President Solís sends tourism sales tax compromise to legislature

The executive branch took a strategic step Tuesday to defend its claim that tourists involved in many activities will have to pay sales tax.

President Luis Guillermo Solís sent a bill to the legislature that would exonerate many tourism businesses from remitting a sales tax that they never knew they had to collect. No official ever tried to collect the tax on these activities until in the last days of the Laura Chinchilla administration this April when tax collectors created an expanded reading of a 5-year old law.

The Solís administration continued the claim that centros de recreo o similares includes many forms of tourism. The deal Casa Presidencial struck with tourism operators is that the government would waive five years of back taxes and not collect the tax until Dec. 31, 2015.  The legislature has to approve this form of tax forgiveness.

The bill says that the tax agency, the Dirección General de Tributación, has concluded that the majority of recreational services exist in a designated place which has infrastructure either open or closed. This infrastructure includes offices, bathrooms, signs and in some cases hiking trails as well as other attractions, it says.

In this sense these services can be developed or not in the open air and form part or not of a bigger infrastructure, as is the case with hotels and restaurants, it adds.

Then the bill concludes that the the terms centros de recreo y similares includes not only centers of recreation as a place intended for diversion but also all those services designed for diversion when they are offered inside this center or the center facilitates their offering.

So as the government has said, even activities like scuba diving or sports fishing that take place far from any building are included because somewhere there is an administrative office.

The bill makes clear that any individuals or firms that have been paying sales tax for the last five years will not get back any money. However, the bill gives some breathing room for tourism operations that were being hit up for five years of sales taxes.

The strength of the government’s argument may be tested in court. Several organizations have said they will litigate the government’s claim to the right to collect sales taxes based on that single phrase that was not considered until earlier this year.

There is no guarantee that the legislature will pass the bill in the form submitted by the president. In fact, they could just eliminate the phrase  centros de recreo y similares from the 5-year-old general sales tax law.

If not, in a year, tourists will face new sales tax on activities that had not been taxed in the past.

President Solís signs the transmittal documents for the bill.

President Solís signs the transmittal documents for the bill.

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