Get to know the authorIf you’re thinking about moving to the land of pura vida, you’ll be glad to know that the taxes in Costa Rica are quite favorable for US expats. Add to that great weather, a relatively low cost of living, stunning nature, low crime rates, and a relaxed pace of life, moving to Costa Rica becomes all the more appealing.
But how exactly does the Costa Rican tax system work?
We’ve put together a comprehensive but easy-to-read guide on everything you need to know about taxes in Costa Rica. Read on to learn who counts as a tax resident, which taxes to pay, how high tax rates are, and more.
Snapshot of taxes in Costa Rica
- Primary tax forms: D-101
- Tax deadline: March 15
- Reporting website: Administración Tributaria web portal
- Administrative language(s): Spanish
- US Tax treaty? No
- Totalization agreement? No
Determining Costa Rican tax residency & liability
Costa Rica’s government classifies those who stay in the country for more than 183 days out of the same fiscal year as tax residents. Periodic absences do count unless an individual can present a certificate proving tax residency in another country.
Understanding the Costa Rican tax system & deadlines
Costa Rica’s tax authority is La Dirección General de Tributación, or General Directorate of Taxation — part of the Ministerio de Hacienda, or Ministry of Finance. The General Directorate of Taxation is responsible for developing tax policies, administering and enforcing tax laws, collecting taxes, and educating taxpayers.
Costa Rica has a territorial-based taxation system in which only Costa Rican-source income is subject to taxation. This includes any income generated from assets used, goods located, or services rendered within the national territory. Any income earned from remote work in Costa Rica for a foreign company is generally exempt from corporate tax — making this country a great destination for digital nomads.
Many Americans living in Costa Rica do not have to file tax returns there. For example, companies employing US expats will file tax returns on their behalf, while digital nomads with only foreign-source income don’t need to file tax returns either.
Note:
Some expats will need to file tax returns, including: self-employed individuals who earn commissions, fees, royalties, or other forms of income from Costa Rican-based individuals or companies, anyone earning interest from a Costa Rican source, and anyone earning rental income from a property based in Costa Rica.
Taxation of income in Costa Rica
In Costa Rica, your income tax rate depends on income type, with rates that vary depending on your overall taxable income. There are separate rates for salary income and “income obtained by individuals from profitable activities.” The latter income type is often referred to as self-employment income.
Note that the income bands for salary taxes are monthly, while the income bands for self-employment taxes are annual.
Costa Rica salary monthly income tax rates for 2024
| Income band (CRC) | Income band (USD) | Rate |
| ₡0 to ₡929,000 | $0 to ~$1,853 | 0% |
| ₡929,000 to ₡1,363,000 | ~$1,853 to ~$2,712 | 10% |
| ₡1,363,000 to ₡2,392,000 | ~$2,712 to ~$4,760 | 15% |
| ₡2,392,000 to ₡4,783,000 | ~$4,760 to ~$9,518 | 20% |
| ₡4,783,000+ | ~$9,518+ | 25% |
Costa Rica self-employment annual income tax rates for 2024
| Income band (CRC) | Income band (USD) | Rate |
| ₡0 to ₡4,127,000 | $0 to ~$8,229 | 0% |
| ₡4,127,000 to ₡6,164,000 | ~$8,229 to ~$12,299 | 10% |
| ₡6,164,000 to ₡10,281,000 | ~$12,299 to ~$20,513 | 15% |
| ₡10,281,000 to ₡20,605,000 | ~$20,513 to ~$41,113 | 20% |
| ₡20,605,000+ | ~$41,113+ | 25% |
Remember:
Those who earn self-employment income must pay quarterly estimated taxes.
Deductions & allowances
Some common Costa Rican tax allowances include:
- A child tax credit of ₡1,730 (~$3.45) per month or ₡20,760 (~$41.35) per year
- A spousal tax credit of ₡2,620 (~$5.22) per month or ₡31,440 (~$62.65) per year
- Self-employed individuals earning income from professional services, insurance brokerage, sales commissions, fees, etc. may deduct either 25% of gross income or itemized expenses
Other taxes in Costa Rica
Capital gains taxes
Capital gains in Costa Rica are typically taxed at a flat rate of 15%. However, the sale of property purchased before July 1st, 2019, may, in some cases, be eligible for a 2.25% tax rate.
Also, capital gains taxes decrease to 10% for properties held for more than two years, and primary homes are exempt.
