Costa Rica Personal Income Tax

Resident and nonresident individuals, regardless of their nationality, are taxed on their income earned in Costa Rica. Foreign-source income is not taxed.

Individuals are considered resident if they have lived in Costa Rica for more than six consecutive months during a taxable year. However, the tax authorities may apply a shorter term for em ployed individuals.

Income subject to tax. The taxation of various types of income is described below.

Employment income. Monthly income in excess of CRC787,000 is taxable, including salary, pensions, bonuses, premiums, com­missions and allowances (for example, housing and educational allowances). Payments made to board members, other executives and counselors not included in the payroll are subject to a 15% withholding tax.

Self-employment and business income. Income derived from self-employment or from a trade or business is subject to taxation.

Investment income. Dividends paid or credited by local compa­nies to resident and nonresident individuals are subject to a 15% withholding tax. If dividends are paid by publicly traded compa­nies registered on the Costa Rican stock exchange on shares acquired through the stock market, the withholding tax rate is reduced to 5%. Interest paid abroad is generally taxed at a rate of 15%. However, interest paid to foreign banks that are part of a Costa Rican financial group or conglomerate regulated by the Costa Rican Financial System (CONASIFF) is taxed at a rate of 5.5% for the first year in which the Reform of Law No. 8634, Development Bank System Law (27 November 2014), which amended Section 59 of the Income Tax Law, applies. This law has applied since 28 May 2015. The tax rate is 9% during the second year, 13% during the third year, and 15% for the fourth year and subsequent years. In addition, interest paid to multilateral devel­opment banks and other institutions of multilateral or bilateral development and to other not-for-profit entities that are not sub­ject to tax is exempt from the withholding tax. Royalties from franchises, technical advice payments and similar payments are subject to a 25% withholding tax.

Directors’ fees. Directors’ fees paid to resident and nonresident individuals are subject to a 15% withholding tax.

Capital gains. Capital gains are taxable and capital losses deduct­ible only if derived from the sale of depreciable assets or from the sale of non-depreciable assets in the ordinary course of business. Occasional (infrequent) sales of non-depreciable assets are not subject to tax.


Personal deductions and allowances. Annual tax credits are allowed in the amounts of CRC17,760 for each dependent child and CRC26,520 for a spouse. The spouse tax credit may be taken by either the husband or the wife, but not by both.

Business deductions. All costs and expenses that are necessary to generate taxable income and protect investments are deductible.

Rates. Employment income is taxable at the following rates applicable from 1 October 2015 to 30 September 2016.

Annual taxable income Tax rate Tax due Cumulative tax due
First 9,444,000 0 0 0
Next 4,728,000 10 472,800 472,800
Above 14,172,000 15 ­


Fringe benefits and salary in kind are subject to a 15% withhold­ing tax.

Self-employment and business income are taxable at the follow­ing rates applicable from 1 October 2015 to 30 September 2016.

Annual taxable income Tax rate Tax due Cumulative tax due
First 3,496,000 0 0 0
Next 1,724,000 10 172400 172400
Next 3,488,000 15 523200 695600
Next 8,743,000 20 1748600 2444200
Above 17,451,000 25 _______________


Withholding tax is levied on nonresidents at a rate of 15% on salaries, other remuneration, pensions, commissions, directors’ fees and other similar items.

Relief for losses. Self-employed individuals may not carry their losses forward or back.

Estate and gift taxes

Costa Rica does not impose estate or gift taxes. However, estates may be taxed as ordinary taxpayers if they derive income before the distribution of assets to beneficiaries.

Social security

Social security contributions are levied on salaries, at a rate of 26.33% for the employer and 9.34% for the employee. Contri­butions are computed based on an employee’s gross compensa­tion, with no deductions allowed.

Tax filing and payment procedures

Employers are responsible for withholding income taxes and social security contributions from employees’ salaries on a monthly basis. Employees are not required to file an annual income tax return if their only source of income is employment compensation. Nonresidents are not required to file tax returns if they are only subject to income tax withholding at source.

The ordinary fiscal year runs from 1 October to 30 September. Returns must be filed, and any tax liabilities due must be paid, no later than 15 December. However, in certain specific circum­stances, taxpayers may elect to file using a calendar tax year (1 Jan­uary to 31 December). Self-employed individuals and individuals with a trade or business must make advance quarterly tax payments.

Double tax relief and tax treaties

Costa Rica has entered into a double tax treaty with Spain, which took effect on 1 January 2010. Costa Rica has signed double tax treaties with Germany (15 February 2014) and Mexico (12 April 2014). Congress approved the treaty with Germany, which will enter into force on the exchange of ratification instruments.

Costa Rica has entered into bilateral tax information exchange agreements with Argentina, Australia, Canada, France, Mexico, the Netherlands, Norway and the United States. Also, the Congress has approved such agreements with Denmark, Faroe Islands, Finland, Greenland, Iceland and Sweden. It is negotiating such agreements with Guernsey, India, Indonesia, Italy, Japan, Korea (South) and South Africa.

Temporary visas

Depending on their country of citizenship, individuals may be required to apply for and obtain an entry visa before traveling to Costa Rica. A Costa Rican consulate overseas grants the visa. Because the rules indicating the countries of citizenship of individu­als who are required to obtain an entry visa before entering Costa Rica and requirements for obtaining a visa often vary, it is necessary to check the entry visa requirements on a case-by-case basis.

Work visas (and/or permits)

The government of Costa Rica grants a work authorization to foreign employees who have special knowledge or experience in a certain field. The granting of a work authorization is subject to certain rules that must be checked on a case-by-case basis because the rules may vary. The main policy applied by the Ministry of Work is that the local labor force cannot be moved through the hiring of foreigners. Consequently, it may not be pos­sible to obtain a work permit for foreigners in certain occupations unless the employer is a company registered and recognized by the immigration authorities.

Residence visas (and/or permits)

The government of Costa Rica may grant migratory statuses that allow foreigners to reside in the country. These include the fol­lowing:

  • Science status
  • Athletes
  • Journalists
  • Workers
  • Businesspersons
  • Investors
  • Retired individuals
  • Religious status
  • Certain types of family relatives

The request must be submitted and processed by the immigration authorities in Costa Rica. Because the application requirements may vary, they should be checked on a case-by-case basis.

Family and personal considerations

Family members. Spouses of foreigners who are granted work permits do not automatically receive the same treatment as the original permit holder and must apply for an independent visa or work permit.

Children of expatriates may use the granted migratory status of their parents to attend schools in Costa Rica.

Marital property regime. Assets obtained by any means, except by donation, after the commencement of the marriage are consid­ered to be marital property.

Forced heirship. If an individual dies without leaving a will, the beneficiaries of his or her assets and patrimony according to the law are descendants, ascendants, spouse and collaterals (certain other relatives). The priority order is set by the Civil Code according to a series of different combinations. The amounts needed to satisfy maintenance and other obligations of the deceased are removed from the decedent’s estate before the estate is divided between the beneficiaries.

Driver’s permits. Foreigners may drive legally in Costa Rica using their home country driver’s licenses for the duration of their tour­ist visas. After the tourist visa expires and before obtaining a migratory status, the foreigner is not allowed to drive. After the migratory status is approved, the resident must obtain a Costa Rica driver’s license in order to drive.