| Costa Rica Income Tax Rates Costa Rica income tax rates for 2008-2009 are progressive between 0%-25%. There are 2 different types of income taxes in Costa Rica: income tax on wages, and income tax on profit generating activities.
Costa Rica Income Tax for Wages (Fixed Salary)
Taxable Monthly Income / Tax Rate %
CRC 0 - 586.000 no tax
CRC 586,000 - 879,000 10 %
Over CRC 879,000 15 %
Any individual employed in Costa Rica pays a monthly withholding tax rate based on his salary. Employment income of individuals is subject to a progressive tax of 15% on a monthly basis as shown above.
All physical persons who receive salaries, pension or retirement - and any Corporations that are involved in commerce in Costa Rica - must pay Income Tax in Costa Rica. There is a tax scale and an amount due from the amount you earn from your employment, your professional services, and from whatever activity your Corporation performs. (There are individual exceptions depending on circumstances.)
Costa Rica Income Tax for Lucrative (Profit Generating) Activities
Taxable Income / Tax Rate %
CRC 0 - 2.599.000 no tax
CRC 2.599.000 - 3.880.000 10 %
CRC 3.880.000 - 6.473.000 15 %
CRC 6.473.000 - 12.972 000 20 %
Over CRC 12.972.000 25 %
If you are self-employed because you have a professional degree, like a Doctor or a Lawyer, you will be subject to above taxation in Costa Rica as above.
Tax Credits for Individuals in Costa Rica
For Each Child:
monthly: CRC 1,110
annualy: CRC 13,320
By the Spouse:
monthly: CRC 1,640
annualy: CRC 19,680
Costa Rica Social Security Contributions for Employees: Individuals contribute 9% if employed by another and 9.5% if self-employed.
Tax Year: Costa Rica tax year starts on 1st October and ends on 30th September.
Costa Rica Corporate TaxationCosta Rica corporate tax rates are progressive between 10% - 30% in fiscal year 2008-2009.
Taxable Gross Income / Tax Rate %
CRC 0 - 38,891,000 10%
CRC 38,891,000 - 78,231,000 20%
Above CRC 78,231,000 30%
Under the Costa Rica tax system, residents and corporations are taxed only on income earned in Costa Rica. The tax year begins on October 1st and ends on September 30th, for both individuals and corporations in Costa Rica. Companies may request filing returns on a different tax year, subject to the approval of the Ministry of Finance. Unless proof to the contrary exists, the Ministry of Finance establishes a presumptive net income for professionals as well as corporations, and constitutes a minimum taxable base.
Costa Rica corporate income tax system is based on the "territoriality principle" which means that only income derived within the Costa Rica territory and from Costa Rica sources is subject to income tax. Costa Rica is not considered to be an offshore centre. Foreign source of income is exempted from taxes. Corporation tax is levied at different rates on income derived in Costa Rica, depending on the total amount of a company's income.
Costa Rica Tax Year: Costa Rica tax year starts on 1st October and ends on 30th September.
Stamp Duty: 1% of the transaction value.
Tax on Interest: 8% of the interest income.
Costa Rica Property Tax (Land): 0.25% of the rental value.
Costa Rica Property Transfer Tax: Property transfer tax in Costa Rica is 1.5% of the sale price. You do not pay sales taxes, as such, for your house or car. Because they have to be inscribed in the National Registry, you pay a Transfer tax. In the case of real estate there is a 1.5% tax over the price registered in Hacienda (the Treasury Department) or in the National Registry. Cars are taxed at 2.5% over the retail price that is established by the Ministry of Treasury in an annual publication for that purpose.
Municipal Patent License: 0.3% of turnover.
Costa Rica Wealth Tax: There is no wealth tax in Costa Rica.
Costa Rica Social Security Contributions for Employers: Employers must contribute 26% of the gross salary paid to an employee.
Payroll Tax: Employers act as withholding agents for employees, deducting 0% to 15% from the salary.
Costa Rica Free Trade Zone Taxation RegimeCosta Rica has a special program called the free trade zone regime, which grants a 100% exemption status to companies that meet minimum fixed-asset investment requirements and that are foreign-market oriented.
Free zones are primary areas for offshore tax and customs operations. They are restricted zones with no resident population, authorized to serve as such by Costa Rica Government's Executive Branch. These facilities are intended to accommodate operations engaging in input and raw material imports, manufacturing and assembly or marketing of export goods and provision of export-related services.
Ease of operation, tax incentives, first-rate communications, electric power, utilities, and highly-qualified labor are the elements underlying the dynamic development of free-zone companies.
Beneficiary companies under the System can engage in park management as well as in handling, processing, production, repair, and maintenance of export / re-export goods and services.
Basic requirements to join the System include new initial investment on fixed assets of at least US$ 150,000 for companies inside industrial parks, and US$ 2,000,000 for those outside.
Companies meeting the following requirements can apply for Free Trade Zone status:
- Export processing industries engaged in processing or assembling raw materials to produce export / re-export finished goods.
- Export trade companies (not producers) engaged in handling, repacking, or redistributing non-traditional export / re-export products and merchandise.
- Service industries or companies exporting to natural or artificial persons abroad or serving to Free Zone companies, as long as these services are directly linked to those companies' production processes.
- Banking, financial, or insurance companies inside Free Zones will not be allowed to benefit from the System.
- Park-managing companies engaging in installing companies under the Free Zone System and to park management and maintenance.
