Who pays taxes in Costa Rica
Do 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.
This article was updated on February 25, 2019.
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
Starting in 2019, investors must pay capital gain tax on a property they sell. If the property is used as your private residence (if you are a resident or citizen), no capital gain tax exists.
Interested in learning more about the capital gains tax, then read more here.
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.
The ordinary fiscal period of the income tax has always been from October 1 until September 30. But the tax authorities decided to make 2019 of 15 months, from October 1 until December 31st.
Starting in 2020, the fiscal year starts on January 1 and ends on December 31st.
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.
Check on taxable income for employees here.
Individual Income Tax – Self-Employed Income
The taxable income for corporations changes every year, so you can best check here.
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.
You can also check here for the tax history here.
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).
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.
In other countries, you pay state tax or sales tax, VAT or whatever you might call it. In Costa Rica, we now pay 13% Value Added Tax or IVA in Spanish on almost everything, products, and services.
When you sell your house through a real estate agent, you have to pay the agent the real estate commission PLUS 13% IVA. The real estate agent is a collector for the state, you like a store or a restaurant is. This is the law.
Do you have a business in Costa Rica? Or maybe a commercial or residential rental property or a vacation rental? You have to not only pay tax over the income since 2019 you also might have to charge your tenants 13% VAT. Learn more about it here.
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 better services.
If you feel you received an incredible service from your waiter or bartender, feel free to tip extra, but it is unnecessary.
Property taxes in Costa Rica are ridiculously low. You will pay a 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 you have to pay property tax. 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 properties are 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.
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.
The luxury home tax has to be paid every year before January 16th.
Those who own a corporation, have to pay corporation tax since 2017. If you don’t know what that is all about, check this article first.
Have you paid your mandatory corporation tax every year? Did you get your mandatory digital signature yet? Did you register the shareholders with the government? If your answer is NO and you don’t know how to resolve this, click on the banner below. We have the solution, at a very affordable cost.
All corporations registered as inactive have to pay (15% over Salario base 2018: ¢ 446.200) ¢66,930 or around $112 (depending on the exchange rate) for 2019.
All corporations registered as active but have no activity have to pay (25% over Salario base 2017: ¢ 446.200) ¢111,550 or around $186 (depending on the exchange rate) for 2019.
You can pay the Corporation Tax or Impuesto a las personas jurídicas during 30 natural days after the 1st of January.
The Tax Collector
The tax collector, Ministerio de Hacienda, is not very good at collecting taxes in Costa Rica; 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 its 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.
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