New criteria for calculating VAT on outsourcing services could increase costs

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Companies that outsource services are required to collect Value Added Tax (Value Added Tax) on their customers on the total amount of the service and not just on the commission as previously understood.

The levying of VAT on the entire contract for outsourcing could make services more expensive, for example to ensure the security of the facilities or to process customer inquiries, as is the case with “call centers”.

This has been stated by the Directorate-General for Taxes in Costa Rica in responses to requests from taxpayers under Article 119 of the Code of Tax Regulations and Procedures, which allows people to ask questions about specific facts.

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Outsourcing of services occurs when a company places orders with third parties to carry out certain work, for example to ensure the safety of its facilities, to carry out maintenance work or to process customer inquiries, as is the case with call centers.

The companies that offer these services charge a commission and usually have their own employees.

Francisco Villalobos, an ICS Consultores partner who had access to some of these answers, said that over the past year, some service outsourcing companies had asked tributación (taxes) if the VAT base was only on the commission the company paid for Service, or the total cost.

The official written response in March 2020 was just the commission.

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However, this opinion was later changed.

“Now taxation has changed its criteria and everyone who has been told that it is the commission will be notified and they say: We have changed our criteria: you have to calculate VAT on the total amount,” said Villalobos.

This means that the 13% tax is calculated on wages, social security contributions and the company’s performance. “The components are no longer different as before,” said this specialist.

“By now, the industry understood that the amount the customer transferred to the company that paid their payroll should be treated as a refund. Now suppliers have to levy VAT at a much higher amount, which is causing the company’s financial impact. The tax calls into question the convenience of discontinuing this type of service, ”he added.

Applying a higher value added tax would increase the amount payable for the tax, which could make the service more expensive. or the company outsourcing services could change their tariffs to reduce the new costs. It all depends on the market conditions.

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