Although the objective of the law is positive in trying to alleviate the fragile situation of public finances, it is doing so at the cost of the profitability and competitiveness of many companies, including technology.
When previously small companies only needed to hire accountants on an occasional basis, today they permanently require their services in order to fulfill the process in a timely manner; every month.
This translates into a minimum of three hours of work, which, according to the College of Private Accountants of Costa Rica, means a monthly outlay of about ¢ 72,500 (the professional time is set at ¢ 24,163). This equeals to about 130USD.
Another point to take into account is that the one who assumes the payment of VAT is the customer and the supplier is only limited to collecting the tax, generating a considerable increase in the price of services.
Let’s look at the impact of VAT on the technology industry, reflected in a hypothetical case. Suppose you have a small software company dedicated to the sale of licenses inside and outside of the country. Although for exports it will not involve any change – the tax is territorial and therefore does not apply to consumption abroad -, in relation to local sales, which are subject to VAT with a maximum of 13%.
In practical terms, this means that, if before July 1, you sold a license for $ 200, after that date you must add the $ 26 tax, for a total of $ 226 (more than ¢ 15,000 difference from at the original price).
Faced with this scenario, the provider faces two equally complicated scenarios. One is to absorb the cost of VAT and the other is to lower the service fee so that the customer continues to pay the same or a portion of the tax is transferred.
In both cases, it would be sacrificing profitability and competitiveness in exchange for not affecting the customer’s ability to consume.