Banks must soon retain 2% of credit card payments as advance payment of income tax

August 28th, 2014 (InsideCostaRica.com) Beginning October 1st, banks must begin retaining 2% of merchant transactions using credit and debit cards as partial prepayment of businesses’ income tax, the result of an order issued by the Directorate of Taxation which was published in the official La Gaceta on August 25th.

 

The order applies to all merchants that accept credit cards, from neighborhood pulperias to hotels.

 

Business chambers have expressed concern about the effect of the measure on small businesses, some of which operate on a profit margin of 5% to 7%.

 

Ana Teresa Vasquez, executive director of the National Association of Retailers, said that retailers’ gross profit margin averages just 6%.

 

Some have expressed concern that the measure may lead small businesses to begin refusing credit and debit card payments or increase prices.

 

The 2% withholding is in addition to the normal transaction fees paid by merchants for processing credit and debit cards.

 

 

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  • stfree

    Cash is King.

    • Upset with goverment of CR

      Lets keep on printing that paper to survive Federal Reserve. Can hardly wait for 30% intrest on getting a loan. Thanks PAC goverment thanks PLN goverment for stealing and screw up Costa Rican.

    • mhogan

      Agree. Used to think there were only two rules for economic freedom: 1. never live in the country in which you are a citizen and 2. never keep your money in the country you live in. Now I add a caveat: never live in a 3rd world country (like Costa Rica) unless you have lots of money to wield influence, otherwise you’ll be screwed like their own citizens.

  • jerry6665

    this is nuts! this is instant taxation! the merchant can use the money to invest in the company or anything else – he earned it, he should be able to use it until the time when it comes to total up what he earned and then pay his/her appropriate taxes. with the fees the credit card companies charge plus this, i don’t see how a merchant can maintain a business.

  • Upset with goverment of CR

    New goverment in CR knows that most Costa Rican use Credit Cards lots to survive so lets tax and raise price on everything in Costa Rica. That there plan to hurt middle class and poor again and not the rich that steal. Do you hear the death rattle in Costa Rica. Soon no tourist in Costa Rica then massive economic crash. Thanks PLN goverment and Thanks PAC goverment for screwing us Costa Rican for having any future.

  • Ken Morris

    I sympathize with the rationale here, which is to enforce tax compliance in a society where tax cheating is common, but think this particular edict will be counterproductive. It probably will have the effect of further discouraging merchants from accepting plastic, when the tax people want to encourage the use of plastic in order to have better records of transactions. Also, it might help push prices up, not a good thing. On the balance, while I would be interested in listening to arguments in favor of this policy, it strikes me a boneheaded idea.

    As an aside, while I strongly support enforcement of tax laws, I wonder if the Department of Taxation may be out of control regarding their tactics.

    I remember when two tax guys came into my bar to investigate. Nothing wrong with the tax guys investigating, but I couldn’t help noticing that they came in during peak business hours and expected the staff and manager to stop what they were doing (serving customers) to produce the paperwork and whatnot they demanded. This didn’t seem right to me, even seemed heavy-handed. Come on, while it’s perfectly legitimate for tax guys to investigate businesses for compliance, I also think they have an obligation to respect that a business needs to make a profit before it can pay a tax. You don’t investigate a business in a way that interferes with its attempt to do business.

    There may be some heavy-handing arrogance in the tax bureaucracy, the way there is in every government bureaucracy I’ve ever dealt with in CR, that really isn’t right. This 2% tax on plastic purchases strikes me as another instance.

    • Upset with goverment of CR

      Sad to say that Costa Rican Tax man is like SS Nazi now i hear many business closing now in CR because of Costa Rica crazy tax enforcement. I would watch your back with Costa Rican Tax man they like closing business over nothing to show off. I hope your business does well.

  • turbooperator

    Us consumers have to pay an instant 13% tax every time we make a purchase (with credit/debit at least). Maybe the government should trust us to pay up at the end of the year. I, too, have better uses for my money. But I’d rather pay a tax on each transaction than have to come up with the all the tax for all my transactions at tax time.

  • Likk Mii

    TRANSLATION : Credit cards no longer accepted in Costa Rica.

  • Karen Mata

    The CR bail-in provisions are quickly gaining momentum.
    Next up, we freeze all bank accounts until certain you are tax compliant, and possibly put a lien on your property regardless of tax status.

    CR is going the way of Argentina, but with ticos being such dullards and ingrates can only imagine the coming surprises.

    • Upset with goverment of CR

      Argentina problems are because of US hedge funds. US hedge fund bet against countries in Latin America. US hedge funds bet against Costa Rica and many other countries. But your right on the bank account this could happen like Cyprus.

      • Karen Mata

        Hi Upset,

        Argentina’s problem simply stemmed from racking up huge foreign debt which they were unable to pay back.

        Any google search will confirm that.

        Costa Rica is facing the same set of problems. Maybe they have a Patagonia to settle their debts too..??

  • prdatki

    I have a better ideal Tax crooked Politicians and Clergy. How much do you think the last two Presidents should pay?

  • Michael Clarkson

    Ok what is the point to pay more taxes if the government will steal it anyway the politicians for their own personal gain and they do not invest a cent in the infrastructure, why make more laws if the laws in place are not enforced or they do not work is senseless and endless, pointless is a 360 degree turn that will lead them back to the same problems.