Tax collectors again change the rules of the game

How many expats who pay Costa Rican income tax know that today is the deadline for telling the government where the money was made and spent in the 2011-2012 fiscal year?

They might be forgiven for being confused because the nation’s tax collectors have instituted rules and then changed them at the last minute.

The most recent switch was the requirement that taxpayers report every expenditure made in the fiscal year on a form D-151.  Every expenditure meant right down to the last cup of coffee.

The Dirección General de Tributación, an agency of the Ministerio de Hacienda, issued that rule in October after the tax year had finished. Observers thought the system was unworkable even then. The agency seems to have agreed now.

Under the proposed plan, anyone who was filing a tax return had to list all the expenditures that they were planning to deduct. Tributación would use its computers to match up the expenses with those who provided services or material to double check those tax returns. The system is a little backwards because tax returns were due to be filed Dec. 17.

The form D-151 deadline was pushed forward several months in anticipation that taxpayers would have to do a lot more book work

Cooler heads prevailed, and the agency returned to its original policy. Now taxpayers must report payments to a single vendor that amounted to 2.5 million colons or more during the tax year. In the case of rents, professional fees, commissions and interest the threshold is just 50,000 colons. That’s about the cost of one visit to a dentist. Tributación is desperately trying to reduce tax cheating.

Studies have shown that professionals are the ones most likely to fail to report income. To attack this, the agency is instituting a plan for electronic facturas or invoices.

The lawyer, physician or dentist will run the payment through a centralized computer system where the data will be available to tax inspectors.

Taxpayers this year also have to itemize on the D-151 form income from a single source of 2.5 million colons or more. The report has to be submitted via the tax department’s special computer program. Paper forms are not being accepted. Those who do not file can face heavy fines. There also are fines for each error in the document.

Once previously the tax department sponsored a law that said that the D-151 had to be submitted quarterly. Again officials changed their minds at the last minute without much publicity and voided the law with a decree. Most of the information on tax policy is not disseminated to the public but provided to tax professionals.

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