New decree resurrects 13% tourism sales taxes

Just when tourism operators thought that President Luis Guillermo Solís cut them a break on taxation, the tax agency came out with a new decree.

The result: There will be no sales tax collected on admissions to national parks and other reserved areas, but many tourism operators will have to collect taxes on their activities.

The collection agency, the Dirección General de Tributación, changed the rules in parallel to a presidential decree and expanded its interpretation of the law.

This is a case that will end up in court. The national tourism chamber, the Cámara Nacional de Turismo, promised as much in a statement Friday.

According to the new interpretation by the  Dirección General de Tributación, any tourism operation that has what is described as a center will have to collect sales tax on its activities. A center is defined as even just bathroom facilities for customers.

The tax collector is basing its argument on a reinterpretation of a 2006 tax law that said sales tax should be paid by those using recreational centers.

The bulk of the recreational services exists in a definite place and involves activities of relaxation and entertainment which normally have an open or closed infrastructure in which are found reception offices, ticket booths, bathrooms for visitors and signage and, depending on the type of activity, some trails that facilitate hiking as well as attractions of diverse nature, said the tax agency in its decree.

In this sense these services can be carried out or not in the open air and from part of a bigger infrastructure such as is the case with hotels, restaurants and similar, it added.

Specifically subject to the tax are canopy tours, spas, hiking trails, bird watching, bungee jumping and zoos. The new decree, over the name of Carlos Vargas Durán, director general,  specifically exempts scuba diving, snorkling, rafting, paragliding, surfboarding, water skiing and balloon and aircraft flights as long as those offering these activities do not have a fixed office,

At such recreation centers sales tax is collected for all activities within even if they are provided by different vendors, said the tax agency.

In a Friday statement, the tourism chamber called the reinterpretation of the 2006 law illegal and said that the legislature is the only body that can assess tax.

The section of the law that calls for taxing activities at centros de recreo y similares fails to define what that is and neither do the regulations that were drawn up to implement the law.

The sales tax measure was one of the last actions of the Laura Chinchilla administration. The thrust of the Chinchilla decree that appeared in the La Gaceta April 30 listed increased admission fees to national parks and other protected areas. Then in a single short paragraph at the end of the lengthy decree the new fees are made subject to the country’s existing sales tax.

The tourism chamber quickly pointed out that sales tax is being assessed on these admission prices for the first time. And it appears that the sales tax also would be assessed on tourism activities at least within such parks and protected areas.

There was an outcry even within the walls of the legislature that the tourism industry was being kicked while it was down. One lawmaker said that tourism operators were facing retroactive tax collections for 384 months.

Then Wednesday the environmental ministry provided reporters with a decree that was prepared the week before. In it, President Solís and Edgar Gutiérrez Espeleta, the environmental minister,  suspended the April 30 measure that imposed the 13 percent levy on park admissions.

Many figured that the presidential decree returned the situation to where it was before April 30. That is, there would be no sales tax on tourism activities.

Not known is whether Solís knew about the tax agency’s decree, but both Casa Presidencial and the  Dirección General de Tributación have been tight lipped about their decrees, and the public usually learns what is going on when the documents show up in the La Gaceta official newspaper. In fact, the new decree in the hands of reporters came from the tourism chamber and not the Dirección General de Tributación, which is an agency of the Ministerio de Hacienda.

The newest decree is DGT-CI-06-14, and Vargas appears to have signed it the same day Solís was eliminating the tax on park admissions. The decree makes heavy use of the prestigious Diccionario de la Real Academia de la Lengua Española to define such terms as recreación and similar. The decree also anticipates a court case and says that the Sala IV constitutional court in a 2001 decision validated the agency’s expansion of sale tax to similar activities.

The tax agency decree says nothing about retroactivity.

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