- Companies or organizations engaged in scientific research to enhance technology levels of industry or agribusiness activities and Costa Rica's foreign trade.
- Companies operating shipyards and dry docks to build, repair, or service ships.
Benefits of the Costa Rica Free Trade Zone RegimeThe companies operating under the Costa Rica Free Zone Regime shall enjoy the following incentives, with some tax exceptions detailed bellow:
a) 100% exemption from payment of all taxes and consular duties on imports of raw materials, manufactured or semi-manufactured products, components and parts, packaging and container materials, as well as other merchandises and goods required for their operation.
When there are national raw materials available, the company shall use them as a priority, if the General Directorate of Industry objectively determines that they provide the same conditions with regard to price, quality and timely delivery required for them. This evaluation shall be conducted if the local producer of the raw materials makes the respective request to the General Directorate of Industry and, after the grant of the Free Zone Regime benefits to the company in question.
b) 100% exemption from all taxes and consular duties affecting the imports of machinery and equipment, as well as those of their accessories and spare parts, and on imports of motor vehicles required for their operation, production, management and transportation.
c) 100% exemption from all taxes and consular duties on imports of fuels, oils and lubricants required for the operation of these companies. Such exemption shall be granted only when these goods are not produced within the country with the quality, in the quantity and within the time necessary. The Ministry of Economy, Industry and Commerce shall grant prior authorization for such importation and issue a reasoned resolution on the matter within no more than fifteen business days.
d) 100% exemption from all taxes associated with the exportation or re-exportation of products. This exemption shall be granted for re-exportation of production machinery and equipment from the Zones that have entered under this Regimen.
e) 100% exemption for a term of ten years counted from the start of the operations from payment of taxes on capital and net assets, from payment of property taxes and from payment of the tax on transfer of real estate.
f) 100% exemption from sales and excise taxes on purchases of goods and services.
g) 100% exemption from all taxes on remittances abroad.
h) 100% exemption from all taxes on profits, as well as any other which taxable base is determined on the basis of the gross or net profits, the dividends paid to shareholders or income or sales, in accordance with the following differences:
- For companies located in zones of "higher relative development", the exemption shall be one hundred percent (100%) for a term of up to eight years and fifty percent (50%) for the following four years.
- For companies located in zones of "lower relative development", the exemption shall be one hundred percent (100%) for a term of up to twelve years and fifty percent (50%) for the following six years.
i) 100% exemption from all taxes on imports and exports of commercial or industrial samples, upon prior authorization of PROCOMER.
j) For a better development of their operations, the companies operating under the Costa Rica Free Zone Regime can freely perform and enter into all kinds of acts and contracts in foreign currency. In this case, the respective amounts shall be necessarily paid in this currency in their international transactions or those conducted with other companies established under the Free Zone Regime.
The companies operating under the Costa Rica Free Zone Regime shall enjoy the free possession and management of foreign currency acquired as provided in the foregoing paragraph or derived from their regular activity, being exempted from the application of the exchange regulations. The Costa Rica Central Bank shall establish the regulations for this benefit and the activities derived from it. These Regulations shall be an essential requirement for the enjoyment of such benefit.
The needs of national currency of these companies shall be processed only through authorized commercial banks, converting the foreign currency they have available for such purpose into local currency.
k) The export processing companies, beneficiaries of the Free Zone Regime, which after four years of operating under such Regime do reinvest in the country can receive an additional exemption from payment of income taxes, in accordance with the following parameters:
1. If the reinvestment exceeds twenty-five percent (25%) of the original investment, the exemption shall be for one additional year.
2. If the reinvestment exceeds fifty percent (50%) of the original investment, the exemption shall be for two additional years.
3. If the reinvestment exceeds seventy-five percent (75%) of the original investment, the exemption shall be for three additional years.
4. If the reinvestment exceeds one hundred percent (100%) of the original investment, the exemption shall be for four additional years.
The additional tax exemptions shall be seventy-five percent (75%) of the income tax payable. Any additional tax exemptions herein granted shall apply after the eighth year of operations, without prejudice of the exemptions corresponding to the final term of four years originally granted, which shall apply once the additional exemption period hereby regulated expires. In the case of companies installed in zones of "lower relative development", the additional exemption granted shall enter into force after their twelfth year of operations, without prejudice of the tax exemptions corresponding to the final period of six years originally granted, which shall enter into force after expiration of this period of the additional exemption. The reinvestment that results in the additional exemption shall be completed after the fourth year and before the start of the eighth year of operations under the Free Zone Regime.
The additional tax exemption can only be granted to companies which original initial investment in fixed assets has amounted to at least two million U.S. dollars (US$2,000,000).
When any of the companies conducts commercialization activities, they shall suffer a reduction of the income tax exemption in the same proportion of such activities, as established in the Regulations to this Law. The performance of commercialization activities by non-commercialization companies operating under the Regime can only be complementary, not their main activities, and shall require the prior authorization of PROCOMER.
Costa Rica General Sales Tax (GST)The rate of General Sales Tax (GST) in Costa Rica is 13%.
Costa Rica sales tax is 13% on the amount paid for goods and for some services. The services of Lawyers, Doctors, Dentists and other independent professionals are exempt from sales tax; anything else you buy, from a candy bar to a computer or furniture is taxed. Houses and cars require payment of a 'transfer tax', and that is covered elsewhere. In some cases the sale is subject to the Simplified Regimen, used for very small businesses like your local 'Pulperia' or 'Soda' (corner store).
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