Although Airbnb has offered to collect the sales tax for transactions made on rentals in Costa Rica through its platform, the Costa Rica tax man is evaluating asking the United States for information on American citizens who are hosts in the country.
The Dirección General de Tributación Directa del Ministerio de Hacienda (Directorate General for Taxation) says it will to explore all alternatives in case it cannot reach an agreement with the company for information of its hosts in Costa Rica.
The Director of Taxation, Carlos Vargas, explained that his department requires people who rent property in the country to register as taxpayers, to be able to charge them the payment of taxes, both sales tax and income tax.
Vargas added that any request made to the U.S. authorities is possible through the application of the international agreements of exchange of information that it has in force with other tax administrations.
For now, Vargas only mentioned making the request to U.S. authorities.
In August 2016, Shawn Sullivan, Airbnb’s Director of Public Policy for Central America and the Caribbean, proposed the collection and remittance of the sales tax on all transactions carried out in the country through its digital platform.
Sullivan said, at that time, the request made by Taxation was for the company to provide information on all of its hosts in Costa Rica.
However, Sullivan emphasized that this is not possible because of policies of protection of personal data which the company must comply with its users, both for landlords and for guests.
The Director of Taxation stressed that the protection of personal data to which the company refers to does not apply for tax purposes.
Sullivan said that he has not communicated or met with representatives of the Government of Costa Rica in search of a tax collection agreement since that meeting in August of 2016.
He added that as a representative of the firm he urges all Airbnb hosts to comply with the law and pay income taxes as they should.
According to Sullivan, the collection mechanism proposed by Airbnb in Costa Rica is at the moment applied in 300 cities in different parts of the world; the most recent Mexico D.F, in an agreement reached last week with Mexico authorities.
In January of this year, Taxation announced changes to the Law to Improve Fiscal Fraud Control (Ley para Mejorar la Lucha contra el Fraude Fiscal (N.° 9416), that rentals for less than one month are subject to sales tax. The current sales tax is 13%.
Thusm the law must be complied with by anyone who rents a real estate property for less than a month. In the view of Taxation, hosts renting through Airbnb must also report the economic activity, as well as lessors who use any other channel.
At the moment, Taxation is making a call to all landlords of any real estate rental for less than a month, whether Airbnb or not, comply with the law.
By the numbers
Airbnb, says it has a supply of affordable housing in Costa Rica that equals to 18% of the hotel supply.
Airbnb says it has some 7,700 hosts in Costa Rica, each earning an average of US$2,600 annually.
The company says approximately 260,000 visitors used Airbnb in Costa Rica during the last 12 months, and the typical host rents their property 23 days a year.
In addition, more than 105,000 Costa Ricans used Airbnb in both Costa Rica and abroad as an accommodation option.
The Airbnb representative in Costa Rica reports there has not been a drop in the number of hosts in the first four months of this year since the changes in the law, and does not expect a downward impact on the number of hosts it has.
“Airbnb is part of the collaborative economy and many people who can not afford a hotel or very high prices are looking for it as a good alternative of hosting in the countries,” said Sullivan.
For Vargas, if Taxation cannot reach an agreement with the company, it will have to resort to ask for outside information of foreign taxpayers in the country, as foreign governments do of Costa Rican taxpayers.