BILL 25.797: A NEW REGIME FOR TAX BENEFITS
The proposal goes beyond repealing exemptions: it would replace the general model used by Costa Rica to administer and control tax benefits.
A far-reaching institutional change
Bill 25.797, titled the Tax Benefits and Tax Expenditure Control Regime Law, proposes a comprehensive reform of how exemptions, reliefs and other tax incentives are granted, used, audited and evaluated.
Operational administration would move from the General Directorate of Finance to the General Directorate of Taxation. Taxation would assume responsibility for granting, auditing, assessing, revoking and sanctioning benefits. Finance would retain mainly tax-policy analysis and tax-expenditure evaluation.
New access and continuing-eligibility requirements
To obtain or retain a benefit, taxpayers would have to be current both with tax obligations administered by the Ministry of Finance and with obligations to the Costa Rican Social Security Fund. Control would no longer focus only on the use of the favored asset or activity; it would also cover the beneficiary's overall compliance position.
Legal entities required to file beneficial-ownership declarations would have to authorize the Tax Administration to consult that information. This would broaden the Administration's verification tools and should be coordinated with confidentiality, data-protection and information-access rules.
More than a review of incentives
The bill centralizes authority, imposes common conditions and creates a cross-cutting framework for benefits currently scattered across many statutes. Its impact would therefore extend beyond entities losing an exemption: it would also change the procedures and controls applicable to those retaining an incentive.
BILL 25.797: PENALTIES AND REPEAL OF TAX EXEMPTIONS
The bill combines substantial penalties with a general repeal of benefits involving customs duties, VAT, excise tax and vehicle property tax.
A stricter penalty regime
If a favored asset is used for a purpose other than the authorized one, the fine could reach 100% of the tax not collected. If the Tax Administration finds willful misconduct, the fine could rise to 150%. The bill also provides penalties for reporting failures and disqualification for repeated violations.
Applying this regime will require close review of culpability, proportionality and non bis in idem, and a clear distinction between a formal breach and deliberate abuse of a tax benefit. The definition of willful misconduct cc and the relationship among tax collection, fines, revocation and disqualification will be particularly sensitive.
General repeal of exemptions
Article 40 would repeal, except for benefits expressly preserved, exemptions contained in different laws involving customs duties, VAT, excise tax and vehicle property tax. Its cross-cutting scope makes this the bill's most aggressive component.
The bill would retain, among others, certain constitutional exemptions or those arising from higher-ranking international agreements, free trade zones, some tourism benefits, public transportation, taxis, specified public-works trusts, JUDESUR and several exemptions currently found in Article 8 of the VAT Law. free zones, some tourist benefits, public transport, taxis, certain public works trusts, JUDESUR, and several exemptions under article 8 of the VAT Law.
Benefits that would disappear
Benefits would be removed for the Fire Department, cultural radio stations, certain livestock and agricultural auctions, community-development associations, education and administrative boards, ASADAS, and OIJ purchases of goods and services. Incentives involving electric vehicles and spare parts for electric motors and batteries would also be repealed.
By contrast, dues paid to professional associations, labor unions and business chambers would move from exempt to outside the scope of VAT and would therefore remain untaxed.
The proposal is not yet law. Beneficiary organizations should identify the statutory basis of each benefit, quantify the cost of a possible repeal and review their compliance controls.