Costa Rica to increase VAT for construction sector

Costa Rica will increase the VAT rate from 4% to 8% on Thursday for the construction sector. 

The hike is part of a law that eliminated the sector’s VAT for the pandemic-hit 2020 and established gradual annual increases as of 2021, to bring the rate to 13% on September 1, 2023.

Engineering and construction trade groups have warned that the higher VAT will lead to an increase in the total cost of projects. 

The president of the college of engineers and architects (CFIA), Rashid Sauma, told local news outlet Monumental that a VAT of 13% would generate increases in project costs of between 4.6% and 7%.

“We foresee that the increase to 13% will make costs rise between 4.6% and 7%, which is the direct cost that people who buy or rent houses, or who undertake any project, will have to shoulder,” he said. 

The executive director of Costa Rica’s construction chamber (CCC), Randall Murillo, said that the VAT increase “comes at a very bad time, when we haven’t been able to reactivate the construction sector’s employment and when there’s a lot of work to be done before reaching an adequate level.”