How will taxes be on the construction sector

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Whereas on the route of economic revival, construction activity is one of the fundamental areas of development within Costa Rican society, and that the Legislative Record 21.637( Adding a transitional V Bis to Law No. 9635, Law on Strengthening Public Finances, for the Promotion of Economic Reactivation) disadvantages more than 130 thousand construction projects that would be overcoated by the way it is drafted , the Executive Branch vetoed this project, in order to ensure that this sector will have the right tax conditions to succeed.

This veto is involved together with a drafting proposal that was prepared by the Tax Administration, which considers the possibility that all projects will be duly incorporated, with the tax advantages that the Legislative Assembly has wanted to define for them.

The new wording of the Transitional V bis and an adjustment in the Single Transitional Section of the Act, referring to the deadline for its regulation, which seeks general application for all, proposes that engineering, architecture, topography and civil works construction services, provided to projects registered and/or visas by the Federated College of Engineers and Architects of Costa Rica, regardless of the date of registration and visa, shall be subject to the following value added tax tax benefits:

Tax BenefitTerm of service delivery
100% ExemptionFrom the day after the validity of this Law to August 31, 2021, inclusive.
Rate 4%From 1 September 2021 to 31 August 2022, inclusive.
Rate 8%From 1 September 2022 to 31 August 2023, inclusive.

As of September 1, 2023, these services will become taxed at the general rate provided for in Article 10 of Law 6826, Value Added Tax, of 8 November 1982.

Referring to this decision of the Executive, the Deputy Minister of Revenue of Finance, Alejandra Hernández, emphasized that “this veto has the sole objective of seeking greater stability in a vital sector for the country in terms of employment and production, in such a way that it achieves a correct application of VAT in services supplied to construction projects, promoting equality and transparency among all taxpayers in this sector”.

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