Costa Rica

Basic taxes (briefly)

Personal tax 0-25%
Corporate tax (in detail) Income tax is levied at the rate of 30%. However, for companies with gross income up to CRC 109.337.000, a progressive taxation scale is established from 5% to 20%.
Capital gains tax. Details Tax on gains from the sale of assets is levied at the rate of 15%.
VAT. Details The standard VAT rate is 13%. Reduced rates of 4%, 2% and 1% apply to some goods and services.
Other taxes Social contributions, Property taxes, Real estate tax
Government fee
Stamp duty 5 CRC for every thousand of the contract value in relation to various transactions

International tax agreement

Tax treaties entered Germany, Mexico, Spain
   
Tax Exchange Information Agreement (TEIA) Argentina, Australia, Canada, Denmark, Ecuador, El Salvador, Faroe Islands, Finland, France, Greenland, Guatemala, Guernsey, Honduras, Iceland, Italy, Netherlands, Nicaragua, Norway, South Africa, St Maarten, Sweden, USA


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TAXES

General Info

Under the Costa Rica tax system, residents and corporations are taxed only income earned in Costa Rica. Foreign source income is tax exempt. As a result, foreign income generated by a Costa Rican corporation will be totally exempt from income and capital gains tax in Costa Rica
On September 1995 a main set of reforms to the prevailing tax structure was issued. These are the tax law (Ley de Justicia Tributaria) and Tax Adjustment Law (Ley de Ajuste Tributario). Both these Laws impose severe administrative fines, administrative penalties and criminal prosecution for failing to comply with the income reporting requirements established by law.

Personal tax

Employment income includes the gross value of a salary, wage, pension, commissions, bonuses, expense allowances and any benefits in kind. No expenses can be deducted in assessing employment income. However in respect of non-employment source income (e.g. dividends on shareholdings, rental from a property letting, etc.) there is a difference in how residents and non-residents are taxed. Thus there are 3 distinct manners of assessing income tax payable by residents and non residents namely:
1) Persons whose income consists of a fixed salary pay taxes at the following rates:
Taxable Income, colons Rate
Up to 714,000 0%
714,000 - 1,071,000 10%
Over 1,071,000 15%

2) Individuals with profit generating activities pay taxes at the following rates (the 2012/2013 tax year):
Taxable Profit, colons Rate
Up to 3,042,000 0%
3,042,000 - 4,543,000 10%
4,543,000 - 7,577,000 15%
7,577,000 - 15,185,000 20%
Over 15,185,000 25%

3) Non-residents who receive income from a non-employment source usually pay withholding taxes.
The fiscal year runs from 1st October to the following 30th September.

Corporate tax

Corporate Income Tax is levied on a gross income of corporate entities at the following rates:
Income, colons Rate
Up to 21,468,000 10%
Up to 43,183,000 10%
Over 43,183,000 30%

Capital gains are not taxed in Costa Rica, with the exception of the realization of two events:
  • the realization of a capital gain from the sale or transfer a depreciable tangible asset (Personal or Real Property);
  • if the realization of a capital gain derived from a habitual activity of the taxpayer.

Capital gains tax

There is no capital gains tax in Costa Rica.

Net operating losses

Operating losses may be carried forward for 3 years for most activities, and for 5 years in agricultural activities.

VAT / Sales tax

There is no VAT in Costa Rica, only a sales tax which stands at 13% and is levied both at the point of importation and at the point of sale (unless the sale is by way of export). It is levied on all goods with the exception of foodstuffs, real estate, medicinal products, services and certain other items.
Sales tax is charged after the imposition of selective consumption tax.
The selective consumption tax varies from 0% to 60% and is levied either at the point of importation or for domestic production at the point of sale.

Sales tax reduced rates

A 10% rate of sales tax applies to the sale of wood and a 5% rate to the consumption electric energy for residential purposes.

Sales tax registration and filing

Registration for Sales tax is compulsory for businesses, but a simplified regime is available for small and medium-sized business.
Sales tax is payable on a monthly basis at the time the tax return is filed.

Withholding tax

In general, certain types of income paid to companies such as dividends, interest, service and professional fees, royalties, advertising fees, and prizes, are subject to withholding tax at source. That is, taxes on these types of income must be deducted at source by the income payer, who is required to file tax returns and pay in the tax withheld to the district revenue offices with 7 days of the following month after income payment.
Withholding tax rates vary depending on the type of income and the income recipient’s tax status:
Type of Income Rate
Dividends 10%
Interests 1%
Service and professional services 3-5%
Royalties 3%
Advertising fees 2%
Prizes 5%

For companies disposing (remitting) profits out of Thailand, the 10% tax shall be withheld at source. The company is required to pay in the tax within 7 days from the remittance date.
For foreign companies not conducting business in Thailand, applicable income taxes shall be withheld at source by the income payer residing in Thailand.

Other taxes and duties

Tax on Corporate Assets a 10% tax on the assets of corporations whose assets exceed ¢30,000,000.00.
Property tax levied annually at rate of 0,25 percent of the appraised value of the property.
Real Property Transfer Tax a 1-2 % tax on a transfer of property depending on its value.
Social security contribution the employer must contribute 26.17% of the gross wages paid to its employee.

