Have a short-term rental property business in Costa Rica? This information is for you
Airbnb and similar options as a Business in Costa Rica:
The influx of tourism into Costa Rica was (and will probably be even after the COVID 19 stage), a source of income both for hotels as well as short term stay properties or Airbnb. It has been estimated that in 2018, 524000 tourists opted to stay at an Airbnb property over a traditional lodging. These makes the short-term lease properties an option, that many local owners and investors have turned into to support their local investments or even make a good income from.
However -as it normally happens upon blue oceans- the Costa Rican Government has approved regulations to cash-in as a partner of this investments. In November 19, 2019, the “Framework Law for the Regularization of Non-Traditional Accommodation and its Intermediation through Digital Platforms” was enacted and published in Gazette No. 220.
Clearly it defines the short-term rental properties use as follows:
ARTICLE 3- Definitions
“For the purposes of this law, the following are understood as follows:
c) Non-traditional accommodation: type of tourism consisting of the provision of tourist services for the rental of homes, apartments, villas, chalets, bungalows, rooms or any other similar construction, which conform to a homogeneous and independent whole, for periods not exceeding one year, nor less than twenty-four hours.”
The law approves the operation of such activities even within neighborhoods if:
“Non-traditional lodgings, regulated by this law, may operate their commercial activity in areas classified as residential, provided that they do not alter, disturb or negatively affect the environment to which the property where the activity is carried out is circumscribed.”
So, it adds a new vision to zoning regulations.
The subject of the law is deemed as:
“Providers of non-traditional accommodation services: any natural or legal person who, in his name, in a habitual and lucrative manner, is engaged in the provision of accommodation services to tourists, whether domestic or foreign, for periods not exceeding one year, or less than twenty-four hours, in homes, apartments, villas, chalets, bungalows, rooms or any other similar construction that fits a homogeneous and independent whole. They are marketed individually and directly or through their own brokerage platforms or platforms between the non-traditional hosting service provider and the end user”
Obligations for the owner of the rental business
What are the legal obligations of this newly regimented activity? Within the same law the Costa Rican government has mandated the following obligations, in order to become an “approved short term rental”:
- Become visible: Register as a provider of the non-traditional lodging service before the Costa Rican Tourism Institute (ICT). This process is deemed as a “simplified digital registration” made available for that purposes of the Costa Rican Tourism Institute.
- Register with the Directorate-General for Taxation as a taxpayer, for the applicable taxes established by law.
- Upon approval, issue the digital invoice broken down with the services provided, in accordance with the agreed or agreed prices.
Applicable taxes to the rental activity:
The applicable taxes to this activity are:
- VAT which is currently 13%. You can consult the VAT tax regulations at: https://www.hacienda.go.cr/contenido/13358-declaracion-de-inscripcion-modificacion-de-datos-desinscripcion-en-atv
- Income tax: which will depend on the bracket your income places you.
Compliance with the law and the obligation to register
The same law that has been enacted call for different kind of administrative and legal penalties when there is an Airbnb (or similar) operation not complying with the local regulations. The non-compliance with the law is defined when:
- The non-traditional lodging service provider is not registered.
- There is the use of a commercial name that implies this is a hotel, misleads the activity or services provided.
Starting November 2019, the law grants a 12-month period to register and comply with the local regulation, so it is important to process your registration for your short-term rental property, within the period, if you currently have this activity.
At my firm, we can guide you both in the local registration process as well as in the compliance of the process itself. Contact us today by mail, or call us at: (506) 2283-2020, and we´ll gladly give you the assistance that you need.