Jun 8, 2026
By: Gabriela Páez | Tax Manager - EAS LATAM
The issue deserves review because international freight normally forms part of the CIF value (cost, insurance, and freight) used to nationalize goods in Costa Rica. Therefore, applying an additional withholding on the freight payment should not be treated as an automatic operational matter, but as a discussion of source, territoriality, and proper legal interpretation.
Development
1. What the consultation says
The consultation analyzes the case of a Costa Rican company that directly hires nonresident suppliers for international air, land, and maritime cargo transportation services, without a permanent establishment, agency, or local representation. The taxpayer argues that, in those cases, the freight should be treated as extraterritorial income.
The General Tax Directorate concludes otherwise. In its view, if the service is materialized, used, deployed, or produces effects in Costa Rica, the payment to the nonresident constitutes Costa Rican-source income and should be subject to a 25% IRE withholding on the gross amount.
2. Why the customs treatment matters
From a customs perspective, international freight is not an isolated service. It is part of the cost required to place the goods in import conditions. Therefore, it may be included in the CIF value declared for nationalization.
The consultation itself recognizes that, when international transportation is included in the CIF value and VAT has already been considered in the customs assessment, it is not appropriate to issue an additional electronic purchase invoice or to self-assess VAT again on that same freight.
That recognition is key: for customs and VAT purposes, the Ministry of Finance accepts that freight may be absorbed into the goods nationalization process. What is debatable is that, for income tax purposes, the same economic component is treated as Costa Rican-source income subject to tax on remittances abroad.
3. It is not double taxation, but it may be a misinterpretation
Technically, this is not juridical double taxation. Import VAT and IRE respond to different taxable events. However, it may generate an overlapping economic burden and, above all, a debatable interpretation of the concept of Costa Rican source.
A payment made from Costa Rica may trigger the formal obligation to analyze whether a withholding applies, but it should not, by itself, define the source of the income. For IRE to apply, there must first be Costa Rican-source income.
In international maritime transportation, a container freight charge does not represent profit generated in Costa Rica. It normally covers fuel, vessel operation, crew, captains, insurance, ports, equipment, maintenance, and international logistics costs. For that reason, taxing the gross amount with a 25% withholding may create a disproportionate economic effect.
4. Practical example
Assume a maritime freight charge of USD 3,500 per container paid to a nonresident shipping company:
Concept | Amount |
International freight agreed | USD 3,500 |
Proposed 25% withholding | USD 875 |
Net payment to the supplier if the withholding is accepted | USD 2,625 |
Commercially, an international shipping company would hardly accept receiving USD 2,625 for a service agreed at USD 3,500. If it requires the full net amount, the importer would have to assume a gross-up, making the freight more expensive:
Concept | Amount |
Net amount required by the shipping company | USD 3,500 |
Gross payment required with a 25% withholding | USD 4,666.67 |
Withholding to be remitted | USD 1,166.67 |
Total economic cost for the importer | USD 4,666.67 |
5. The international transportation rule
The legal issue is that the Income Tax Law contains specific rules on international transportation. In the consultation, the taxpayer invokes the rule referring to income from transportation between Costa Rica and foreign countries, and vice versa, especially when the companies are domiciled in Costa Rica or when the service is contracted through agencies or representatives of foreign companies.
If there is a special rule for international transportation, it does not seem sufficient to resolve the case only through a general rule on services that produce effects in Costa Rica. The Tax Administration should justify why it is appropriate to apply the general clause and a 25% withholding on the gross amount, instead of first analyzing the special rule for international transportation.
The discussion, therefore, should not be reduced to the place of payment. The correct question is whether international freight paid to a nonresident shipping company, carrier, or freight forwarder, without a permanent establishment or local agency, truly constitutes Costa Rican-source income.
6. What companies should review
• The agreed Incoterm and who legally assumes transportation.
• Who hires, who pays, and who appears as the party obligated before the transportation supplier.
• Whether the freight was included in the CIF value and in the customs declaration.
• Whether there is a separate freight invoice and whether the supplier is a nonresident without a permanent establishment.
• Whether the contract with the shipping company or freight forwarder provides for a net price, gross price, or gross-up clause.
• The consistency among the contract, commercial invoice, bill of lading, payment documents, and customs declaration.
Consultation MH-DGT-CONS-119-001-2026 adopts a broad position that is adverse to importers. It may make sense from a collection standpoint, but not necessarily from a systematic interpretation of income tax, customs, and international trade rules.
International freight forms part of the cost of nationalizing goods. Treating it also as Costa Rican-source income taxed at 25% on the gross amount, solely because of payment from Costa Rica or the destination of the cargo, may constitute a misinterpretation or an excessive application of the source concept.
Due to its economic impact, this criterion should not be applied automatically. In relevant or recurring operations, it deserves specialized legal review and may eventually justify escalating the discussion to a higher administrative or judicial level.
References
General Tax Directorate. Consultation MH-DGT-CONS-119-001-2026, April 28, 2026. Tax treatment of remittances abroad, international cargo transportation, VAT, electronic purchase invoice, and CIF value.
Income Tax Law, Law No. 7092, as amended. Rules on Costa Rican-source income, remittances abroad, and applicable rates.
Regulations to the Income Tax Law, Executive Decree No. 43198-H, as amended.
General Customs Law, Law No. 7557, and its regulations. Rules on customs valuation and items that form part of customs value.
General Customs Directorate. Circular MH-DGA-CIR-060-2023, on the declaration of domestic transportation in Costa Rica and its treatment in relation to customs value.