Taxes
Costa Rica — Tax: Vat
Costa Rica's VAT (Impuesto al Valor Agregado, IVA) has a standard rate of 13%, confirming the AI draft's headline figure, but the system is more tiered than the draft suggested: reduced rates of 1% apply to basic consumption goods (including items in the 'Basic Taxable Basket' like bread, milk, and fruit), 2% to medicines, 4% to private health services and domestic flights, and 0.5% to organic agricultural products/supplies. Education, public health services, and exports are exempt/zero-rated, as are certain services like residential electricity/water and land transportation.
Why this matters
The single 13% rate the AI draft cited is correct for most goods and services, but the reduced-rate tiers (1% on basic foods, 2% on medicine, 4% on private healthcare/domestic flights) are real and meaningfully lower — relevant for budgeting essentials versus discretionary spending, and knowing residential electricity/water/land transport are VAT-exempt is useful for a household budget.
Key facts
- Standard IVA rate: 13%, applied to most goods and services.
- Reduced 1% rate: basic consumption goods within the 'Basic Taxable Basket' (e.g., bread, milk, fruits).
- Reduced 2% rate: medicines.
- Reduced 4% rate: private health services and domestic (national) flights.
- Reduced 0.5% rate: organic agricultural products and supplies.
- Exempt/zero-rated: education services, public health services, exports, residential electricity and water supply, and land transportation services.
Steps
- Apply the correct rate by category — Most goods/services: 13%. Basic foods: 1%. Medicine: 2%. Private healthcare/domestic flights: 4%. Organic agricultural products: 0.5%. Education, public health, exports, residential utilities, and land transport: exempt.
Costs
- Standard VAT rate: 13%
- Basic consumption goods: 1%
- Medicines: 2%
- Private health services / domestic flights: 4%
- Organic agricultural products/supplies: 0.5%
Required documents
- VAT/IVA registration with the Dirección General de Tributación (for businesses)
Common mistakes
- Assuming a flat 13% applies to everything — basic foods, medicine, and private healthcare have meaningfully lower reduced rates (0.5-4%)
- Not realizing residential electricity/water and land transportation services are VAT-exempt
- Assuming exports and education services are taxed at the standard rate rather than being exempt/zero-rated