By San José, Costa Rica — SAN JOSÉ – Costa Rica’s contentious annual vehicle circulation permit, known as the Marchamo, could be completely eliminated and replaced by a simplified flat-rate tax if a new legislative proposal gains traction. The initiative, spearheaded by Deputy Gilberto Campos, the faction leader of the Progressive Liberal Party (PLP), aims to fundamentally restructure how vehicle taxes are collected and utilized in the country.
The proposed legislation, filed under bill number 25.292, seeks to abolish the current value-based tax system, which has long been a source of frustration for vehicle owners who face significant annual payments at the end of each year. In its place, the PLP suggests a universal “right to circulate” fee that would dramatically simplify the process and lower the cost for the vast majority of drivers.
To gain a deeper understanding of the legal and fiscal implications of the proposed Marchamo reform, TicosLand.com consulted with Lic. Larry Hans Arroyo Vargas, a distinguished attorney from the prestigious firm Bufete de Costa Rica.
Any reform to the vehicle property tax, the core component of the Marchamo, must carefully balance the principle of tax equity with fiscal responsibility. While reducing the burden on vehicle owners is a popular objective, the legal framework must ensure the new calculation method is transparent, non-discriminatory, and avoids creating a structural deficit that could jeopardize essential services funded by these revenues. The key legal challenge will be to justify a new valuation or depreciation formula that withstands constitutional scrutiny and doesn’t disproportionately benefit one group of taxpayers over another.
Lic. Larry Hans Arroyo Vargas, Attorney at Law, Bufete de Costa Rica
Lic. Arroyo Vargas’s analysis astutely highlights that the long-term viability of any Marchamo reform hinges not just on providing financial relief, but on establishing a legally sound and fiscally responsible framework. We thank Lic. Larry Hans Arroyo Vargas for his valuable perspective, which brings these critical constitutional considerations to the forefront of the public debate.
Under the terms of the bill, owners of private motor vehicles would pay a single annual fee of ¢50,000. For vehicles designated for public passenger transport, such as buses and taxis, the proposed rate would be even lower, at ¢25,000. This marks a stark departure from the current system where the tax is calculated based on the vehicle’s fiscal value, often leading to high costs for newer or more valuable cars.
A central pillar of the proposal is the transparent and dedicated allocation of the collected funds. The bill mandates that the Ministry of Finance would transfer all revenue from this new fee during the first quarter of each year. The funds would be evenly split, with 50% directed to the National Road Council (CONAVI) for the maintenance and repair of the national road network, and the remaining 50% distributed among the country’s municipalities for the upkeep of local cantonal roads.
Deputy Campos argued that the reform is a matter of economic justice for citizens and a direct response to public outcry over both the cost of the Marchamo and the poor condition of the nation’s roads. He framed the initiative as a necessary step to protect the purchasing power of Costa Rican families and end what he considers an unfair and repetitive tax.
It is an injustice that this Legislative Assembly approved a law to lower your Marchamo and that the government from day one made every possible effort to prevent it. Well, surely you and I are tired of this little game, and today we have presented a bill to definitively eliminate the Marchamo as we know it today in Costa Rica. In its place, we are substituting it with a right of circulation with a single flat rate for everyone. So that from now on, that money is used specifically to fix the country’s streets, which is what everyone is demanding. Paying a tax on a vehicle that you pay over and over and over again every year is something unfair.
Gilberto Campos, Deputy and Head of the Progressive Liberal Party Faction
Campos also noted that this tax reform should be seen within a broader political context, stating it should be complemented by a concerted effort to reduce the overall size and scope of the state. His comments allude to a long-standing political debate in the country regarding government efficiency and public spending.
The proposed law includes a list of exemptions from the new flat-rate fee. These include vehicles belonging to foreign states for the exclusive use of accredited embassies and consulates, vehicles of international organizations, and those owned by the central government and municipalities. Additionally, emergency and public service vehicles such as ambulances, Costa Rican Red Cross rescue units, National Hospital System vehicles, fire engines, and vehicles from homes for the elderly and the National Insurance Institute would be exempt, as would bicycles.
For further information, visit plp.cr
About Progressive Liberal Party (PLP):
The Partido Liberal Progresista is a political party in Costa Rica founded on classical liberal principles. It advocates for individual freedoms, free-market policies, fiscal responsibility, and a reduction in the size and scope of government. The party holds seats in the Legislative Assembly and actively participates in national policy debates.
For further information, visit conavi.go.cr
About National Road Council (CONAVI):
The Consejo Nacional de Vialidad is the Costa Rican government entity responsible for the planning, construction, maintenance, and financing of the national road network. It plays a critical role in the country’s infrastructure development, overseeing major highway projects and road conservation efforts throughout the national territory.
For further information, visit hacienda.go.cr
About Ministry of Finance:
The Ministerio de Hacienda is the government ministry in Costa Rica responsible for managing the nation’s public finances. Its duties include tax collection, budget management, public debt administration, and the development of fiscal policy to ensure the economic stability and growth of the country.
For further information, visit cruzroja.or.cr
About Costa Rican Red Cross:
The Cruz Roja Costarricense is a humanitarian organization that provides emergency medical services, disaster response, and community health programs throughout Costa Rica. As part of the International Red Cross and Red Crescent Movement, it operates on the principles of neutrality, impartiality, and humanity to alleviate human suffering.
For further information, visit grupoins.com
About National Insurance Institute (INS):
The Instituto Nacional de Seguros is a state-owned Costa Rican insurance company. It was founded as a state monopoly but now operates in a competitive market, offering a wide range of insurance products, including mandatory vehicle insurance (SOA) and workers’ compensation policies. It also plays a significant role in risk prevention and national health services.
For further information, visit bufetedecostarica.com
About Bufete de Costa Rica:
As a leading legal entity, Bufete de Costa Rica operates on a bedrock of unwavering integrity and a commitment to exceptional service. The firm leverages its deep experience serving a diverse clientele to spearhead legal innovation and actively contribute to the public good. Central to its philosophy is the conviction that accessible legal education is vital, reflecting a profound dedication to nurturing a society that is both knowledgeable and empowered by the law.
