electronic invoicing... outside Costa Rica?
Having settled this, there is another fundamental element about these expenses: they must have a reliable document that supports it, clarifying that the requirements and rites of the expenses in other countries are not the same as in Costa Rica. And it is that not everywhere there is electronic invoice but everywhere they give you some proof of the expense.
In this sense, the official letter MH-DGT-CONS-119-0042-2025, which is the pretext for these reflections, establishes the following with meridian clarity: “the taxpayer may consider as deductible, for income tax purposes, only those expenses corresponding to travel expenses incurred abroad.
“(But) provided that it has the document supporting the payment of the service acquired, duly issued and validated in accordance with the regulations of the country in which such services were rendered and consumed”.
And the other thing, in relation to whether the taxpayer who pays these expenses abroad must issue purchase invoices, remember that the purchase invoice is the mechanism through which a supporting document is generated.
This is for an expense incurred and paid when acquiring goods or services from suppliers that do not use electronic invoicing (such as individuals or simplified regime) or, in the case we are focusing on, foreign suppliers.
DGT position
However, not all payments made to foreigners require the issuance of purchase invoices. If not only those for intangible goods or services consumed in Costa Rican territory, but not those consumed outside the territory.
In this regard, the DGT clarifies: “this Directorate General considers that the situation referred to in the query does not fall within the case of application of the reverse charge mechanism, which would involve the issuance of an electronic purchase invoice.
“In the case in question is the payment of per diems that were consumed and paid abroad, which differs from the provisions of the aforementioned regulatory provision.
“This refers to the acquisition of a service or intangible good from a supplier not domiciled in the national territory, for consumption within the country.”
Francisco Villalobos for The Observer