Mandatory eInvoicing in Costa Rica is becoming a reality in 2018. Initially targeted toward service providers, Costa Rica is rolling out the requirement to additional companies later this year, and they must prepare now for the change in processes and operations.
Summary of the Law
In late 2017, Costa Rica announced mandatory eInvoicing for service providers and expanded the requirement to all taxpayers in March 2018. Currently, the mandate includes four types of documents:
- Invoices (for B2B transactions)
- Receipts (for B2C transactions)
- Credit Notes
- Electronic Debit Notes
What Does It Mean?
Taxpayers in Costa Rica must issue electronic invoices and have two options for doing so:
- Using a software provider (for those that issue large numbers of invoices on a daily basis and/or those that need an integrated, automated solution.)
- Using the software provided by the tax administration (available for those that issue a small number of invoices and don’t require integration and automation - mostly small taxpayers.)
Taxpayers mandated to issue electronic invoices are prohibited from issuing standard paper invoices; all invoices should be issued following the XML format established by the tax administration and reported in real-time for corresponding validation.
Who Must Comply?
All taxpayers paying VAT in Costa Rica are required to issue and report electronic invoices, with exception of those under the simplified regime.
The current regulations of Costa Rica empower the tax administration to extend the requirements at any time. In fact, we expect a mandate requiring eReceipts for retailers in the second semester of 2018.
When Is It Effective?
Service providers in Costa Rica must begin issuing and reporting electronic invoices to the tax administration in accordance with the following deadlines:
- Jan. 15, 2018: Medical-Related Services
- Feb. 1, 2018: Accounting Services
- Mar. 1, 2018: Legal Services
- April 2, 2018: Software & Computer-related Services
- May 1, 2018: Miscellaneous Services
- Sept. 1, 2018 - Tax IDs ending in 1, 2 or 3
- Oct. 1, 2018 - Tax IDs ending in 4, 5 or 6
- Nov. 2018 - Tax IDs ending in 0, 7, 8 or 9
It’s important to note that those businesses considered large taxpayers that used to be included in the system via a personal resolution are now required to comply according to the schedule above - forgoing the need for individual notifications.
What Is Required?
Costa Rica’s tax authority issued three sets of regulations governing eInvoicing. Collectively, they require taxpayers to issue XML eInvoices that include the following details:
- Identification of taxpayer or declarant: full legal and commercial names, tax registration number or ID, physical and email addresses
- The name of the type of document, which must include the word electronic: electronic invoice, electronic ticket, electronic credit note or electronic debit note.
- Consecutive numbering
- Date and time of release of the electronic document
- Conditions of sale or service: credit, cash, section, consignment, lease with purchase option, lease in financial function or any other condition that is consigned in the invoice
- Means of payment: credit card, cash, check, transfer - bank deposit, collected by third parties or any other condition stated on the invoice
- Detail of the merchandise or service provided: quantity sent, unit price, unit of measure, product code, description of the product or service and transaction amount
- Discounts granted, with the indication of their nature and amounts
- The value of goods and services rendered, separating taxed from exempt
This data, and more, must be included in each XML, and all fields should be included regardless of whether they are used or not. For a full list of information required, refer to Costa Rica’s eInvoicing implementation guide or contact us.
Clients of the taxpayers mandated to invoice electronically may get a printed version of the invoice or an XML version of it. However, once the electronic invoice has been issued and reported, the current system does not allow companies to revoke it, even if the transaction is canceled. Instead, taxpayers must issue debit and credit notes, so that the original document is kept with its initial number assigned by the tax administration. The tax administration may occasionally allow taxpayers to issue paper invoices in situations where it is impossible to issue the electronic invoice in contingency mode.
Taxpayers must keep electronic invoice records for a period of no less than five years. This mandate applies both electronic and printed invoices and their debit and credit notes.
How Do I Comply?
Companies mandated to comply with eInvoicing in Costa Rica must evaluate how they will approach compliance, with an eye to the fact that the new invoicing rules will likely change over time. Since eInvoicing has become more and more prevalent worldwide, they also must consider where else eInvoicing is required, and where it may expand. Download our checklist for choosing the right compliance partner for more considerations.
What Are the Penalties for Non-compliance?
There are several sanctions applicable to taxpayers that do not comply with the mandate, which vary depending on the severity of the infraction. Those that are not in compliance will be subject to fines ranging from 2 to 100 basic salaries (1 basic salary = US$762), or up to 2% of the amount of a non-reported invoice. In total, fines can reach up to US$76,287. In addition, the tax administration possesses the authority to close businesses that consistently are not compliant.
What Do Companies Need to Do Now?
Companies in Costa Rica must first determine their deadlines for compliance, and then whether the tools provided by the tax authority are sufficient. Those with a large invoice volume or need for integration and automation must then determine the best eInvoicing solution to meet their needs.
Taxpayers should also remain alert and aware that at anytime the Ministry of Finance of Costa Rica may change and add new requirements to the eInvoicing process.
Join our webinar to learn more about Costa Rica's eInvoicing mandate and ensure your company and your ERP system are prepared.
About the Author
As Tax Counsel, Ramon is licensed to practice law in the Dominican Republic and is a member of the Dominican Bar Association. He has a Certificate Degree from Harvard University as well as a JD from the Universidad Autonoma de Santo Domingo.Ramon has written many essays about tax administration, and for one of them won the first prize in the international essays contest sponsored by the Inter American Center of Tax Administrations (CIAT). Prior to joining Sovos Compliance, Ramon worked for more than 10 years in the Department of Revenue of the Dominican Republic where he served as Deputy Director. He is proficient in French and Spanish.More Content by Ramon Frias