Withholding tax is levied on nonresidents at a rate of 10% on salaries, other remuneration, pensions, commissions and directors’ fees. A 25% rate applies to payments for professional services rendered by nonresidents in Costa Rica.
Relief for losses. Self-employed individuals may carry their losses forward for a period of three years.
B. 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.
C. Social security
Social security contributions are levied on salaries, at a rate of 26.67% for the employer and 10.67% for the employee. Contributions are computed based on an employee’s gross compensation, with no deductions allowed.
D. 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 fiscal year for self-employed individuals and individuals with a trade or business in Costa Rica is from 1 January to 31 December. Returns must be filed, and any tax liabilities due must be paid, no later than 15 March. However, in certain specific circumstances, taxpayers may elect to file using a different tax year. Self-employed individuals and individuals with a trade or business must make advance quarterly tax payments.
E. Double tax relief and tax treaties
Costa Rica has entered into double tax treaties with Spain (effective from 1 January 2010), Germany (effective from 1 January 2017), Mexico (effective from 1 January 2019) and the United Arab Emirates (effective from 15 April 2021).
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.
F. 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. The immigration authorities have established a list of countries for which an entry visa is required before entering Costa Rica. The requirements for obtaining a visa often vary. Therefore, it is necessary to check the entry visa requirements on a case-by-case basis.
As of 1 April 2022, the temporary immigration measures with respect to COVID-19 for entering Costa Rica were eliminated.
G. 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 criterion applied by the Ministry of Labor (Ministerio de Trabajo) is that persons in the local work force cannot be displaced by the hiring of foreigners. Even for a company registered with the immigration authority, a request for a job listed in the official document issued by the Ministry of Labor related to forbidden professions will be rejected.
H. 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
• Digital nomads
• Certain family relatives
The request must be submitted and processed by the immigration authorities in Costa Rica. The application requirements may vary. Therefore, they should be checked on a case-by-case basis.
On 8 July 2022, Law No. 10008, “Law to Attract International Workers and Services Providers,” also known as “Digital Nomads Law,” was published. The Digital Nomads Law is designed to attract workers and service providers who perform their activities remotely from Costa Rica and accordingly to encourage long stays in the country and increase the expenditure in Costa Rica of resources of foreign origin.
Under the Digital Nomads Law, for an individual to opt for the migratory category of nonresident and subcategory of “stay” and accordingly qualify for the tax and other benefits of the law, this individual should comply at with the following conditions:
• He or she should be a nonresident individual who provides services remotely.
• The services rendered by him or her should be provided in favor of a nonresident individual or entity.
• He or she should receive payment or remuneration from abroad.
When the Department of Immigration and Foreign Affairs issues the termination of the beneficiary status, the tax benefits established by the Digital Nomads Law are immediately revoked.
Regarding tax equalization matters, the Digital Nomads Law provides a total exemption for income tax purposes for an individual working under the migratory status of nonresident subcategory of “stay.”
I. 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. However, they can apply as a dependent of the main applicant.
Children of expatriates may use the granted migratory status of their parents to attend schools in Costa Rica.
Once residency is obtained, the spouse and children must be registered as insured before the Costa Rican social security system so that they can be attended to in the medical centers.
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. A foreigner may drive legally in Costa Rica using his or her home country driver’s license for the duration of his or her tourist visa. After the migratory status is approved, the resident must obtain a Costa Rica driver’s license to drive. For digital nomads, the driver’s license issued in the country of origin of the beneficiary can be used in Costa Rica for as long as it is valid. After the tourist completes the immigration process, he or she will be able to complete the driver’s license approval process and obtain the Costa Rican driver’s license. He or she must obtain his or her immigration identity document for foreigners and schedule an appointment for the issuance of the approved driver’s license.