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It’s another breath of fresh air you’ll experience in Costa Rica—taxation in Costa Rica is much more simplified than in many other countries. The limits of taxation are dependent on your income, fluctuating according to the following general rule: the more you earn, the more you pay. And individuals who earn less than the minimum amount set by Costa Rican law pay no taxes.

What follows is a basic summary of the Costa Rican tax system, designed to give you a better understanding of the tax situation here. Please use this as a baseline that was accurate at the time of this writing; because both tax and exchange rates are subject to change, this information (based on a 500 colones to $1 U.S.D. exchange rate) should not be construed as tax advice. Consult with a qualified attorney of your choice for exact tax rates in Costa Rican colones.


Income Tax

Working individuals and commercial corporations are required by law to pay annual income tax. As stated earlier, the amount due is relative to your or your corporation’s earned income; and each individual must file a mandatory declaration, even if no business took place and/or no income was earned that year.

Individuals: Exemptions apply to individual “regular” workers who earn less than the minimum amount set by Costa Rican law; as of this writing, that exempt amount is approximately $430.00 U.S.D. Also at this time, a 10% tax is assessed on income in the range of approximately $430.00-$650.00 U.S.D., and 15% on incomes in excess of $650.00 U.S.D.

Self-employed individuals: Self-employed professionals who earn their income utilizing qualifications of a specialized degree (e.g., medical doctor, dentist, psychologist, lawyer, etc.), are considered “lucrative” workers subject to a different tax scale. As of this writing:

• Incomes of up to approximately $1,915.00 U.S.D. are exempt;
• 10% tax is assessed on incomes from $1,915.00 to $2,860.00 U.S.D.;
• 15% tax is assessed on incomes from $2,860.00 to $4,775.00 U.S.D.;
• 20% tax is assessed on incomes from $4,775.00 to $9,750.00 U.S.D.; and
• 25% tax is assessed on incomes exceeding $9,750.00 U.S.D.

Corporations: Corporations pay 30% tax over the annual earnings for the fiscal year (October 1 to September 30). No exemption amount applies to corporations; however, specific expenses may be deducted from their annual earnings. The tax percentage is taken from gross earnings, but is applied to net earnings.

As of this writing, corporations with gross earnings under $93,090.00 U.S.D. are considered “small enterprises” on which the following tax rates are assessed:

• 10% tax on amounts up to $26,400 U.S.D. in gross income.
• 20% tax on amounts from $26,400.00 to $57,720.00 U.S.D. in gross income.


Municipal Taxes

Municipal taxes are those charged by the local community government (called the “Municipal” ) to maintain the community (e.g., maintaining the roads, installing public lighting, etc.) and to finance the Municipal itself. Taxes are assessed on your property based on its location, the number of meters of street frontage of the property, and on the specific Municipal your land is a part of.

In the past, this local tax was assessed by the Costa Rican central government; however, Municipal Government Property Tax is now managed by the local Municipality, to which you pay directly 0.25% of the price of your property per year. While amounts vary, they rarely exceed $10 per month per residence. You are exempt if your house is rated at less than the ¢6,000,000.00 (six million colones, or approximately $12,000.00 U.S.D.) but you must apply for this exemption through your local Municipality.


Sales Tax

A 13% sales tax is assessed on the amount paid for goods and for some services. Anything you buy, from an ice cream cone to home appliances, is taxed; typically the tax is already included in the prices of items that you see on the shelves or order from menus. The only exceptions are certain professional services (e.g., those of doctors, lawyers and dentists), which are exempt from sales tax. Houses and cars require payment of a “transfer tax,” discussed next.


Transfer Taxes

In Costa Rica, sales tax is not applicable to the purchase of certain “transferable” items, such as a property, house or car. By law, it is required for these items to be inscribed (registered) in the National Registry. The purchaser always pays a Transfer tax upon the purchase of a new or used car or property.

In the case of real estate, a 1.5% tax over the price registered in the Treasury Department (called the “Hacienda”) or in the National Registry applies. Automobiles are taxed at 2.5% over the retail price set by the Ministry of Treasury in an annual publication for that specific purpose.

Bargain Costa Rica Real Eseate hopes you found the above information helpful. If you have any questions about the content of this article or would like our help in finding a qualified team of professionals that will assist you in exploring your real estate options, please contact us. We are always available and happy to serve you.