Costa Rica’s New VAT Tax & Travel: What You Need (and Want) to Know

Tamarindo ocean view

The price of paradise? What you need to know about the IVA, or VAT tax.

Traveling to Costa Rica soon? You may have already heard about something called the IVA (pronounced ee-vah). If you have, you almost certainly have questions. Maybe a few concerns, even. What is Costa Rica’s new IVA tax and how will it affect your trip?

First, let’s start with the super basics: IVA is short for el Impuesto sobre el Valor Agregado, or value-added tax. If you live in or have traveled through Europe, you’re already familiar with this type of tax: in English, we often refer to it as a VAT tax, a goods and services tax, or a national sales tax. But, it’s new to Costa Rica: the IVA tax just went into effect on July 1, 2019.

Essentially, Costa Rica’s IVA adds a 13% tax to all goods and service that don’t already pay a 13% sales tax (aka the IVI – el impuesto de ventas incluido, or the included sales tax).

To put that into layman’s terms, things like your vacation rental or restaurant meal have long included a 13% IVI sales tax and will not incur an additional 13% IVA tax. But, travel goods and services – well, they are affected. Here’s how it works.

How Does Costa Rica’s IVA Tax Affect Travel & Tourism?

Let’s get this out of the way: As of right now, some travel and tourism goods and services already have the 13% IVA tax applied. In other words, they’re 13% more expensive than they were a few months ago.

But, it’s not an across-the-board change. Not yet, at least.

Travel & Tour Operators

Travel and tourism services registered with the Costa Rican Tourism Institute (ICT) are temporarily exempt from any IVA tax until July 2020. From July 2020 through June 2021, they’ll pay 4% IVA tax. From July 2021 through June 2022, they’ll pay 8% IVA tax. Beginning on July 1, 2022, they’ll have leveled up to the final 13% IVA tax.

That said, many smaller tour operators are not registered with the ICT. (Side note: To operate a travel or tourism business, you are not required to register with ICT. Think of it as a national Chamber of Commerce; registration is not mandatory, in any way.) These tour operators enjoy no IVA grace period, however, and began collecting the 13% IVA tax on July 1, 2019.

Air / Plane Travel

Another exception to the 13% rule extends to air travel: Your international flights will be taxed at a rate of 4% IVA, but only on your outbound flight (departing Costa Rica); inbound flights – that is, flights originating outside of Costa Rica – will not be taxed.

To give a solid example: If your flight costs $500 round-trip and $250 of that ticket cost is associated with your outbound flight, then you’ll pay 4% of $250, or $10 additional in IVA. Notably, air travel purchased prior to July 1, 2019 will NOT be charged any IVA, regardless of when you fly.

What About Stay in Tamarindo’s Concierge Services?

Okay, so what about our famously no-added-cost concierge services?

We’re happy to say, they’re still no-added-cost! After all, you can’t tax free. Well, you could – but the total would still be $0.

So, here’s how it (still) works: Our talented and friendly concierge, Cris, can still build the trip of your dreams with no markup. That’s because, to make a long story short – in Costa Rica, travel and tour operators pay commission on bookings without passing that commission cost on to you. In other words, if X Tour costs $85 on their website, it costs $85 when Cris books it for you.

The only difference today, is that many Tamarindo tours now pay the 13% IVA tax. A few are exempt but most aren’t. So, expect to pay the 13% IVA on most tours, car rentals, airport shuttles, and other tourism services. In other words, X Tour now costs $85 + 13%, or $96.05 total.

Have Questions?

Please get in touch and we’ll be happy to answer them!

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