During 2018 Costa Rica went through the transition to electronic invoicing, and it is still evolving. This year brings something new: Value Added Tax (VAT) on various purchase and sale transactions.
All of these changes affect you directly and indirectly, and it matters that you understand what the new version of electronic invoicing means and how to use it, along with the new VAT rules that take effect on July 1, 2019.
Below are some details you should know about this new kind of invoicing and tax management.
Official information
The first thing to know is that the main source of reference, and the final word on all of this, is the Ministry of Finance.
On electronic invoicing specifically, you should review the rulings issued by the Directorate General of Taxation that relate to electronic receipts Here
On the introduction of VAT as a new tax on commercial transactions, you will find a useful source of reference at this link
Four things to know about electronic invoicing
1. What is an electronic receipt?
Electronic receipts are digital files generated and transmitted in a universal format for structured documents and data on the Internet (XML). They represent the evolution from traditional pre-printed invoices and cash register tickets (paper documents) to an electronic document, with its graphic representation in PDF.
Electronic receipts that meet the legal and regulatory requirements set by the Directorate General of Taxation guarantee the authenticity of their origin and the integrity of their content.
Acá puedes consultar la General Information Guide on Electronic Receipts.
2. What are the most common types of electronic receipt?
Electronic invoice
It backs the sale of goods and the provision of services.
Electronic ticket
An electronic receipt backing the sale of goods and services, authorized only for transactions with end consumers.
Credit/Debit note
They cancel or modify the accounting effects of an electronic invoice or ticket without altering the information in the original document.
3. Acceptance of electronic receipts by the electronic recipient.
Under article 10 of resolution DGT-R-48-2016, the electronic receipt issued by your supplier (the electronic issuer) must be "accepted", "partially accepted" or "rejected" by the electronic recipient, within 8 business days from the first day of the month following the transaction, in order to support the expenses and/or claim tax credits.
That process is carried out through the same system adapted for issuing electronic receipts, which must include the option to receive electronic receipts.
4. If I issued an electronic invoice or ticket in error, can it be cancelled or corrected?
To cancel or modify the accounting effects of an electronic invoice or ticket already issued, resolution DGT-R-048-2016, in article 12, allows the use of an electronic credit note and/or electronic debit note, so the original document and its sequential number remain in force and cannot be reused, since an issued electronic receipt cannot be cancelled directly, while its accounting effects can be, through these two methods.
What's new in electronic invoicing version 4.3
The new version 4.3 for issuing electronic receipts brings the following changes:
New fields (foreign address details, tariff heading, tax factor, others)
More characters allowed in existing fields (issuer name or company name, discount, among others)
Other requirements for implementing Law 9635 "Public Finance Strengthening Act" tied to the Value Added Tax (VAT) that takes effect on July 1, 2019.
It also adds two new receipt types
Electronic export invoice
It must be used by every company whose sales include exporting goods as well as exporting services.
Electronic purchase invoice
It must be used by taxpayers who buy goods or services from taxpayers excluded from using electronic receipts (for example, under the Simplified Tax Regime), where that purchase constitutes an expense or cost. These electronic purchase receipts must be issued by the electronic recipient (the buyer), who is responsible for issuing them and sending them to the Ministry of Finance validator.
Invoicing with Odoo in Costa Rica
Since 2018 Odoo has been able to handle electronic invoicing in Costa Rica, covering every format and technical specification laid out in the annexes and XML structures the country's tax authorities publish.
Odoo can issue and receive official Costa Rican electronic receipts, with the security mechanisms required for it:
Digital signature (individual)
Electronic seal (legal entity)
Ministry of Finance cryptographic key. You obtain it once registered on the ATV portal, under "Electronic Receipts", by choosing "Generate production cryptographic key".
And what about VAT?
From July 1, 2019, Value Added Tax (VAT) comes into force in Costa Rica.
That brings a range of implications, especially for the business and industrial sectors, which deserve attention and preparation so operations are not affected from a tax standpoint.
Things to keep in mind
It is a tax that replaces the current Sales Tax (IV).
VAT applies to all sales of goods and provision of services.
The VAT system taxes each stage of producing goods or providing services, so the producer can deduct the tax paid at every stage where value is added to the goods or services they sell or provide.
Keys to understanding VAT in Costa Rica
What are the main differences between VAT and Sales Tax?
As a rule VAT applies to all sales of goods and provision of services, unlike the sales tax, which taxes sales and, by exception, some services. This is what is known as broadening the base.
VAT is a tax credit for every expense and cost tied to the operation. The sales tax is a credit only for direct costs and expenses, not indirect ones. With VAT, the credit can also be applied to indirect expenses.
What are some examples of services exempt from VAT?
Exempt from VAT are, for example, education services, rent payments below 1.5 reference base salaries, electricity consumption up to 280 kWh, non-bottled drinking water consumption up to 30m3, among others.
Do independent professionals have to charge VAT?
Yes. Private services offered by professionals such as lawyers, doctors, dentists, engineers, surveyors, accountants or economists, among others, must charge VAT. These professionals will also be able to improve their tax deductions by asking their suppliers for invoices.