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Did anyone else notice Laura’s tax proposal to levy a 15% tax on all monies brought into Costa Rica?
For the life of me, I can’t figure how they come up with these things! If they pass that, then on top of the proposed 14% VAT, on top of the existing 13% sales tax, on top of the proposed corporation tax, on top of the 18% reduction in the exchange rate over the past year – – what do they think all of this will do to construction and the resulting creation of jobs?
The net result will be an increase in social programs and more government spending to support those without jobs.
With the 15% tax on incoming money, a new $300,000 house for someone moving here just went up to $345,000, a new hotel that would have cost $100,000,000 just went up to $115,000,000, and YOUR monthly pension just went DOWN by 15%.
Can you spell P-A-N-A-M-A?I wrote a long letter to A.M. Costa Rica about this which they’ve not seen fit to publish. You’re right on all counts and then some, Bill.
Question is, as you transition to Panama, what’re you going to do with your home in Costa Rica. Who, exactly, do you think will be inclined to buy it?
[quote=”costaricabill”]Did anyone else notice Laura’s tax proposal to levy a 15% tax on all monies brought into Costa Rica?
For the life of me, I can’t figure how they come up with these things! If they pass that, then on top of the proposed 14% VAT, on top of the existing 13% sales tax, on top of the proposed corporation tax, on top of the 18% reduction in the exchange rate over the past year – – what do they think all of this will do to construction and the resulting creation of jobs?
The net result will be an increase in social programs and more government spending to support those without jobs.
With the 15% tax on incoming money, a new $300,000 house for someone moving here just went up to $345,000, a new hotel that would have cost $100,000,000 just went up to $115,000,000, and YOUR monthly pension just went DOWN by 15%.
Can you spell P-A-N-A-M-A?[/quote]I just got off the telephone with Costa Rica Tax Expert Randall Zamora who says that:
“If” this is implemented and it’s a big “if”.., then the 15% would apply to interest, dividends and rental income.
The 15% would NOT apply to your pension.
And your example about adding 15% to the cost of a new home is also NOT correct!
Scott
I thought there was already some sort of tax on interest and dividends. Whenever we have gotten any kind of CD whether it be in dollars or colones, the tax was taken out before the principle and interest were credited to our account at the end of the CD period. It seemed like this tax was something like 13% of the interest earned. Another 15% would mean that the interest would be taxed at something like 28%. That surely would be a deterent to tying up otherwise liquid money especially with the CD rates being so low right now. If others think likewise, that would mean less money available for banks to lend out.
[quote=”rosiemaji”]I thought there was already some sort of tax on interest and dividends. Whenever we have gotten any kind of CD whether it be in dollars or colones, the tax was taken out before the principle and interest were credited to our account at the end of the CD period. It seemed like this tax was something like 13% of the interest earned. Another 15% would mean that the interest would be taxed at something like 28%. That surely would be a deterent to tying up otherwise liquid money especially with the CD rates being so low right now. If others think likewise, that would mean less money available for banks to lend out.[/quote]
( My parents came in 1940 and bought land up till the last 10 years)
C.Rica is getting more and more American and is not the haven it was even 15 years ago. Cars, gas are double the price. The car insurace for little to NO coverage is $1400 a year for a Kia and in Fla. we pay $900.00 for good coverage that the insurance company pays for a SUV 2009 Lexus. We dont have to hold up traffic for 4 hours and wait
for some ins. guy make his way thru 4 hours of traffic to get to you.
I really dont know what is inexpensive here other than some
foods and labor and home taxes. Land is more here in C.R. than Fla. on the intercoastal right now. YOU can get a $500,000 new condo on the intercoastal in WPB for $136,000 3/2 1800sq ft. Taxes yes are more for a home. BUT do the math… YOU can not live cheaper here and have the same quality,car, and tech,phones,and ease of getting a paper notorized for $3.00 verses $20.00 and on and on with the C.R. fees and lets not forget
the $500 ticket for no seat bill. Fla. is $80.00. Lets not forget the CRAP for roads and damage and cost to your car per year, tires, air filters,oil cost, and brakes.
