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Tax Gap of Heated Tobacco Products in Costa Rica

The excise taxation of most tobacco products was established in April 2012. Heated tobacco falls in the category of “other manufactured tobacco and tobacco substitutes; homogenized or reconstituted tobacco,” which is taxed based on weight. For this category, the law establishes that a factor of 0.6811 (given as the average weight in grams of a cigarette) should be used to convert weight into units (sticks).

The system includes several taxes, including ad-valorem and specific excise taxes. Specific excises are increased every year based on the Consumer Price Index published by the National Institute of Statistics and Census (INEC). As of April 1, 2020, the specific tax was CRC 24.18 per gram of tobacco. The specific tax rate on cigarettes was CRC 24.18 per stick. 

In addition, all tobacco products are subject to the Selective Consumption Tax (SCT) at a rate of 95% (Law on SCT No 4961), although, effectively, the tax base for the SCT is a very small portion of the price. Costa Rica also imposes a 2.5% tax (referred to as INDER) on domestic and imported tobacco products aimed at covering technical education and other needs of rural development (Law No 5792). They are also subject to the VAT (the general sales tax) of 13%. The tax base for these “ad-valorem” taxes or sales taxes is the retail sales price exclusive of the specific tax.

The law also includes a minimum level of taxation for cigarettes calculated based on the “most sold brand” of cigarettes, established annually by the General Tax Office. Since June 1, 2020 this tax has been CRC 490.2654 per pack of 20 sticks (Resolution DGT-R-12-2020, published in Gazette No. 131 of June 4, 2020). 

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Last Updated Feb. 20, 2021