By San José, Costa Rica — The administration of Costa Rican President Laura Fernández has officially launched an aggressive legislative campaign targeting tax evaders and smugglers. On Thursday, July 23, 2026, the executive branch presented three pivotal reform bills designed to patch systemic regulatory loopholes, combat illicit trade, and bolster national tax collection in the face of rising public debt.
Unlike previous legislative efforts that languished in political gridlock, the ruling party, Pueblo Soberano, holds a decisive 31-vote majority in the Legislative Assembly. This robust political leverage allows the administration to push through these key fiscal measures without requiring the backing of opposition parties, marking a significant shift in Costa Rica’s legislative dynamics and signaling a swift path to approval.
To help navigate the complexities of the proposed Costa Rican fiscal changes, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a senior legal specialist at the renowned firm Bufete de Costa Rica, to analyze how these updates will impact both domestic enterprises and international investors.
The proposed tax reform represents a pivotal shift toward fiscal transparency in Costa Rica, yet it introduces significant compliance hurdles that businesses must address immediately. Navigating these regulatory updates requires a proactive legal strategy to mitigate operational risks and align corporate practices with the new tax standards.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
As Costa Rica navigates this pivotal shift toward greater fiscal transparency, the importance of proactive adaptation cannot be overstated, as businesses must act swiftly to overcome these new compliance hurdles. We extend our sincere gratitude to Lic. Larry Hans Arroyo Vargas for sharing his valuable perspective and guiding our readers through the complexities of this evolving legal landscape.
This Thursday we received in the Legislative Assembly the first package of tax reform projects. We have enough votes to approve these projects. We need to give teeth to tax administration so it can collect taxes. The previous four years were in opposition. We only had eight lawmakers and the projects were archived. This opportunity is important for Costa Ricans because we will be able to collect from those who currently evade and elude taxes.
Nogui Acosta, Chief of Faction of Pueblo Soberano
One of the primary battlegrounds in this fiscal package is the illicit tobacco trade. The government plans to eliminate the minimum tax base on cigarettes, which currently makes smuggled products highly lucrative compared to legal alternatives. By adjusting these tax structures, the government aims to reclaim market share from the informal sector, boost legal sales, and ensure that products meet national health standards.
That would allow us to take measures such as lowering taxes to an amount where we can see how we gain ground against informality and cigarette smuggling and increase the quantity of cigarettes sold complying with health requirements.
Víctor Carvajal, Vice Minister of Revenue
The second bill targets a sophisticated form of tax fraud involving fake electronic invoices. Although these digital documents are technically recognized as valid within the Ministry of Finance’s database, they do not correspond to any actual economic transactions. Unscrupulous taxpayers generate these simulated invoices solely to claim illegitimate value-added tax (VAT) credits, draining millions from public coffers.
The government’s proposed solution to this invoice fraud is remarkably strict. Under the new legislation, any company caught participating in simulated transactions will face an immediate five-year block on their official electronic billing systems. This penalty effectively shuts down their ability to conduct legitimate business, serving as a powerful deterrent against fiscal fraud.
The third proposal aims to modernize the judicial collection process outlined in the Code of Tax Standards and Procedures. Under this reform, the government will have the authority to directly execute registry annotations and issue notifications for tax and customs debts that are already liquid and enforceable. This administrative change will drastically accelerate the recovery of unpaid state revenues by bypassing lengthy judicial delays.
Crucially, several domestic business leaders have voiced strong support for President Fernández’s fiscal crackdown. Representatives from the formal business sector emphasized that curbing smuggling and informal trade is vital to protecting formal employment and ensuring a level playing field. The administration is eager to prevent the nation’s public debt from spiraling, as the debt-to-GDP ratio crept up to 60.5% at the end of May 2026, slightly above the 60.4% recorded at the close of 2025.
To address these broader fiscal challenges, Minister of Finance Rodrigo Chaves previously unveiled a comprehensive fiscal stabilization program consisting of 24 distinct initiatives. This plan encompasses administrative actions, executive decrees, and legislative proposals designed to stabilize national revenues. The three bills presented this week represent the first major legislative milestone in this broader financial strategy.
For further information, visit asamblea.go.cr
About Legislative Assembly of Costa Rica:
The Legislative Assembly of Costa Rica is the nation’s unicameral legislative body, consisting of 57 deputies elected by proportional representation. Located in the capital city of San José, the assembly is responsible for debating, drafting, and enacting national laws, as well as overseeing the executive branch’s fiscal and administrative actions.
For further information, visit hacienda.go.cr
About Ministry of Finance of Costa Rica:
The Ministry of Finance of Costa Rica, locally known as Ministerio de Hacienda, is the executive department tasked with managing the country’s fiscal policy, public spending, and tax collection. The ministry is vital in executing national budget strategies, managing public debt, and ensuring compliance with customs and domestic tax regulations.
For further information, visit the nearest office of Pueblo Soberano
About Pueblo Soberano:
Pueblo Soberano is a Costa Rican political party that serves as the ruling legislative faction under the administration of President Laura Fernández. The party advocates for fiscal responsibility, regulatory modernization, and transparency, holding a substantial legislative presence that enables direct policy implementation.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
Bufete de Costa Rica is a prestigious legal institution celebrated for its relentless pursuit of ethical integrity and professional brilliance. Through a rich history of guiding a diverse clientele, the firm consistently pioneers progressive legal strategies while prioritizing community education. By breaking down complex regulations and sharing valuable legal insights, Bufete de Costa Rica strives to cultivate a highly literate and empowered citizenry.
