This Week in Costa Rica

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This Week in Costa Rica is a weekly, online radio program and podcast by US expat, Dan Stevens

A Costa Rica Vacation Rental Tax in Place?

Costa Rica News – For all of you that are marketing your Costa Rican vacation rental properties on VRBO or other websites, you might have to start increase you prices a little if you abide by the rules.  The funny thing is that this law is going to be next to impossible to enforce in Costa Rica. After the 2008 market crash many foreigners had to stop traveling to Costa Rica. This led to fewer hotel stays, in addition to second home owners having to rent out or sell their homes to rental companies because they couldn’t afford to use them personally.

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Now the hotels are claiming that they loose business to vacation properties, because many of these are private homes that don’t pay taxes or health insurance for workers are able to offer lower rates.

The Costa Rican Tourism Board (ICT) is putting forth efforts to enforce tax and licensing requirements for vacation rentals. “We are not trying to discourage renters. We are trying to level the playing field,” said Herman Navarro, a tourism manager in the ICT.

Hotels are subject to 13% sales tax and higher industrial utility rates. They also pay for services like lifeguards on beaches, which vacation rental occupants benefit from. Vacation rentals are able to undercut prices of hotels because they are not usually paying the same fees.

If a company owns 25 rental properties, it’s similar to owning a large hotel, and they should have the same responsibilities to the government, hotel owners say. They are getting income that’s not reproducing any benefit in the community. The law is equal for vacation properties and hotels but they are rarely enforced.

President Laura Chinchilla signed a clarifying law that will be published in the newspapers shortly. The law also applies to renting rooms in your own home, if they are rented for less than 15 days at a time. The ICT has completed a year-long investigation where it found hundreds of rentals that should be paying taxes. This list has been forwarded to the Ministry of Finance.

One hotel owner said, “We don’t mind the competition as long as we are all on an even playing field.”

Now lets think about how Costa Rica is going to enforce this law?

The government entity in charge of enforcing this law will have to solely rely on the owners presenting complete and honest occupancy and revenue flow from their property, and how many owners are going to actually do this?

The other option is they are going to have to watch every single vacation rental website in Costa Rica and monitor what prices each owner is placing on his or her property.  After monitoring this it will have to be placed in a system to hold the rental owner accountable for the taxes.

During this process the Costa Rican government is going to have to keep tallies on when the property was actually occupied and how much each client paid. Costa Rica cannot even keep tallies on the money it’s own government spends what makes anyone think they will be able to handle the 1000′s of vacation rentals in Costa Rica?

 

This article was originally published at The Costa Rican Times. 

 

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