New Tax on Tour Operators Finds No Favor with Tourism Ministry

Recently, an order was issued by the Tax Administration for sales tax to be charged on all tourism activities. The move was one that had concerned the National Tourism Chamber (CANATUR) for quite some time.

A statement was issued by the Tax Administration, which is part of the Finance Ministry, in July that featured a new interpretation regarding recreational centers as pertaining to the Sales Tax Law. The statement also contained an order indicating that tax would be applied to all tourism activities, including hiking trails, zip lining, bungee jumping, bird watching, zoo visits, and spas.

The president of CANATUR, Pablo Abarca, responded by stating that such actions are outside the legal authority of the Tax Administration. Abarca went on to state that only lawmakers have the legal authority to make such changes.

For now, all recreational areas are subject to the Tax Administration. Such areas are defined by the Administration's interpretation as a physical area that is clearly defined for the implementation and management of recreation, fun, entertainment, and leisure activities.

In April, an Environment Ministry decree went into effect ordering all national parks and conservation areas to begin taxing entrance fees. An amendment to the decree was later signed by President Luis Guillermo Solís that excludes application of the tax to entry fees. The amendment was made in a move to avoid damaging the tourism industry.

Leaders of the tourism chamber adamantly opposed the decree, stating that it would harm the country's ability to compete as a popular tourist destination. Leaders went on to state that the decree could also establish a legal precedent that would allow the Tax Administration to start tax tourism activities, which is precisely what has now occurred.

The new order was issued at the same time that a new promotional tourism campaign was launched by businesses to increase visits to Costa Rica, which has served to concern business leaders even more.

CANATUR continues to analyze the legality of the order and may soon be working toward developing a strategy to fight the order.