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Who pays taxes in Costa Rica

Who pays taxes in Costa RicaDo your homework on who pays taxes in Costa Rica, which taxes and when they have to be paid. This guide will assist you in having you always up to date on all your Costa Rican tax payments. That’s because the government won’t tell you and you will find out when it’s too late.

You are investigating the purchase of Costa Rica real estate. Before you move to Costa Rica, you would, of course, like to know what is waiting for you tax-wise.

If you move to Costa Rica or buy real estate in Costa Rica, do you need to pay taxes in Costa Rica or not?

Capital Gain Tax

Let’s start with the best news: Costa Rica doesn’t have any capital gain taxes. That means that when you buy a property and sell it with capital gain years later, you won’t have to pay a dime to the tax office in Costa Rica.

This makes Costa Rica a great investment environment.

Income Tax

When you retire to Costa Rica, no matter where you come from, you probably pay taxes on your retirement income already.

This exempts you from paying income tax in Costa Rica. Yes, retirees in Costa Rica do NOT pay any taxes on their foreign retirement income. You only pay income tax if you run a profitable business.

Fiscal period

The ordinary fiscal period of the income tax begins on October 1 of a year and ends on September 30 of the following year (12 months).

How?

The income has to be declared with From D-101.

When to pay

The annual income tax has to be paid before the 15th of December of each year.

Individual Income Tax – Self-Employed Income

In case you do plan to work in your personal name you’ll have to pay income tax as follows:

                            Tax year 2015           Tax year 2016            Tax year 2017            Tax year 2018          Rate %

Income up to      ¢793.000                   ¢787.000                    ¢792.000                       ¢799.000              exempt

In excess of        ¢793.000                     ¢787.000                  ¢792.000                        ¢799.000                   10%

to ¢1.190.000       up to ¢1.181.000     up to ¢1.188.000         up to ¢1.199.000

In excess of         ¢1.190.000                ¢1.181.000                  ¢1.188.000                   ¢1.199.000                  15%

Corporations

                               Tax year 2014     Tax year 2015     Tax year 2016     Tax year 2017     Rate %

Income up to         ¢49.969.000        ¢52.710.000      ¢52.320.000        ¢52.634.000        10%

All Income up to ¢100.513.000     ¢106.026.000     ¢105.241.000        ¢105.872.000       20%

Income up to        ¢100.513.000     ¢106.026.000     ¢105.241.000        ¢105.872.000       30%

If you work as an employee (if you have a working permit), your employer will deduct a certain percentage of income taxes in Costa Rica, depending on how much you earn. We don’t have the deductibles you might know from your home country, like on studies, how many children you have or your mortgage.

Marchamo – Circulation tax

Every year, you have to pay circulation tax or road tax on any vehicle you own. This tax is charged by INS (the government-owned insurance company).

The deadline to pay the marchamo is December 31.

Starting Jan. 1, drivers without the marchamo sticker displayed on their vehicles will be fined and have their license plates removed.

Vehicle owners can find out exactly what they have to pay on the INS website. You can also send a text with the word MARCHAMO followed by your license plate number to 1467, or call, toll-free, 800-MARCHAMO (800-6272-4266).

Import Tax

Allow me to tell you a bit about the import tax system in Costa Rica. One thing is for sure, once you live here, you pay quite a bit of taxes in Costa Rica. The Costarican government needs of course income to pay their employees, build roads and run their state business. So they get their money from taxing all imported articles.

That means all cars, jewelry, clothing liquor and many food products are taxed. Some are higher than others and are therefore more expensive here than in other countries. Do your homework on this before you decide to move to Costa Rica.

The household you might bring with you when you move to Costa Rica will be taxed, though very low as used goods. Depending on how you dress, many of us go to the States at least once a year for shopping. In another article, you can find out how to move your household without having to pay too much taxes in Costa Rica.

