Biased Tax Collection on 'Streaming'
by Luis Chacón
Published: July, 2018
Submission: July, 2018
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According to the bill, online purchases will also be taxed
Recently, the government announced the submission of the latest tax reform to the Legislative Assembly, which is called the Public Finance Enhancement Plan.
Within this tax plan, the government announced that Internet transmission services, or streaming, such as Netflix or HBO GO, will be taxed with the new IVA, has caused uproar in the public opinion.
The government, however, failed to mention in its announcement that, according to Article 30 of the referred bill, tangible and intangible goods and services bought via the Internet or any other telecommunication platform will also be taxed 15% as IVA.
This means that the IVA would have to be paid on more than just streaming services, but also on every online purchase of tangible or intangible goods, including any and all applications purchased on mobile phones, in addition to all transactions made using a telecommunication platform.
When a tax is created, the law that regulates it must establish certain essential parameters for its application and interpretation. Among the constituent elements of these contributions, we have the tax objective and the taxpayers. In this sense, the bill objective would be to apply the IVA to all sales and services rendered in Costa Rican territory.
Regarding taxpayers, as exception to the previous rule, it is declared that sales or services made abroad may be taxed only when the recipient is an IVA taxpayer.
In other words, and to be more precise, this bill established the following guidelines: Article 1° indicated that the sale of goods and delivery of services made in the Republic’s territory are subject to the IVA. Meanwhile, Article 4 declares that when the service or tangible good provider is residing outside of Costa Rica, those who must pay the tax are those that use services and are duly registered as taxpayers before the Ministry of Finance (i.e.: those who present and pay their IVA declaration monthly).
According to the policies established in this bill, hotels that offer guests Netflix or Apple TV services would have to pay the IVA. Hotels would be required to pay the IVA when, even if the streaming services are provided through an external platform, the Hotel is an IVA taxpayer, as hotel services are subject to this tax.
On the contrary, if a person purchases intangible goods on the Internet, is a Netflix user, or uses any other streaming service and is not an IVA taxpayer because they do not produce or sell merchandise or services under this tax, they do not have to pay the IVA for online purchases and services whose platforms are found outside of Costa Rica.
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