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An ocean view with beach chairs is superimposed with the words "Electronic Invoicing"
August 21, 2020

‘Factura Electrónica’ in Costa Rica: All about Digital Invoicing

If you go into a Subway sandwich shop in Costa Rica, you’ll be asked a lot of questions: What kind of bread would you like? What kind of meat? Cheese? Toppings? Drink? Chips? Cookies? … And would you like a “factura electrónica”?

A, um, what? An electronic receipt, that’s what.

The “factura electrónica” — electronic invoicing — is one of the more complicated and far-reaching fiscal reforms implemented in Costa Rica in the past couple of years. And it affects virtually everyone — including all of our property owners at Special Places of Costa Rica.

The stated purpose of the “factura electrónica,” meaning a digital receipt or electronic invoice, is to reduce tax fraud, NOT to make everyone’s life more complicated. But it manages to achieve both of these ends.

This system was rolled out in conjunction with Costa Rica’s new value-added tax (VAT), or “impuesto al valor agregado (IVA),” which is 13%. Apparently the legislature of Costa Rica knew that nobody would pay the tax unless there was a way to force them to pay it.

To make matters just a bit more confusing, “factura electrónica” means two totally different things: It means an electronic “bill” for goods sold or services rendered — with the merchant still waiting for your payment. And it ALSO means an electronic “receipt” for goods or services you’ve already paid for.

‘Factura electrónica’ in Costa Rica: 2 meanings

For example, if you own an income-producing property in Costa Rica and a contractor renovates your kitchen for $10,000, he may send you a “factura electrónica” (a “bill”) for $10,000, plus the 13% IVA, for a total of $11,300.

The Costa Rican tax agency, Departamento de Hacienda, will automatically receive a copy of this “factura.” When the contractor receives your payment, he will owe the 13% ($1,300) to the Hacienda.

Similarly, if you want an official receipt indicating that you have paid the bill, this is also called a “factura electrónica.” This “factura” can be submitted to the tax authorities to deduct the expense from your taxes.

The good news for property management clients of Special Places of Costa Rica is that we take care of all of these headaches for you, processing all the electronic invoicing for cable TV, internet, electricity, water, repairs, necessary purchases, HOA fees and more. All of these expenses should be deductible for our clients if handled properly.

Yet this responsibility involves much more than receiving emails from our service providers. Every “factura electrónica” contains three documents — one PDF and two XML documents that must be imported into electronic invoicing software. We have to manually accept the electronic invoice and then store it in the appropriate tax group. And we are required to keep all documents for five years. In addition, we provide legally required invoices stating the income of all our property owners.

For these reasons, we bill our clients a monthly fee to manage this electronic invoicing, with additional charges possible depending on the number of invoices and the complexity involved.

If you have any questions on this issue, contact us here. We’re happy to help, and we’re committed to making your life as easy as possible in an increasingly complicated business environment.

 

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