Costa Rica is losing it touch and other S.A. countries are looking better if USA is not to your liking with the government and its taxes. There is corruption in both and a whole lot of waste,greed,and these taxes are not going to
the people ( ticos), roads or health care. Maybe the C.Ricans need to stand up to their government and protest the high cost of electric,insurance and imports.
There would be less theif, more jobs and a better standard
of living for all here in C.R.
My two cents on the taxes.[quote=”DavidCMurray”]I wrote a long letter to A.M. Costa Rica about this which they’ve not seen fit to publish. You’re right on all counts and then some, Bill.
Question is, as you transition to Panama, what’re you going to do with your home in Costa Rica. Who, exactly, do you think will be inclined to buy it?[/quote]
I thought about that while writing my original post, David, and it is a very worrysome question! And all I can hope for is a wealthy Tico or Gringo who already has their money in CR before the law is passed, if it is passed.
[quote=”Scott”]
I just got off the telephone with Costa Rica Tax Expert Randall Zamora who says that:“If” this is implemented and it’s a big “if”.., then the 15% would apply to interest, dividends and rental income.
The 15% would NOT apply to your pension.
And your example about adding 15% to the cost of a new home is also NOT correct!
Scott[/quote]
Scott, it is great that you have the ability to call a tax expert at your whim! Not all of us have that priviledge, but we can all profit by your ability to do so and offer us your and Randall’s sage advice!
That being said, and in the absence of any information on your site pertaining to the proposed tax package proferred my Ms. Presidente, all the rest of us have to go on is your second least favorite stepchild (behind the TT), being “AM Costa Rica” and the information they offered in their recent edition which stated [i]”The proposal also calls for a 15 percent tax on interest, dividends, profits [b]and money sent from outside the country[/b].”[/i](emphasis added).
As far as your, or Randall’s [b][i]”If” this is implemented and it’s a big “if”.., [/i][/b] I am pretty sure I can recall similar “ifs” and “big ifs” coming from you (and maybe Randall) when the luxury tax was first proposed and its terms were being bantered about.
I always enjoy Randall’s writings and his advice. I have corresponded directly with him regarding the luxury tax, and his advice is always concise and considered (he told me that the luxury tax may never be enacted if one lawsuit were filed against it), but the simple fact is until the law and regulations are published and enacted, NOBODY knows what they will say or how they will be interpreted…..cases in point:
1. your property (land) will not be added to your property improvements when calculating the luxury tax on your home; and,
2. the luxury tax will only be calculated on that portion of your property (excluding land) above 100 million colones.We all believed those two things were fact UNTIL the final law and act were published and implemented!
As far as your statements that “The 15% would NOT apply to your pension.” and “your example about adding 15% to the cost of a new home is also NOT correct!” I hope you are right, but again, I refer back to what we thought we knew about the luxury tax, only to find out that we were wrong!
Instead of new tax laws, CR just needs to improve their efficiency in collecting the tax laws already on the books. Everyone knows that most bars and restaurants keep 2 sets of books to reduce their tax oblgation, and there is still tens of millions of dollars that should be collected on the luxury tax, and they have no process in place to go after those monies.
And yes, I paid my luxury tax (both years) – and from my house I can see a dozen or so homes that should have paid and did not!
I hope that AM Costa Rica has it wrong, but if their report is accurate, and the money for my (and others) pension or new home comes from outside the country, then this new law will be catastophic for existing and future expats, as well as the CR economy!!
How many nails will it take to close the CR coffin?
The government
the culture
the crime
the cost
the professional ineptitude
the non professional ineptitude
the ethnocentricismbeaches
weather
beautyI guess its hard to close the lid on those?
I feel sorry for Ticos with the cost of living. How do they do it?
It wasn’t so long ago people were all being terrified by various sources who said the the income requirement for the pensionado status was going to be raised to $3,000 per month…
As we all know, that has not happened.