Free trade zones

There are more than 20 Free Trade Zones in Costa Rica:
  • Almacenes Atalanta, P.I.Z.F. Atalanta, San Jose
  • BATCCA Park, Llorente, Heredia
  • Centro de Ciencia y Tecnologia Ultrapark, Ulloa, Heredia
  • Conair Costa Rica, Turrialba, Cartago
  • Corporacion de Inversion Desarrollo BES, El Coyol, Alajuela
  • Diursa Inmobiliaria de Costa Rica, Europlaza Diursa, Barreal de Heredia
  • FTZ Coca Cola Park, La Uruca, San Jose
  • Inmobiliaria Oslo, Guadalupe, San Jose
  • Intel Free Trade Zone Park, La Ribera de Belen, Heredia
  • Inversiones Zeta-Cartago, Cartago
  • Inversiones Zeta-La Valencia, La Valencia, Heredia
  • Inversiones Zeta-Montecillos, Montecillos, Alajuela
  • Los Arallanes, San Francisco, Heredia
  • Parque Biotecnologico, Golfito
  • Parque Global, La Aurora, Heredia
  • Parque Industrial y de Servicios Coyol, San Jose de Alajuela
  • Parque Industrial Zona Franca Alajuela, Alajuela
  • Saphill, P.I.Z.F. Saphill
  • Ultrapark L.A.G., Heredia
  • Zona Franca Metropolitana, El Barreal, Heredia
  • Zona Franca Puntarenas, Puntarenas

Companies that operate under the Free Zone Regulation have the following benefits:
  • Exemption of import taxes and surcharges on imports (raw materials and inputs)
  • 100% exemption of taxes on profits.
  • Exemption of export taxes of local and excise taxes and of profit repatriation taxes.
  • No restrictions on capital repatriation.
  • Streamlined and centralized processing of documentation required for installation
  • and operation.
  • Possibility to sell in the local market (up to 25% of total sales)

Stamp duty

Stamp duty is only payable by corporate entities and the branches of foreign corporate entities which are registered in the Costa Rican companies registry. There are two types of stamp duty:
  • a set duty for every entry recorded in the companies registry (750 CRC);
  • an annual stamp duty charge based on a company's issued share capital.

Government fee

All corporations must pay an annual fee in relation to their net capital in accordance with the following schedule:
Amount of Capital, CRC Fee
Up to 1 000 000 3000
1 000 000.00 – 2 000 000 6 000
Over 2 000 000 9 000

The annual fee is payable in February - March each year.

Anti-avoidance rules

Transfer Pricing: no, but a substance-over form-principle is commonly applied by the tax authorities to evaluate commercial transactions between related companies.
Thin capitalization: no
Controlled foreign companies: no
Disclosure requirements: no

Foreign exchange control

There are no exchange controls of any kind in Costa Rica. Consequently, funds may move freely in and out of the country at any time and may be held by any domestic or foreign natural or legal person.

Double Tax Agreements

Costa Rica has tax treaty with 25 jurisdictions.
3 DTCs: Germany, Mexico, Spain.
23 TIEAs: Argentina, Australia, Canada, Denmark, Ecuador, El Salvador, Faroe Islands, Finland, France, Greenland, Guatemala, Guernsey, Honduras, Iceland, Mexico, Netherlands, Nicaragua, Norway, Sint Maarten, South Africa, Sweden, United States.

ACCOUNTS

Accounting books

According to Cost Rican law, all Costa Rican corporations, regardless of whether they do business in Costa Rica or not, must keep registered accountancy books.

Financial statements

Costa Rican companies are not obliged to file financial statements.

Annual Return

Generally speaking, Annual Return is a short review on the current state of the company, which is prepared by the company secretary annually. As a rule it includes the following information:
  • Incorporation information (registration date, registered address);
  • Information about directors and their resignation;
  • Information about secretaries and their resignation;
  • Information about registered capital, nominal value of shares and amount of issued shares;
  • Information about shareholders and share transfer.

In Costa Rica companies are not obliged to prepare or file Annual Return, if the company is not operating. The company must be registered before the tax authorites as non active in order for this to be waved.

Tax return

All Costa Rican corporations, regardless of whether they do business in Costa Rica or not, must file an annual income tax return, unless specifically exempted from such filing obligation by the Tax Administration. This return would only indicate that the company had no local source income, in case of companies which do all their business abroad.
Corporate tax is payable in quarterly installments. The tax return must be filed and paid within 2 months and 15 days after the tax year end. The tax year is the 12-month period from 1 October to 30 September, although the taxpayer may request a different period. The return must be filed in Spanish.
Late filing is subject to a penalty of 1% of the total debt for each month, up to a maximum of 20%.

    Taxes of Costa Rica

    Min. rate for corporate tax 30%
    Capital gains tax 15%
    VAT 13%
    Withholding tax 15%/15%/25%
    Exchange control No
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