Some countries have fared better than others during this time, the world has stalled while waiting for resolution, or at least reassurance, that the worst of the coronavirus pandemic has been experienced. The economic shutdowns dealt a severe and disproportionate blow to the global economy In Costa Rica´s case, many health experts attribute the country´s relative success to the pre-emptive regulation implemented on March 9th to suspend mass gatherings, as well as urge employees to work from home. From then until now, Costa Rica has continued to directly address and administer regulations to help their nation navigate through these difficult times. Many would argue that as a result of their swift and targeted action regarding health care, tax, working hours, and more the country is now able to shift their focus to forward and future looking endeavours to return to the country to a state of economic normalcy.
The Law of Authorization of the Reduction of the Working Day considering the Declaration of National Emergency applies to private business and went into effect on the 21st of March 2020. The law authorized the reduction of the working day and salaries. Under this law, any business with a gross income impact of 20% has the right to request a decrease of 50% and an impact of 60% to request a 75% reduction in the working hours and salary.
The Law of Tax Alleviation in light of Covid-19 was law approved by the Legislative Assembly to monitor the payment of VAT (Value Added Tax), the partial payment of utility taxes, the selective consumer tax and the tax to nationalize merchandize during the months of April, May, and June 2020. If VAT contributors present their tax declarations for April, May, and June of 2020 they will be temporarily exempt from the corresponding VAT payment. If deemed eligible and approved, the responsible party will be taxed for the respective months covered by the moratorium which must be paid no later than the 31st of December 2020. They are eligible to make payment arrangements with the tax administration without incurring interest payments or fines, under the conditions determined by the tax administration in the regulations. As of the 1st of January 2021, taxpayers who have not paid the respective tax by the aforementioned deadline and have not established a repayment plan will be subject to the regular and corresponding interest, fines, and penalties.
Utility tax contributors are eligible for partial tax payments during April, May, and June 2020. This moratorium will not apply to contributors that are currently benefiting from a previous special tax period by the Tax Administration. Non eligible tax contributors must declare and pay the respective utility taxes in the respective months.
Selective consumer taxpayers and those who are also contributors to the Registro Unico Tributario de la Direccion General de Tributacion, must present their tax declarations for March, April, and May to be eligible for payment exemption during these months. If accepted, the contributor must pay the tax corresponding to the months covered by the moratorium by the 31st of December 2020. Alternatively, these contributors eligible for the postponement of the tax payment have the option to make a payment arrangement with the tax administration without incurring interest payments or fines, under the conditions determined by the tax administration in the regulation. As of the 1st of January 2021,any responsible parties who did not pay the tax during the months of the moratorium and do not have a payment arrangement will be subject to the corresponding interest, fines and penalties that typically apply.
Taxes to nationalize merchandise payments have also been placed under a moratorium during this time. Taxpayers in the Single Tax Register of the Directorate-General of Taxation may, during the months of April, May, and June 2020, nationalize goods without paying the corresponding tariffs. Agricultural and livestock products classified in Chapter 1 through 24 of the Central American Tariff System are excluded from this measure and the mechanisms established in national legislation will be maintained in the event of possible becoming of a possible requirement. If eligibility is met, the responsible party may enter the tariffs for the months covered by the moratorium until the 31st of December 2020. Alternatively, they can make a payment arrangement with the tax administration without incurring interest payments or fines, under the conditions determined by the customs administration in the regulation. As of the 1st of January 2021, taxpayers who did not pay the respective tax for the months covered by the moratorium and have yet to establish a payment arrangement will be subject to interest.
Disability leave due to the Coronavirus. The ´Reglamento de Seguro de Salud de la Caja Costarricense de Seguro Social was modified to reflect a new, temporary, and exceptional leave type, for those who are suspected to have Covid-19. This is applicable only when an isolation order has been issues by a member of the corresponding Costa Rican Social Security office. The Ministry of Work (MTSS) has published a guide for the implementation of working from home as well as recommendations for those working in positions that do not permit working from home. The Costa Rican Office of Social Security (CCSS) has also approved measures to help private businesses in light of the emergency. It includes a series of measures designed to help employers and the self-employed individuals to keep employees on staff.
As we move further into the year, scheduled relaxation of quarantine restrictions will be updated four separate phases. Phase 1 was between May 16th and May 31st. June 1st through 20th and 21st through the 11th of July are for phases 2 and 3. The final phase, 4, is reserved for the fourth and final phase of the country’s reopening from July 12th to August 2nd. The gradual reopening of the national economy in 2020 is accompanied with regulations regarding public safety for a variety of sectors.
Costa Rica issued sanitary measures (Resolution No. MS-DM-3874-2020). General guidelines for different establishments during phase 1 such as, seat separation of a minimum of 2 meters between each person in cinemas and movie theatres. Gyms and swimming schools or other facilities for practicing sports training without contact can open at 25% of their maximum capacity. Retail shops, beauty salons and barber shops can open at 50% capacity as well. Similarly, public dining rooms are able to operate at half capacity. As Costa Rica moved into the next phases of reopening, we will continue to see a loosening of these capacity restrictions in certain establishments.
The Ministry of Health and the Ministry of Economy, Industry and Commerce, together with representatives of the private and public sectors, have developed national guidelines for the surveillance of the Coronavirus infection (2019-nCoV) and specific protocols with prevention and mitigation measures to allow the reactivation and continuity of workplaces, activities and services, as established by the President of the Republic Carlos Alvarado for the gradual reopening of economic activities in the Country.
Ultimately, Costa Rica has made many efforts in multiple areas to ensure the buoyancy of the national economy during and after the pandemic peak. The Costa Rican government continues to emphasize public health and safety, while also ensuring economic security to businesses, business owners, and self-employed individuals through tax incentives, payment moratoriums, and now by taking measured steps to detail how a safe reopening of the economy will be structured. As Costa Rica continues into the next phases of this reopening plan it is every individual’s responsibility to comply with the legal provisions, protocols and regulations established by the Ministry of Healthy and other public authorities of Costa Rica during this time.
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Tyler M. Forbes
Key Account Manager & Business Development Associate
All information contained in this publication is up to date on 2020. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.