Sales Tax

In other countries, you pay state tax or sales tax, VAT or whatever you might call it. In Costa Rica, we pay 13% sales tax on almost everything, products, and services. Except for what we call “canasta básica” which is the basic necessities to be able to live on, like rice, beans, butter, milk, etc. Count of having to pay sales tax on almost everything on all your shopping.

When you sell your house through a real estate agent, you have to pay the agent the real estate commission PLUS 13% sales tax. The real estate agent is a collector for the state, you like a store or a restaurant is. This is the law.

Service tax

I call it a service tax even though it is really a mandatory tip. The 10% tip for restaurant/bar service assures the waiter and bartender to receive a tip automatically, included in your restaurant or bar bill. A great idea although it does nothing to promote a better service.

If you feel you received an incredible service from your waiter or bartender, feel free to tip extra, but it is unnecessary.

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Real Estate Tax

Property taxes in Costa Rica are ridiculously low. You will pay 0.25% property tax on the value appraised and registered by the city, which is always a lot lower than the real value. A $200,000 property might be registered by the city for $50K and will, therefore, pay $125/annually.

You do NOT receive a notification from the city to tell you that have to pay. So you either pay your real estate tax every quarter or you get the amount for the whole year in February. When you purchase Costa Rica real estate, you pay property taxes at closing.

To present a property value declaration every 5 years is mandatory. This declaration has to be presented at the municipality where your property (ies) is located. This article will explain the declaration which includes how to calculate and where to get the values.

Property tax and municipal tax have to be paid every quarter. You can request the annual amount with your municipality before the end of January. By mid-February, most municipalities will be able to give you the total amount for the whole year.

When?

The property tax has to be canceled on or before March 31st, June 30th, September 30th and December 31st.

Luxury Home Tax

We have a Luxury Home Tax, only for luxury homes, used to eradicate the shacks of the poor. For all necessary information on this tax, on our website, we have a downloadable eBook to calculate the value of your house in Costa Rica, for filling out the luxury home tax forms, taking into account all the guidelines that are given by the  Tax authorities.

When?

The luxury home tax has to be paid every year before January 16th.

Corporation Tax

The new annual Corporation Tax 2017 is now in effect. If you have not paid corporation tax 2012 – 2016, you better check on this article.

How much?

All corporations registered as inactive have to pay (15% over Salario base 2017: ¢ 426.200) ¢21,368 or around $38

All corporations registered as active but have no activity have to pay (25% over Salario base 2017: ¢ 426.200) ¢35,614 or around $61

When?

You can pay what you owe over 2012 – 2106 until December 31st, 2017

The 2017 tax already expired on October 2nd, but you can pay a small fine of 1%

Form D-140

If your corporation is inactive, you have to fill out form D-140. Find out more on this issue in the Mandatory D-140 Requirement article and how to fill it out.

 

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The Tax Collector

The tax collector, Ministerio de Hacienda, is not very good at collecting; there is huge tax evasion on all levels. That’s the reason they are always trying to come up with new taxes, just like most governments do.

Proposals like another tax on gas to build new roads, a tax on power bills to create fire departments in smaller towns and many others. Unfortunately, the money ends generally up in the wrong places, because of budget shortages they have everywhere. Costa Rica is 40 years behind on their tax system, which hurts the growth of the country.

It’s the reason there is never money to build new bridges, maintain roads, have up to date equipment to work with and training of their employees.

I expect this article about taxes in Costa Rica was useful for keeping track of what tax you need to pay and when. We have the necessary knowledge to guide you through the process of buying a home in Costa Rica.

Contact us now.

Contact the AE MLS Costa Rica

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Ivo Henfling

Ivo Henfling started the American European Real Estate Network Costa Rica in 1996 and has grown it into the largest Costa Rica MLS with thousands of up to date property listings for sale and for rent. Ivo has written hundreds of articles about real estate and living in Costa Rica for The Tico Times and other online informational sites.

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