What You Need To Know About The 13% VAT Tax In Costa Rica

Hi Be!

This is a great question. Thanks so much for checking in about it because you’re right, upon first glance the breakdown of tax seems strange. I’d need to know more information to accurately answer your question (specifically, which date you placed the reservation and which dates you intend to travel), but for now, the breakdown looks correct. Here’s why:

There are a few different taxes that apply in Costa Rica. For one, there’s the original 13% sales tax, which companies previously charged for some services before the new VAT tax was established. Then there’s the new 13% VAT tax (described in our article above), which applies to previously untaxed tourism services, such as tours. There’s also an optional 10% service tax, which is essentially a mandatory gratuity, which some restaurants choose to apply to food/beverage services. Double taxation (a.k.a. double charging) happens when a company applies two different taxes to one item that are collected for the same purpose. I don’t believe the company in question here is doing that, because they’re applying different taxes to accommodations, tours, and food/beverages for unique purposes. Specifically, they’re charging the following:

– 13% tax on accommodations. The tax they are charging here is likely the age-old 13% sales tax. The accommodation has probably been charging this sales tax for years, which is legal. The tax shouldn’t have anything to do with the new VAT tax that was introduced.
– 4% tax for tours. The tax they are charging here is likely the new mandatory VAT tax (described in our article above), which is legal and is being rolled out over several years. The exact tax rate applied (which would be either 4%, 8%, or 13%) would have been determined by your travel dates.
– 23% tax for food/beverages. The tax they are charging here is actually comprised of two parts: the old 13% sales tax plus the 10% automatic gratuity. Both of these charges are legal charges that have nothing to do with the new VAT tax; they have applied to food and beverage sales for years.

In my opinion, though it looks a bit funny to have different tax rates apply to different services, the charges look correct. You’ll pay 13% tax on accommodations and food/drink charges (regardless of whether it is recorded on paper as the “sales tax” or the “VAT tax”), you’ll pay 4% VAT tax on tour charges, and you’ll pay a 10% gratuity on your food/drink charges. To confirm, though the individual tax figures add up to 40%, you won’t pay a tax equivalent of 40% overall (i.e., across all accommodation, tour, and food/beverage charges).

Where I can appreciate things seem extra strange is where the accommodation originally quoted you a price for one room (including food and a drink) plus only 13% tax. When they came back to you with the breakdown of other taxes when you asked to book the whole hotel, it probably seemed like they were adding in extra taxes all of a sudden. Though I don’t know the specifics of the quote you received, my best guess is that the original quote ($264 + 13% tax) was correct for your accommodation (taxed at 13%) and your food/drink (also taxed at 13%). The only difference between that quote and the quote you received for booking the entire hotel (apart from the full-hotel quote including a request for tours) is that the full-hotel booking quote included the 10% gratuity charge. Technically, the original room quote you received could have been $264 + 13% tax and an extra 10% gratuity charge on food/drink sales, but for whatever reason, the hotel didn’t charge you the gratuity. Applying (and not applying) the gratuity charge is common practice in Costa Rica; some hotels/restaurants opt to apply it only to large-group bookings (others do not), so perhaps this is why the company you were in contact with didn’t apply the legal charge when you initially requested a quote for only one room. Though the application of the sales tax and the VAT tax (one or the other, not both, per item) are required by law, the application of the automatic gratuity is not. So, if you’re looking for a way to reduce the overall price of your visit, your best bet would be to negotiate the application of the gratuity. I know many hotels won’t budge on this in order to stick to their internal policies, but it is one area where costs could legally be reduced.

Wishing you safe and enjoyable travels! Pura vida! 🙂