Property taxes
There are several different types of taxes associated with the purchase, holding, or sale of property in Costa Rica:
- Property purchases
- 4% to 6% between transfer taxes, stamp duty, registration, notary fees, etc.
- Note: Often split between buyer and seller, but exact amounts are typically up for negotiation
- 4% to 6% between transfer taxes, stamp duty, registration, notary fees, etc.
- Property ownership
- .25% standard
- Additional solidarity tax (aka luxury tax) of .25% to .55% on homes valued at over ₡371,000,000 (~$739,733)
- 15% on rental income
- .25% standard
- Property sales
- 15% standard; 10% if held for more than two years; 0% if selling primary home
Social security taxes
Costa Rican employees typically have 10.67% of their salary withheld for social security taxes. Social security contributions for self-employed individuals range from 10.67% to 18.62%, depending on the amount and type of income earned.
VAT
The value-added tax (VAT) in Costa Rica — aka the tax applied to the sale of most goods and services — is known locally as the impuesto al valor agregado, or IVA. It carries a standard rate of 13%, with discounted rates for certain goods and services, such as:
- 4% IVA: Health services
- 2% IVA: Education
- 1% IVA: Basic goods
The price of goods you see in stores typically already includes IVA. Otherwise, it will show up as a line item. Self-employed individuals and business owners must charge IVA and remit it to the government.
Inheritance/gift taxes
Costa Rica does not have any gift or inheritance taxes.
Wealth tax
Costa Rica does not have any wealth taxes.
How to avoid double taxation as an expat in Costa Rica
According to the US’s citizenship-based taxation system, all American citizens and permanent residents are subject to US taxes, even if they live abroad.
Those who earn above the minimum income reporting threshold must file a US tax return and may have to pay taxes. If you are subject to income taxes in Costa Rica as well, that could lead to double taxation.
B!T note: Americans living overseas get an automatic two-month tax deadline extension until June 15th (or the next business day, if it falls on a weekend). You can extend this deadline even further upon request until October 15th. In either case, though, you must pay any taxes you owe by April 15th.
Fortunately, the US offers a couple of dedicated credits for Americans abroad. This includes:
The Foreign Tax Credit
With the FTC, Americans who have paid foreign income taxes receive dollar-for-dollar credits that they can apply to their US tax bill. If you pay foreign income taxes at a higher rate than in the US, the FTC usually not only completely erases your US tax liability, but also gives you surplus credits to use in the future.
The Foreign Earned Income Exclusion
With the FEIE, Americans living abroad can exclude a certain portion of their foreign-earned income from taxation. For the 2023 tax year (aka the taxes you file in 2024), you can deduct up to $120,000. For the 2024 tax year, that figure rises to $126,500.
To be eligible for the FEIE, you must meet either the Physical Presence Test or Bona Fide Residence Test. Doing so automatically qualifies you for the Foreign Housing Exclusion or Deduction as well, which lets you offset the cost of qualifying foreign housing expenses (e.g. rent, utilities, rental insurance, etc.).
It’s worth noting that moving abroad may also affect your reporting obligations:
- Americans with over $10,000 across foreign financial accounts must file a Foreign Bank Account Report (FBAR)
- Americans abroad with over $200,000 in foreign assets on the last day of the tax year — or over $300,000 at any point in the tax year — must file Form 8938
- Note: This reporting obligation applies to Americans living within the states as well; however, the filing threshold is much lower ($50,000-$75,000)
Navigate your US expat taxes with confidence
Filing US expat taxes from abroad can be complex and confusing. The best way to ensure accuracy, full compliance, and an optimal tax strategy is by turning to a professional who offers US expat tax services.
Resources
- Costa Rica – Individual – Residence
- Costa Rica – Individual – Taxes on personal income
- Costa Rica – Individual – Tax administration
- Costa Rica’s Tax Authority publishes income tax brackets for tax year 2024
- Costa Rica new brackets of income tax effective from 1 January 2024
- Costa Rica – Individual – Deductions
- Costa Rica – Individual – Income determination
- PROPERTY TAXES IN COSTA RICA – ONE MORE REASON TO MOVE HERE
- What are the closing costs when purchasing or selling real estate in Costa Rica?
- Costa Rica Taxes 101: Property Taxes, Import Taxes, Income Taxes, IVA & More
- Costa Rica – Individual – Other taxes
- Cost of Living in Costa Rica: Example Table of Monthly Expenses 2024