[quote=”Scott”]It wasn’t so long ago people were all being terrified by various sources who said the the income requirement for the pensionado status was going to be raised to $3,000 per month…
As we all know, that has not happened.[/quote]
I think the original proposal was $2,000 per month, and they settled on an increase from $600 to $1,000, but I get your point – things change during the final process of approval and implementation. And that was my point exactly …. in the case of the luxury tax they changed for the WORSE, not better, and it can happen again.
Maybe your and/or Mr. Zamora’s interpretation is correct that pension monies and monies sent into the country are intended to be excluded from the 15% proposed tax, but no one can predict what will happen when a bunch of politicians start discussing a tax that will not affect them! And that problem is not the private property of CR, it happens in the States all of the time.
Let’s keep our fingers crossed that Ms. presidente does not gather a majority to approve the new tax proposal.[quote=”DavidCMurray”]I wrote a long letter to A.M. Costa Rica about this which they’ve not seen fit to publish. You’re right on all counts and then some, Bill.
Question is, as you transition to Panama, what’re you going to do with your home in Costa Rica. Who, exactly, do you think will be inclined to buy it?[/quote]
David, hopefully they will choose to publish your letter, but if not, I (and I am sure others on WLCR) would appreciate the opportunity to read your well-reasoned perspective.
[quote=”costaricabill”] David, hopefully they will choose to publish your letter, but if not, I (and I am sure others on WLCR) would appreciate the opportunity to read your well-reasoned perspective.[/quote]
Okay . . .
Editor:
I’m not expert enough to reflect meaningfully on the overall impact of the value added tax that’s proposed by the Chinchilla administration, but I understand that governments need resources to accomplish what is expected (demanded) of them, and those resources have to come from somewhere. Maybe this is a good idea. Great Britain has had a value added tax for years and their economy has survived. Enacted and administered prudently, a value added tax can probably be made to work to the country’s benefit in Costa Rica, too.
It doesn’t take much expertise, however, to recognize a bad idea when you see it coming, and the proposed fifteen percent tax on funds brought into Costa Rica from other countries is a bad idea that sticks out like the proverbial sore thumb. Taxing imported funds amounts to double taxation, plain and simple: First the money would be taxed fifteen percent when brought in from outside; then it would be taxed another fifteen percent when it is actually spent in the local economy.
When purchasing goods, the effect would be to increase the cost of those goods by seventeen percent — a fifteen percent “import” tax on the funds themselves plus an increase of two percent in the effective sales tax rate. But when purchasing the services of attorneys, physicians and dentists, mechanics and other service providers the impact would be a full thirty percent increase in cost, as these services are not taxed at all today. Foreign source funds would be taxed fifteen percent before the fifteen percent value added tax is applied to these services.
More than a few Costa Ricans relocate temporarily to the United States and elsewhere to work and send money home to their families. Many save their money prudently and essentially fund the rest of their lives once they return home to Costa Rica. Penalizing them with a fifteen percent foreign funds import tax would be draconian, and it would amount to double taxation on their enterprise.
And then there are the expats to consider. They, too, would be subject to double taxation, as their foreign source funds would also be subject to the fifteen percent tax and to the value added tax. For individuals (many of them retirees), this double taxation would be a major deterrent to living in Costa Rica, and perhaps that is what the government wants.
But foreign corporations would also be subject to this imported funds tax. Is it really the intent of the government to deter Intel, HP, Boston Scientific, Dole and Chiquita and many others from investing in Costa Rica by increasing their costs so dramatically? Can that be true?
A final consideration is the actual administration of this proposed tax on imported funds. How will it be administered? And by whom? If one brings U.S. dollars in cash to Costa Rica and converts them at a bank, will that be taxed? How will the bank know that those dollars have not already been taxed and are now simply in circulation? And what if those dollars are spent in a store? What about Traveler’s Cheques? What about ATM withdrawals? What about wire transfers? Just how will all this be accomplished?
Wiser heads than mine have considered value added taxes favorably and maybe it’s a good idea for Costa Rica, but the taxation of foreign source funds that help to finance Costa Rica’s development, funds that feed Costa Rica’s families, is a bad idea that the Assembly should reject out of hand. It would be bad for the economy. It would be bad for the people. And it would be an administrative nightmare.
David C. Murray
Grecia, Alajuela
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