Agreement 424-2018 - Customs Tax Instruction of Article 15 Section D of the Sales Tax

In accordance with the provisions established in Article 15, subsection d) of the Sales Tax Law, its amendments and interpretations, the following services are exempt from the payment of Sales Tax:

• 1)

  Electric power service, excepting residential subscribers who have a monthly electric power consumption greater than seven hundred fifty kW/hour monthly (750 kW/h), for the provision of public or private utility service;

• 2)

  Potable water and sewer service;

• 3)

  Construction services, which include urbanization, construction and in general the execution of material work of real property, for which the contractor directly or indirectly builds, manufactures, erects, or raises works, buildings, constructions for residences or businesses, bridges, highways, dams, aqueducts and buildings in general and works inherent to their construction, such as: electrical work, plumbing, piping, masonry, drainage systems and all elements that are incorporated into the construction. Likewise, construction services include reconstruction and remodeling services that imply structural changes to the original work, including studies: designs, supervision and services of maintenance or repair directly related to the work;

• 4)

  Professional fees obtained by natural persons, understood to mean the remuneration or stipend granted for the performance of work or services to natural persons engaged in the liberal exercise of a profession when there is no economic relationship of dependence between the parties and where the person performing the work or service freely sets their compensation;

• 5)

  Teaching service;

• 6)

  Hospitalization service and ambulance transportation;

• 7)

  Clinical laboratory service and human clinical analysis;

• 8)

  Radiological services and other medical, diagnostic and surgical services;

• 9)

  Land transportation services for passengers;

• 10)

  Banking and financial services;

• 11)

  Services related to personal insurance premiums (life insurance, personal accident insurance and medical and dental expense insurance) including insurance brokerage or placement services. Personal insurance premiums shall be understood to mean the cost of insurance or economic contribution that a natural person must pay in their capacity as insured or contracting party to an insurance company to cover all risks that may affect the existence, physical integrity (loss of life, partial or permanent disability, dismemberment, among the principal ones) or health of the insured consisting of terminal illnesses; and, 12. Services related to reinsurance in general, understood to mean the commercial contract and technical instrument by which an insurance institution obtains the necessary compensation to equalize or standardize insured risks, ceding part of these to another institution called a reinsurer, in exchange for the payment of a reinsurance premium.

The following services are excluded from the exemption from Sales Tax established in Article 15, subsection d) of the Sales Tax Law: 1. Cosmetic aesthetic beauty treatment services, such as: spa, laser liposuction and similar treatments. 2. The leasing of movable property with a purchase option; and, 3. The sale or service of prepared food for consumption inside or outside the premises. When the sale or service of prepared food includes products that are expressly detailed in the "List of Essential Items for Mass Consumption," approved by Article 1 of Decree No. 4-2014, such tax shall not be charged.

The sales of services exempt from the payment of Sales Tax described in Article 1 must be documented with an "INVOICE" except for professional fees which must be documented with the "RECEIPT FOR PROFESSIONAL FEES".

Services other than services related to personal insurance premiums and reinsurance in general that are provided by legal persons in the capacity of insurance brokerage or placement services to insurance companies are subject to Sales Tax. Insurance companies shall be the withholding agents of Sales Tax generated in accordance with the preceding paragraph, therefore no insurance intermediary may serve as a withholding agent. Services provided by natural persons in the capacity of insurance brokerage or placement services of any type of insurance to insurance companies are exempt from the payment of Sales Tax by virtue of the fact that professional fees obtained by such persons are exempt from the payment of Sales Tax.

The General Directorate of Tax Policy in coordination with the Tax Administration must review and update this instructional guide when necessary in accordance with the Applicable Current Legal Framework.

This Agreement shall enter into force on the date of its approval and must be published in the Official Gazette "La Gaceta". LET IT BE COMMUNICATED AND PUBLISHED, ROCÍO IZABEL TABORA MORALES Secretary of State in the Ministry of Finance CESAR VIRGILIO ALCERRO GÚNERA General Secretary